July 11, 2013
Apple Loses To The DOJ
That mean old Department of Justice (also known as the DOJ) has been giving Apple a hard time over their supposed eBook price fixing when they entered the market in 2010. I’m sure you remember the story: Some states (33 of them) brought the case against Apple and five publishers for conspiring to raise eBook prices and bend Amazon’s arm and move them from that pesky $9.99 price point. Despite the US Senate’s love affair with Apple during their hearing over their tax practices, the DOJ ruled on Wednesday that Apple had violated antitrust law by playing a quote unquote “central role” in persuading Amazon to eventually lower their prices.
Actually, I believe the word Steve Jobs used was “aikido,” but who are we “aikidding?”
Sorry, I’ll see myself out.
“Apple chose to join forces with the publisher defendants to raise e-book prices and equipped them with the means to do so,” wrote US District Judge Denise Cote in her lengthy, 159-page decision, according to Reuters.
“Without Apple’s orchestration of this conspiracy, it would not have succeeded as it did.”
But wait! Would it surprise you to learn that Apple plans to appeal this decision?
It’s the beauty of the American court system, or at least where it pertains to corporate law. Don’t like the ruling? Just ask for a redo!
“Apple did not conspire to fix e-book pricing,” explained Apple spokesperson Tom Neumayr.
“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 in a sense, Neumayr’s right.
When Apple broke into the scene in 2010 with the iPad, publishers were growing worried about Amazon’s supposed growing monopoly over the e-book game. Let’s review:
Publishers were accustomed to charging wholesalers like Amazon one price for the rights to sell their books. If Amazon wanted to sell them cheaper, they could.
Ah, but then publishers run the risk of consumers getting a little too used to paying only $9.99 for eBooks and not a penny more.
It’s almost similar to Apple getting customers accustomed to paying only .99 cents per track, minus the sticky antitrust lawsuit.
Apple talked with these publishers and persuaded them to switch to an agency model, meaning they could set their own price so long as Apple got a nice little 30 percent cut from the top.
Honestly, it’s a fair way to do business, in this writer’s humble opinion. But, as the story goes, some people were upset by this, took Apple to task for price fixing, and here we are.
It’s also worth noting that the other publishers settled earlier, likely because they couldn’t afford the legal fees like Apple could.
They may end up paying much more than legal fees, depending on what the DOJ decides the should pay for their wrongdoings.
Some say they could end up paying millions of dollars in damages after it’s all said and done.
Which means Apple will really want you to buy their next iPhone, whatever they’ll call it.
Image Credit: Thinkstock.com