Outlook Turns Gloomy as Judge Slams Apple in E-Book Case

In a damning indictment of collusive practices between Apple (NASDAQ:AAPL) and five major U.S. book publishers, outspoken District Court Judge Denise Cote rejected their requests to dismiss a class action suit alleging price-fixing in the marketing of e-books through the new ‘agency’ model.

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Pulling no punches, she holds Apple (and the late Steve Jobs) responsible for being the catalyst that created and nurtured the alleged conspiracy:

“In short, Apple did not try to earn money off of eBooks by competing with other retailers in an open market; rather, Apple ‘accomplished this goal by [helping] the suppliers to collude, rather than to compete independently.’”

Judge Cote’s order means that the class action can proceed to trial, where the merits of the plaintiffs’ claims can be adjudicated.

The action involves Apple and publishers Hachette, Harper Collins (NASDAQ:NWS), Simon & Schuster (NYSE:CBS), Penguin (NYSE:PSO), and Macmillan. Of these, Hachette, Harper Collins, and Simon & Schuster have settled with the Department of Justice and are negotiating with the state governments on the amount of restitution to be paid to e-book purchasers. These moves should help them avoid the class action suit and its untold capacity for levying damages.

Penguin and Macmillan have refused to settle and hold that they did no wrong. Apple, predictably, is likely to be the pugnacious litigant, and may be on firmer and more consistent ground, as it uses the same agency model for selling other types of content.

The proceedings probably ignored Apple’s more substantive (and hidden) agenda – to thwart the growing popularity of Amazon’s (NASDAQ:AMZN) Kindle tablet by depriving the company of the opportunity to sell low-priced e-book content through the legacy ‘wholesale’ book selling model it created and dominated, controlling over 90 percent of e-book sales before Apple jumped into the game.

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