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SCOTUS Turns Down Apple's Plea in E-book Pricing Case

Zacks Equity Research
Updated

The Supreme Court of the U.S (SCOTUS) has refused to hear Apple Inc.’s AAPL appeal in the e-booking price fixing case. The Supreme Court has upheld the ruling of the 2nd U.S. Circuit Court of Appeals that found the company guilty of manipulating e-book prices and levied a $450 million penalty.

In Apr 2012, the Department of Justice (DOJ) along with 33 states filed a civil antitrust class action lawsuit against Apple and five publishers, namely, News Corp’ NWSA HarperCollins Publishers Inc., CBS Corp’s CBS Simon & Schuster Inc, Hachette Book Group, Macmillan and Penguin Group for manipulating e-book prices.

The DOJ alleged that the nefarious collaboration led to an average $2.0 to $3.0 increase in e-book prices over a three-day period in early 2010, siphoning millions of extra dollars for e-books from consumers. In 2010, Apple had introduced iPad and an iBookfeature to foray into the e-book business.

The DOJ pointed out that Amazon’s AMZN leading position in the e-book space and its enviable low priced business model were causes of concern for Apple.  Publishers, too, were wary of Amazon’s low pricing model. This bought Apple and the publishers together to ward off a common enemy.

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In Jun 2013, U.S. District Judge Dennis Cote found the Cupertino based iPhone maker guilty of scheming with publishers to increase e-book prices. While the accused publishers settled with the DOJ by paying over $160 million, Apple challenged the judgment in the appeals court. However, it failed to receive any relief from the appeals courts, which slapped a hefty penalty in Jun 2015.

However, Apple has maintained that it has done nothing wrong and labeled the settlement as something that would "chill innovation and risk-taking."

Shares of Apple, which currently holds a Zacks Rank #3 (Hold), were down 1.11% yesterday.

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CBS CORP (CBS): Free Stock Analysis Report
 
AMAZON.COM INC (AMZN): Free Stock Analysis Report
 
APPLE INC (AAPL): Free Stock Analysis Report
 
NEWS CORP NEW-A (NWSA): Free Stock Analysis Report
 
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