Apple Heads to Court Over Alleged Price-Fixing of E-Books

applestore-2(Ping! Zine Web Tech Magazine) – Apple went to court on Monday to contest claims the company was involved in a price-fixing scheme for online e-book sales.  The civil suit, filed against Apple and five major publishing companies, alleges an alternative agency model was used to drive up prices.

Attorney John Riccione, a corporate litigation attorney with Aronberg Goldgehn in Chicago, explains that horizontal price-fixing occurs when a group of competitors agree to sell their product at a given value, using the lack of competition to keep prices artificially high.  “In this case, five of the largest U.S. publishing houses all told their retailers at the same time, ‘We’re switching to an agency model, and these are going to be our two price points,’ which quickly aroused suspicions at the Justice Department,” says Riccione.

All five publishers moved swiftly to settle their claims when the allegations arose, leaving Apple as the only defendant with enough financial and legal assurance to face trial. This week, prosecutors will argue that the tech giant acted as “ringmaster” for the deal, using the launch of their new platform as an excuse to bring publishers together and negotiate a mutually beneficial deal—one that cost consumers millions. Much of the evidence is circumstantial, such as the timing of the switch and public statements by former CEO Steve Jobs that express confidence in the agency model. But the Justice Department says it will also present emails between Jobs and the publishers, as well as testimony that Apple orchestrated the deal.

Last week, current Apple CEO Tim Cook told a different story, “The e-book case to me is bizarre. We’ve done nothing wrong there…we’re not going to sign something that says we did something we didn’t do.” Riccione speculates that Apple may have a viable defense if they can show they were only indirectly involved in the deal, “Since there’s no possible competitive justification for horizontal price-fixing, it’s one of the easier antitrust charges to prosecute–the DOJ just has to establish that an agreement was made. The problem is, Apple is not in direct competition with the publishers, so their involvement in the agreement, whatever it was, doesn’t carry the same clear benefits or liability. Prosecutors will have to prove that Apple undertook a large-scale, concerted effort to bring all these publishers into collusion, and circumstantial evidence may not be enough.”

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