Apple entered the e-book market in April 2010, shortly after the launch of its iPad. Amazon launched the Kindle e-reader in 2007 and by 2009, had established a $9.99 price point for e-books. Amazon sold almost 90% of all e-books. The book publishers did not like the $9.99 price, because they thought it was eating into the sales of their hardcover books, threatening the existence of brick and mortar bookstores and threatening their business model. Apple did not like the $9.99 price, because it didn’t want to adopt a low price strategy. From December 2009 through January 2010, Apple met with the top publishers, the Big Six Publishers, to find a way to change Amazon’s $9.99 e-book price point. The result was five of the Big Six Publishers entering into agency agreements with Apple. The agency agreements gave Apple a 30% commission, set a $12.99 to $14.99 price range for e-books and gave Apple MFN status. The MFN clause guaranteed that Apple’s e-book prices would be the lowest retail price in the marketplace and effectively forced the publishers to require all of their distributors, including Amazon, to sign an agency agreement in which the publishers would control the retail prices of books they published. Apple controlled e-book prices at the retail level.
The U.S. Department of Justice (DOJ) filed an antitrust lawsuit against Apple and the five book publishers on April 11, 2012. The book publishers settled and the case proceeded to a bench trial against Apple alone. The district court ruled that the plaintiffs showed by “compelling direct and circumstantial evidence that Apple participated in and facilitated a horizontal price-fixing conspiracy. As a result, they have proven a per se violation of the Sherman Act.” (Opinion pdf page 120).