NY judge: Apple statements damage lawsuit position

[May 16, 2012]  NEW YORK (AP) -- A federal judge cited the confident voice of the late Apple founder Steve Jobs on Tuesday as she refused to toss out lawsuits alleging the company and various publishers conspired to drive up the price of electronic books.

U.S. District Judge Denise Cote noted in her written ruling that Jobs had made statements that agreements between the publishers and Apple Inc., based in Cupertino, Calif., would cause consumers to "pay a little more" and that prices would "be the same" at Apple and Amazon.com.

In a lawsuit this year, the U.S. government joined 15 states in suing Apple and publishers, saying they conspired in the fall of 2009 to force e-book prices several dollars above the $9.99 price charged by Amazon.com on its popular Kindle device. According to the lawsuit, the publishers were concerned that Amazon's e-book price was too far below the price of hardcover books and Apple was concerned because it was preparing to launch the iPad. By 2010, Amazon was responsible for 90 percent of e-book sales in the United States, the judge noted.

Amazon's $9.99 price for best-sellers was such a deep discount from list prices of $20 and more that it was widely believed Amazon was selling the e-books at a loss to attract more customers and force competitors to lower their prices.

The judge rejected the argument that Apple and the publishers were merely improving the efficiencies of distribution, saying: "It has everything to do with coordinating a horizontal agreement among publishers to raise prices, and eliminating horizontal price competition among Apple's competitors at the retail level."

The judge noted that Jobs told the publishers that "the customer pays a little more, but that's what you want anyway."

A lawyer for Apple did not immediately respond to a message for comment Tuesday. But Apple said last year the government's accusation that it conspired with major book publishers to raise the price of e-books was untrue. Apple said it instead had fostered innovation and competition by introducing its iBookstore in 2010 and said customers had benefited from e-books that are more interactive and engaging.

The judge wrote that Apple had a "strong incentive" to encourage publishers to agree together on the rules for e-book sales so that its iBookstore did not face stiff competition.

"With the fortuitous entry of Apple into the market for e-books, and the decision by Apple to join the price-fixing conspiracy, that horizontal conspiracy became a potent weapon for engineering a fundamental shift in an entire industry," the judge said.

The federal government has reached a settlement with three of the publishers, Hachette, HarperCollins and Simon & Shuster. But it is proceeding with its lawsuit against Apple and Holtzbrinck Publishers, doing business as Macmillan, and The Penguin Publishing Co. Ltd., doing business as Penguin Group.

Messages left Tuesday with lawyers for Holtzbrinck and Penguin were not immediately returned.

[Associated Press; By LARRY NEUMEISTER]

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