US court agrees Apple violated antitrust law in e-book entry

Apple violated antitrust laws by colluding with publishers to raise electronic book prices when it entered a market in 2010 that had been dominated by Amazon.com, a federal appeals court said today.

The 2nd US Circuit Court of Appeals in Manhattan ruled 2-to-1 that a lower court judge was right to find Apple Inc violated the laws to upset Amazon.com Inc's control of the market.

The appeals court also agreed that US District Judge Denise Cote was right to order injunctive relief to ensure the Cupertino, California-based company didn't commit additional violations of antitrust laws.

An Apple lawyer said in an email that comment would be issued soon.

Cote ruled against Apple after a civil trial in summer 2013. She ordered the technology giant to modify contracts with publishers to prevent price fixing and appointed a monitor to review the company's antitrust policies. The appeals court weeks ago upheld the appointment of the monitor.

In a majority opinion written by Judge Debra Ann Livingston, the 2nd Circuit said Cote's finding that Apple orchestrated a conspiracy among publishers to raise electronic book prices was "amply supported and well-reasoned."

"We also conclude that the district court's injunction is lawful and consistent with preventing future anticompetitive harms," the appeals court said.

In a dissent, Judge Dennis Jacobs defended the actions Apple took as it fought to raise the price of e-books when Seattle-based Amazon had 90 per cent control of the market selling books online for USD 9.99.

He said it was a mistake by Cote and his fellow appeals judges to assume "competition should be genteel, lawyer-designed, and fair under sporting rules, and that antitrust law is offended by gloves-off competition."

In the majority opinion, though, Livingston wrote that it was "startling" that Jacobs would agree Apple intentionally organised a conspiracy among publishers to raise e-book prices and then say the company was entitled to do so because the conspiracy helped it become an e-book retailer.

"Fundamentally, the dissent's theory that the presence of a strong competitor justifies a horizontal price-fixing conspiracy endorses a concept of marketplace vigilantism that is wholly foreign to the antitrust laws," Livingston wrote. "By organising a price-fixing conspiracy, Apple found an easy path to opening its iBookstore, but it did so by ensuring that market-wide e-book prices would rise to a level that it, and the publisher defendants, had jointly agreed upon."

The US Justice Department and 33 states and territories originally sued Apple and five publishers. The publishers all settled and signed consent decrees prohibiting them from restricting e-book retailers' ability to set prices. Two publishers joined Apple's appeal.