Apple 2.0

Covering the business that Steve Jobs built

Apple found guilty of colluding to raise e-book prices

July 10, 2013: 10:06 AM ET

Judge: "Apple seized the moment and brilliantly played its hand."

Judge Cote.

Judge Cote.

FORTUNE -- In a 160-page ruling following a three-week bench trial, U.S. District Judge Denise Cote has found that Apple (AAPL) did indeed violate the Sherman antitrust act by conspiring with five publishers to raise the price of e-books.

The key paragraph:

"The Plaintiffs have shown that the Publisher Defendants conspired with each other to eliminate retail price competition in order to raise e-book prices, and that Apple played a central role in facilitating and executing that conspiracy. Without Apple's orchestration of this conspiracy, it would not have succeeded as it did in the Spring of 2010."

Although the judge had announced before the trial began that she believed the Department of Justice would prove its case, the ruling comes as a surprise to observers who heard Apple's defense.

The facts were less in dispute than the rules governing a distributor like Apple, which recent antitrust case law treats differently than competitors -- such as book publishers -- forming a horizontal agreement to fix prices.

Although the judge is going to schedule a separate trial to determine damages, the case seems destined to be appealed, perhaps all the way to the Supreme Court.

UPDATE: We have statements from both sides.

The DOJ: "Companies cannot ignore the antitrust laws when they believe it is in their economic self-interest to do so. This decision by the court is a critical step in undoing the harm caused by Apple's illegal actions."

Apple: "Apple did not conspire to fix ebook pricing and we will continue to fight against these false accusations. When we introduced the iBookstore in 2010, we gave customers more choice, injecting much needed innovation and competition into the market, breaking Amazon's monopolistic grip on the publishing industry. We've done nothing wrong and we will appeal the judge's decision."

Analysis: The Apple e-book case is headed for the 2nd Circuit.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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