The U.S. Justice Department will be taking Apple to court over allegations that the company illegally conspired with publishers to fix the prices of electronic books in order to sell them to iOS users at a higher cost. Apple is the last defendant in the price-fixing case as other publishers have already agreed to settlements with the Justice Department in recent months. According to the government, Apple knowingly engaged in a conspiracy with Macmillan, Simon & Schuster, Hachette Book Group, Pearson, and HarperCollins in order to set prices above the $10 norm that Amazon was charging for e-books.
According to a lawyer with Patton Boggs, it is “pretty unusual” to see a case like this one go to trial because defendants usually have a tendency to settle. Observers note that it is indicative of a larger trend that has been seen with the Obama administration’s Justice Department more vigorously pursuing antitrust actions against companies.
If the government wins the case, Apple would likely be barred from certain anticompetitive actions, including price fixing in the ebook market. Apple holds that it acted on its own, negotiating contracts with each individual publisher to establish an “agency” model. Under this model, publishers set prices for books instead of the retailers and model, Apple receives 30% of the price for each book.
The Cupertino California company says that before it entered the ebook market, nine out of 10 ebooks bought by consumers were purchased through Amazon. Publishers were supposedly unhappy with the low $10 price that the online retailer was set on charging for their products, even though Amazon was actually paying more money to the publishers than it was charging customers for the books. Apple went on to say its entry into the ebook market gave consumers more choices, better e-readers, and lower overall prices. Even CEO, Tim Cook has been resilient in his defense of the company. At last week’s D11 conference, Cook said the following:
The ebook case to me is bizarre. We've done nothing wrong there and so we're taking a very principled position on this... And so we're going to fight.