Apple is On the Hook for the $450m Settlement after Supreme Court Rejects Apple’s eBook Conspiracy Appeal

4647640145_b156e6d547_bThe U.S. Supreme Court on Monday declined to hear Apple Inc's challenge to an appellate court decision that it conspired with five publishers to increase e-book prices, meaning it will have to pay $450 million as part of a settlement.

The court's decision not to hear the case leaves in place a June 2015 ruling by the New York-based 2nd U.S. Circuit Court of Appeals that favored the U.S. Department of Justice and found Apple liable for engaging in a conspiracy that violated federal antitrust laws.

Apple, in its petition asking the high court to hear the case, said the June decision by the 2nd U.S. Circuit Court of Appeals in New York upholding a judge's ruling that Apple had conspired with the publishers contradicted Supreme Court precedent and would "chill innovation and risk-taking."

The 2nd Circuit's ruling followed a 2013 decision by U.S. District Judge Denise Cote after a non-jury trial that Apple played a "central role" in a conspiracy with publishers to eliminate retail price competition and raise e-book prices. The Justice Department said the scheme caused some e-book prices to rise to $12.99 or $14.99 from the $9.99 price charged by market leader Amazon.com Inc.

Publishers that the Justice Department said conspired with Apple include Hachette Book Group, HarperCollins, Penguin, Simon & Schuster, and Macmillan.

On Feb. 17, the appeals court in New York upheld the proposed settlement, which had been challenged by an e-books purchaser.

The case is Apple v. United States, U.S. Supreme Court, No. 15-565.

(Reporting by Lawrence Hurley, images by b o w n o s e)

23 Comments on Apple is On the Hook for the $450m Settlement after Supreme Court Rejects Apple’s eBook Conspiracy Appeal

  1. This has gotta be a conspiracy to punish Apple for daring to enter what Amazon sees as its domain, but how did Amazon manage to buy the US Supreme Court?

  2. Since the Supreme Court is dealing with having only eight members, I believe SCOTUS did not want to deal with a minor case like this. The Big Five already settled this 2012 case years ago and paid their dues, so I am glad Apple will finally have to pay for their crime.

  3. Timothy Wilhoit // 7 March, 2016 at 11:01 am // Reply

    For a large,successful company, it was an astonishingly goofy decision not to settle this case when they had the chance. I suppose it’s the RDF in action that persuaded them to fight it…otherwise it’s beyond comprehension.

    • Yes, they could have settled it cheap and then moved on to more important matters. Heck, ebooks don’t matter to Apple _at_all_, so you have to wonder why they bothered. It’s not even chump change; Apple probably spends more on paperclips.

    • Symptomatic of the same hubris that led them to participate in the scheme in the first place. Sadly, in the long run we still got agency pricing and higher e-book prices, but at least the publishers and Apple got taken to the woodshed over it. And the publishers are probably thanking their lucky stars that they swallowed their pride, settled, and got off so cheaply, only having to pay $166 million among the five of them.

      I’m just happy that I can now say outright that Apple broke the law without having to deal with protests that “it’s not settled yet.” It’s settled.

  4. Probably good, temporary, news for BIG 5 publishers. Many refund recipients will probably by some of the overpriced books that they have avoided…

  5. Although it could be argued that Amazon was breaking economic sense (in selling ebooks at a loss and paying full price to the publishers). Unless a business is backed by Wall St (which is still believing that Amazon will raise prices dramatically to make a profit at sometime in the future), there’s no way Barnes and Noble could do the same trick or any “old school” business could do the same.

    • Have you read the original complaint and exhibits? At the time the suit was filed, Amazon’s ebook business was found to be consistently profitable and the publishers were actually wholesaling many ebooks at a lower price point than paper to reflect publisher cost savings associated with the electronic format.

      I think B&N, Kobo, etc. could have competed just fine on the pricing issue. They just made too many other mistakes that are proving too difficult to overcome.

      • I’m not convinced that you can compete at ebooks. No one has pulled it off yet, aside from Amazon, Apple, and Google, and two of the three don’t care if they make money at ebooks.

        • Well, we know two things:

          1- relying on B&M bookstores for customer aquisition doesn’t work in the US.

          2- selling ebook readers at cost is a good way to never make money selling ebooks. Especially if they support somebody else’s DRM and you don’t sell ebooks using that DRM.

          A third, still unverified, fact is that you can’t appeal to heavy ebook buyers without a cheap(ish) dedicated reading device. Apps are necessary but not sufficient for selling eooks successfully.

          • I’m going to add customer service issues to this list. I don’t know anyone in real life that is still using B&N but I know many who started there.

  6. Yes I did.

    And I agree partly with the second part too.

  7. If I remember right, it only takes 4 of the 9 Justices to grant certiorari, so not even a majority. Apple’s legal arguments couldn’t even get that. What they did was a per se violation and I’m glad the Supreme Court denied cert. The 2nd Circuit got it right.

    If anyone wants to read more about the case and the laughable brief filed by Authors United, you can check out The Digital Reader’s coverage of one of my blog posts here: http://the-digital-reader.com/2015/12/06/94787/

    • Yep, all it takes is a strong minority of the USSC.

      • No longer a minority, it has to be 50% since there are only 8 current justices. Given their historic voting records, it was probably the four liberal judges with swing vote Kennedy that ruled in favor of the government’s position. With historically pro-business Thomas, Alito and Kennedy on the other side. The absence of Scalia might have been the deciding vote in them not hearing it.

        • That’s being pretty generous considering the fact that there really was no Circuit split. You also put Kennedy on both sides. I imagine the court gave deference to the fact that Texas submitted a brief against Apple and some of the briefs for Apple could barely put together a cogent legal argument. The U.S. Supreme Court only grants cert around 1% of the time, so I doubt taking the appeal even had 3 votes.

          • Timothy Wilhoit // 8 March, 2016 at 10:41 am //

            Considering the court only has eight members, they may have granted Cert if three wanted to review the case. IMHO, they may have had only one, perhaps two votes in favor. Then again, they may have had none. Being in favor of collusion isn’t really a common conservative stance. Adam Smith’s invisible hand shackled by a secret deal? I can’t see many conservatives being in favor of that.

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