Judge Denise Cote plans to bring Apple back into court in May, 2014, to determine what damages should be imposed on the iPad and iPhone maker in its ebook price fixing case. Judge Cote found Apple guilty of conspiring with book publishers to artificially raise book prices and is considering imposing harsh restrictions on Apple's contracts with publishers as well as limiting how the company can negotiate for new deals, and Apple plans to fight her, so don't expect this soap opera to end any time soon.
Apple plans to fight ebook price fixing ruling
The Department of Justice, which filed the case against Apple, asked Judge Cote to impose a ten-year plan that would include strict oversight over Apple's business activities and contract negotiations. She isn't considering everything the DOJ requested, but is looking much of what's on the list. Apple called the proposed remedies draconian and overreaching.
Apple, Penguin, MacMillan Simon & Schuster, HarperCollins, and Hachette Book Group were all accused by the DOJ of conspiring to push book prices up above the rates Amazon was charging. The publishers all settled out of court to avoid the potentially high costs they would've otherwise incurred leaving Apple to go to trial alone. The publishers did, however, back Apple which the DOJ brought up in court as proof the companies did conspire and were already working on new conspiracy plans.
Apple has asserted that it didn't do anything wrong and was independently negotiating with book publishers for competitive deals to bring titles to its iBookstore for the iPad. Publishers echoed Apple's statements, but Judge Cote and the DOJ weren't swayed. In the end, Judge Cote ruled that Apple played a key role in colluding with publishers, essentially saying that the government endorsed Amazon's practice of selling books below cost, which puts competitive pressure on other retailers who can't afford to sell books at a loss.
While the publishers backed down and agreed to settlements to avoid going to trial, Apple is going down swinging. The company has made it very clear that it intends to fight Judge Cote's ruling and will be appealing the case. Apple had asked the Judge to postpone the damages trial until the appeals process is complete, but she refused.
With the case moving forward, Apple faces tough sanctions and steep fines -- possibly hundreds of millions of dollars -- and a limited ability to compete in the ebook market. With an appeal planned, however, there isn't any guarantee that the remedies Judge Cote imposes will ever be enforced.
Apple presented a strong case with compelling evidence, some of which Judge Cote refused to allow or disregarded in her ruling. Apple has already told the Judge it thinks she made errors in the trial by doing so, and no doubt those will be points brought up during the appeal process. Assuming Apple wins on appeal, any remedies imposed by Judge Cote will be dropped.
As it stands today, Amazon gets to continue using its sell-at-a-loss tactics to dominate the book market and drive competitors out. Apple and publishers have little recourse since the contracts they negotiated to make a more level playing field for themselves and retailers are essentially dead in the water.
Despite those setbacks, however, Apple is still fighting and is showing every indication that intends to keep on fighting even if it has to take its appeals all the way to the U.S. Supreme Court. That could drag this case out for years, and in the mean time Amazon is the real winner because it can continue to sell books at prices that competitors can't afford to match, and we'll keep buying.