Monday, April 23, 2012

Legal Experts Question Antitrust Claims Against Apple

After weeks of hints, the U.S. Department of Justice finally brought antitrust charges against Apple and the publishing industry over the agency pricing model for electronic books. Apple, Macmillan, and the Penguin Group were hit with lawsuits April 11 claiming they conspired to raise retail e-book prices and limit competition in the market. The DOJ also announced it had settled the same complaint with Hachette, HarperCollins, and Simon & Schuster.

Then on April 18, the Toronto Globe & Mail reported a class action suit is being filed in British Columbia charging Apple, the publishing companies, and their Canadian subsidiaries of fixing e-book pricing.

The complaints have caused a predictable stir around the industry. Some argue that agency pricing forces consumers to pay more for their e-books than necessary. Others claim the pricing model actually created competition and the DOJ move only makes it easier for Amazon to finish off its opposition, namely the other publishers and booksellers big and small.

Amazon has been pretty quiet about the whole thing, although it has announced a new round of aggressive price cuts on e-book titles. That has many predicting a new round of doom-and-gloom for booksellers, as well as the suggestion it might ultimately lead to a DOJ investigation into monopoly claims against the retail giant.

The really interesting twist to the current debate is experts saying Apple will likely win its part of the case.

“The case against Apple will be more difficult to prove given that Apple was a new competitive entrant into that market and was trying to find a way to compete with a dominant market player, Amazon,” attorney David Vance Lucas told MacNewsWorld. “Apple’s attempt to enter the market actually was pro-competitive, long term.”

Apple also appears to have legal precedents on its side and wants its day in court. The DOJ had to admit its 1982 antitrust case against IBM was “without merit” and federal appeals courts ruled against the DOJ when it tried to use antitrust laws to split Microsoft into two companies.
“The DOJ knows its case is not a slam-dunk, so, all things being equal, might very well prefer not to go to court, so you would expect there to be continued discussions between the holdout publishers, Apple and the DOJ over terms of settlement they could all accept,” said Geoffrey Manne, executive director of the International Center for Law and Economics.

One question remains: What does this all mean to the average reader?

First, e-book readers will likely see lower prices, but probably not until June, the earliest that the DOJ settlement with Simons & Schuster, Hachette, and HarperCollins can go into effect, according to an article in In addition, all the legal sparring does not mean an end to agency pricing because the model was not declared illegal, just the way it was created.

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