Based on an April 2013 lawsuit filed by the Department of Justice, a New York federal judge has found Apple colluded with major book publishers to inflate the price of e-books. The Department of Justice asserted Apple acted as a hub in and “hub-and spoke” conspiracy to move the book industry from a wholesale model dominated by Amazon to an agency model where companies such as Apple would take a commission on book sales. On Wednesday a judge said DOJ showed the publishers conspired with each other to eliminate retail price competition to raise e-book prices and Apple played a significant role. Ways in which they conspired included: 1. Taking control of ebook pricing and moving the price point above $9.99 by acting as a group against Amazon. 2. Delaying release or “withholding” the ebook version of a new release.
The partners agreed that Apple would sell books and take a 30 percent commission. Apple would make a profit. The Judge asserted this was raising price caps and moving e-tailers to an agency model. The Judge rejected an argument that Apple should be applauded because of their practices’ beneficial impact on the e-book market. Instead saying it violated The Sherman Act and they failed to show agreements with pro-competitive effects. The case now moves to a penalty phase.