July 16, 2014: Apple agrees to pay $450 million to resolve the Department of Justice’s antitrust case against the company over e-book pricing in the iBooks Store. In the e-books lawsuit, Apple stands accused of conspiring with five major book publishers to fix prices on digital books.
After all five publishers settle their claims outside of court, Apple becomes the only one to go to trial. The e-books lawsuit settlement closes the book on a bad chapter in Apple’s history.
History of the iBooks Store lawsuit
Apple’s bid to challenge the dominance of Amazon’s Kindle platform led to the e-books pricing-fixing scandal. Prosecutors said Apple’s desire to make the iPad the device of choice for digital books turned into an illegal scheme to make digital reading more expensive for readers — and more profitable for publishers and Cupertino.
The case foreshadowed the antitrust fights that Apple would face later over the App Store and other locked-down components of its ecosystem, where the real product isn’t just a book or an app, but control over the marketplace that sells it.
A conspiracy to challenge Amazon’s low Kindle prices
The United States v. Apple Inc. antitrust case was filed in April 2012. It accused Apple, the Hachette Book Group, HarperCollins, Macmillan Publishers, Penguin and Simon & Schuster of conspiring to keep e-book prices high.
This came in response to Amazon’s charging $9.99 for many popular books on its Kindle e-book reader. This upset publishers, who said the low price for digital books diminished their profit margins. Apple, instead, planned to sell new books for $12.99 to $14.99 through its own channels. This would result in more money for publishers and Apple alike.
A damning piece of evidence surfaced in the form of a conversation between Apple CEO Steve Jobs and technology journalist Walt Mossberg soon after the unveiling of the iPad. Mossberg asked why any customer would agree to spend $14.99 on an Apple e-book when they could buy the same thing from Amazon for $9.99.
“That won’t be the case,” Jobs responded.
“You won’t be $14.99 or they won’t be $9.99?” Mossberg asked.
“The prices will be the same,” Jobs said. “Publishers are actually withholding their books from Amazon because they’re not happy.”
Apple settles e-book lawsuit to avoid a damaging trial
Still, Apple remained a bit player on the e-books front, with a tiny market share compared to Amazon. However, the threat that Apple represented — especially after the popularity of the iTunes Music Store as a music distributor — meant that the iBooks case made headlines.
In July 2013, U.S. District Judge Denise Cote ruled that Apple was liable for colluding with the publishers to impede e-book competition. A damages trial was due to begin in August 2014. Attorneys general and lawyers for a class-action group of customers sought a maximum of $840 million.
In the end, Apple folded and agreed to pay $450 million rather than go to trial. However, the company continued to assert that it did nothing wrong and would continue to appeal.
In addition to the payment, the court also appointed an antitrust monitor to watch over Apple’s activities, which caused Cupertino no end of headaches in the following years.
Luke Dormehl is a U.K.-based journalist and author, with a background working in documentary film for Channel 4 and the BBC. He is the author of The Apple Revolution and The Formula: How Algorithms Solve All Our Problems … and Create More, both published by Penguin/Random House. His tech writing has also appeared in Wired, Fast Company, Techmeme and other publications.
One response to “Today in Apple history: Apple pays $450 million to settle e-books suit”
So what exactly was wrong with letting the publishers decide on the price of their books?