Apple v. Amazon– The E-Book Conspiracy
As a Kindle carrying, subway riding, and requisite Apple aficionado New Yorker, it scares me to hear about my favorite brand conspiring to keep me away from my favorite pastime. The Department of Justice brought an antitrust suit against Apple last year in the Southern District of New York over allegations that it led a conspiracy against Amazon.com in order to force the number one e-book seller to change its pricing model.
Trial was recently held before U.S. District Judge Denise Cote and a decision is due shortly. The United States argued Apple made its customers pay more for e-books than they would in a free market. The alleged scheme, which included Hachette Books, Macmillan, Penguin, Harper Collins, and Simon & Schuster (all of which have settled prior to the commencement of trial), has Apple pushing publishers to agree to sell copies of their books under an agency model. An agency model allows the publishers to set the prices for books, rather than the retailer, with the upshot for Apple being a 30% commission on each sale. The move led to newly release books being hiked from $9.99 to either $12.99 or $14.99.
However, commentators are pointing out that Amazon.com controlled 80% of the market when Apple began selling e-books in 2009. Furthermore, the online seller was selling the most desired titles at $2 to $5 below cost; a move many in the industry, including fellow bookseller Barnes & Noble, criticized as “consolidating monopoly power.” Yet, this issue seems to have gone unnoticed throughout the trial before Judge Cote.
In its brief the Government wrote: “[Apple] could instead have remained out of the market and focused on developing other aspects of its business—leaving it to Amazon and other retailers to innovate and improve the e-reading experience on Apple’s devices—as they had been doing for years.” The problem critics have is that the argument seems counterintuitive. In blaming Apple for trying to compete in a market largely controlled by one company through alleged price fixing, the Government seem to miss the fact that Amazon.com was itself in many ways fixing prices prior to the arrival of Apple.
Tomorrow I may not know whom to blame, be it my iPhone or my Kindle, but I look forward to reading the final decision. Which means…update to follow!