DOJ Asks Supreme Court To Turn Away Apple

The Department of Justice is asking the Supreme Court to refuse to hear Apple's appeal of a ruling that it conspired with publishers to raise the price of e-books.

The antitrust ruling against Apple -- issued in 2013 by U.S. District Court Judge Denise Cote and affirmed this year by the 2nd Circuit Court of Appeals -- was "supported by overwhelming evidence," DOJ says in Supreme Court papers filed Dec. 23.

Apple "orchestrated the publishers’ conspiracy and actively relied on their collusion to achieve its business ends," DOJ argues.

The new filing marks the latest development in a legal battle dating to 2012, when federal and state authorities charged Apple and five publishers -- Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster -- with conspiring to end Amazon's policy of charging $9.99 for electronic versions of new releases and bestsellers.

When Amazon introduced the Kindle, the company was able to discount ebooks because the industry ran on the “wholesale” model, meaning that companies like Amazon purchased books at wholesale and then decided what price to charge.

In 2010, Apple and publishers forged an agreement to shift to an "agency" model. With that model, the publishers set prices and retailers like Apple and Amazon act as agents, selling the books for a commission. The price of bestselling ebooks soon rose to $12.99 and higher.

Apple allegedly wanted the shift in order to sell books on the then-new iPad, but for more than $9.99 -- a rate that in some cases, reportedly, was below cost. The company presumably believed it wouldn't gain a foothold in the relatively new ebook market if it charged more than Amazon.

After a three-week trial in New York in 2013, Cote ruled that Apple “changed the face of the e-book industry” by illegally orchestrating a price-fixing conspiracy with publishers.

A panel of the 2nd Circuit upheld that finding by a 2-1 vote.

Apple is now asking the Supreme Court to take the case. The company has drawn the support of several outside organizations including the Authors Guild, which says Apple helped writers -- and boosted competition -- by preventing Amazon from creating a monopoly in ebooks. "Whatever else may be said about how Apple entered the market, one thing is clear: Following its entry the industry became more competitive," the Authors Guild wrote in a friend-of-the-court brief filed in October.

But the DOJ argues that price-fixing isn't a legitimate means of increasing competition. The government's brief criticizes Apple and the publishers for trying "to reduce Amazon’s dominance in the ebook market, not by introducing new goods or pricing policies that consumers would find more attractive than those that Amazon had previously offered, but by increasing the price (and thus reducing the attractiveness) of Amazon’s own wares."

DOJ adds that the finding against Apple "rests on the unexceptionable proposition" that it wasn't entitled "to accomplish its entry into a market by organizing a horizontal price-fixing conspiracy among that market’s suppliers."

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