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DoJ’s eBook Price Fixing Lawsuit Could Harm Apple’s Customers

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Last Tuesday, Apple made a court filing with the US District Court in Manhattan. The company claims that the Department of Justice’s antitrust lawsuit about the alleged eBook price fixing sends the wrong message to the market. They’ve pointed out that the DoJ is retroactively questioning a “perfectly proper” business strategy.

Apple’s eBook Pricing Antitrust Suit

Last April, DoJ filed an antitrust suit against Apple and a number of publishers at the New York district court. It was alleged that the company convinced the eBook publishers to switch to “agency model” instead of the “wholesale model” sales that Amazon is implementing on its Kindle Store. They also claimed that the company colluded with Simon & Schuster, Hachette, Penguin, Macmillan and HarperCollins to fix the price of their digital books under the said sales model.

However, the company reiterated that they did not collude with the publishers to deliberately increase the prices of eBooks that are purchased through the iBookstore. As stated on last Tuesday’s court filing:

“For Apple to be subject to hindsight legal attack for a business strategy well-recognized as perfectly proper sends the wrong message to the market. The government’s complaint against Apple is fundamentally flawed as a matter of fact and law.”

Although the agency sales model is said to dethrone Amazon as a market leader, Apple claims that it offered an option for the online retailer to have a veritable vacuum of competition. They also alluded that the lawsuit could discourage new market entrants, which could be harmful to consumers.

“The Government sides with monopoly, rather than competition, in bringing this case. The Government starts from the false premise that an eBooks ‘market’ was characterized by ‘robust price competition’ prior to Apple’s entry. This ignores a simple and incontrovertible fact: Before 2010, there was no real competition, there was only Amazon.”

Amazon’s Wholesale Model vs. Apple’s Agency Model

Under Amazon’s wholesale model, they will purchase the eBooks from its respected publishers under the wholesale price. Then they will offer it using their own rate. Biographer Walter Isaacson revealed that the late CEO Steve Jobs said that publishers were disappointed at the online retailer’s method because it continues to sell their titles at a loss.

That’s why they’ve partnered with the company and adapted their agency model. Using Apple’s sales model, publishers can set the prices for their eBooks while the company will have its 30% price cut.

 

Earlier this month, the DoJ cited an email from Steve Jobs as evidence that the company conspired with the publishers to hype fair market prices. However, the Cupertino-based company denied it.

Fighting with Apple are the Macmillan and Penguin Group publishing houses, while HarperCollins, Simon & Schuster and Hachette Book Group have settled their lawsuits out of court.

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