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E-Book Retailers Distribute $400 Million to Victims of Apple-Led Conspiracy

June 22, 2016

Many consumers received some good news yesterday when e-book retailers such as Amazon and Barnes & Noble reached out to notify them of significant credits being added to their accounts.  The source of these credits was a payment by Apple Inc. of $400 million to reimburse e-book purchasers for the higher prices they paid for e-books during the time in which a price-fixing conspiracy between Apple and five e-book publishers was in force.  Purchasers of New York Times bestsellers are being provided a $6.93 credit for each title they bought.  Purchasers of other titles are receiving $1.57 for each e-book.  Consumers can apply these credits to future purchases.

Apple’s obligation to make these payments arose from conduct that the Justice Department’s Antitrust Division challenged in a civil antitrust lawsuit it filed in April 2012.  The Antitrust Division alleged, and ultimately proved at trial, that Apple knowingly orchestrated a price-fixing conspiracy among five large book publishers that led to substantial increases in the prices readers were required to pay for e-books.  As Judge Denise Cote of the U.S. District Court for the Southern District of New York found:

The Plaintiffs have shown through compelling evidence that Apple violated Section 1 of the Sherman Act by conspiring with the Publisher Defendants to eliminate retail price competition and to raise e-book prices.  There is overwhelming evidence that the Publisher Defendants joined with each other in a horizontal price-fixing conspiracy.  Through that conspiracy, the Publisher Defendants raised the prices of many of their New Releases and NYT Bestsellers above the $9.99 price at which they had previously been sold through Amazon.  They also raised the prices of many of their backlist e-books.  The Plaintiffs have also shown that Apple was a knowing and active member of that conspiracy.  Apple not only willingly joined the conspiracy, but also forcefully facilitated it.

United States v. Apple, Inc., 952 F. Supp. 2d 638, 691 (S.D.N.Y. 2013).  The U.S. Court of Appeals for the Second Circuit affirmed Judge Cote’s decision a year ago.  United States v. Apple., Inc., 791 F.3d 290 (2d Cir. 2015).

On March 7, 2016, the U.S. Supreme Court denied Apple’s petition for certiorari and made final the lower court decisions in the case.  The Supreme Court’s action triggered Apple’s obligation to pay $400 million to e-book purchasers under Apple’s July 2014 agreement to settle damages actions brought by the attorneys general of 33 states and territories and a private class of e-book purchasers.  With the $166 million previously paid by the conspiring publishers to settle claims against them, Apple’s payment brings to $566 million the amount repaid to e-book purchasers overcharged as a result of Apple’s and the publishers’ illegal conspiracy.

The final judgment entered by Judge Cote also took steps to meet the court’s goal of “ensur[ing] that the government need never again expend its resources to bring Apple into court for violations of the country’s antitrust laws.”  In her final judgment, Judge Cote appointed an external compliance monitor to work with Apple to improve its antitrust compliance and training programs.  The monitor worked with Apple for two years, overcame efforts on Apple’s part to discredit him and impede his work and, in the end, ensured that Apple implemented significantly strengthened policies, procedures and training that we hope will prevent a recurrence of the activities that led to this case.  Apple will also face further compliance and reporting obligations for the judgment’s two remaining years.

The terrific outcome achieved in this case shows how our antitrust laws work to protect consumers against antitrust conspiracies and how the Antitrust Division will pursue antitrust enforcement actions where warranted against even the most powerful companies in the world.  The Antitrust Division and 33 state attorneys general worked together to expose the unlawful conduct, negotiate consent decrees with the book publishers, establish Apple’s liability at trial and defend that result on appeal.  The states and private plaintiffs used those outcomes to secure damages for the many consumers injured by the conspiracy.

Consumer Protection

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Updated March 3, 2017