Apple E-book Antitrust Lawsuit - Essay Example

? Apple E-book Antitrust Lawsuit Apple E-book Antitrust Lawsuit Apple publishers are one among the largest book publishers in the European Union. Together with other several large books publishing companies, they were hit by the U.S. Department of Federal antitrust lawsuit for purportedly conspiring to fixing the prices of the e-books. The United States Department of Justice filed a complaint that more than five publishers planned to fix the prices before the launch of the iBookstore and the iPad tablet in 2010. They forced the Amazon to increase the e-books prices on the rival kindle. The five publishers were HarperCollins, Simon & Schuster, Penguin, Hachette, and Macmillan. HarperCollins, Hachette, and Simon & Schuster (owned by CBS) have cleared with the department of justice. Macmillan and Apple have declined to negotiate (Banks 127). They have said that they never colluded in the increase of the e-books prices. The publishers had already complained that the $9.99 price for e-books set by the Amazon was greatly discounted. This was before the introduction of the iPad and the iBookstore. After the iPads were unveiled into the market, Apple prices were set at $12.99 together with a Californian-based company (Cupertino).This allowed publishers to set the ‘agency model’, which was the individual prices for companies. Amazon took an immediate action to allow publishers to set their own prices too. This rose up the digital edition prices (Banks 129). The major allegations toward Apple Company are that it facilitated the collective efforts of the publishers to terminate retail price competition because it encouraged the agency model among the retailers. According to the CNN money report, the conspiracy was first alleged in a class action lawsuit in California District Court by kindle consumers during last summer. They argued that booksellers were terrified by the discounted price of the e-book structure launched by Amazon in 2007 (Ceruzzi 415). The department of justice could lose the e-book antitrust suit while targeting the Apple Company. The alleged suit stretches the antitrust law and could probably end in defeat. In 1982, embarrassed department of justice confessed its antitrust lawsuit against IBM.It abandoned the case because the case was “without merit” (Ceruzzi 437). In 2001, Microsoft Company had been divided into two different companies by a federal appeal court because of the department ambition to formulate the antitrust law. According to Geoffrey Manne, a lecturer at the Lewis and Clark School in Oregon, the case is harder against Apple than the publishers. As stated in the (justice department complaint 36), Apple was not present at the breakfast meeting at the London hotel and dinners at the Manhattan’s posh Picholine restaurant. He also said that it is not good for competing firms to meet without the presence of lawyers (Ellig 270). Other than Apple, the justice department has a better case against publishers. Dominick Armentamo; a professor in economics at Hartford University argued that the chief executive officers of the publisher who met at the hotel rooms to discuss the price changes can also settle the prices. According to Richard Epstein, a legal scholar and a law professor at the University of NewYork, there are difficulties in the department of justice case against the publishers because it will take time to hear the whole case. He says that the charge is a mistake. The attorney general (Eric Holder) accused the defendants to the case of creating a “conspiracy.” The version of events used by Holder did not blame the publishers on the agreement toward specified prices. If in any case they agreed on something, it was on the agency model. It meant that Apple’s iBookstore was better as compared to the Amazon.com wholesale model (Page and Lopata 340). Apple and other publishers had benefited from the serial precedents of the supreme court of the United States as from 1970s.This is the issue that the department of justice is trying to avoid. According to the case of BMI vs. CBS in 1979, the court rules in the direction that not every deal between the competing firms will have an impact on price changes. In 2007, the court said that manufacturers enforce minimal retail prices. This is an accusation to publishers with e-books (Eisenach and Lenard 301). Justice department in the United States has taken sides with the “monopoly” e-bookseller. The Californian-based computer maker does not enjoy the market share in e-books but the Amazon.com does. Amazon remains the world’s largest digital book retailer. In 2010, it boosted the market share to as much as 90%. This market power alarmed the publishers who stroke a deal with Apple CEO (Steve Jobs) to sell the digital books on the iPad some days before its announcement in January. Strengthening new competitors in the market against the potential investors is terrifying to consumers. According to the consumers electronic association, they added to the statement stated that the confusing antitrust laws are in use to take on new entrants into the market with just two years to have market power to set the prices (Gordon 217). John Sargent, the Chief Executive Officer denied any wrongdoing and said that he did not agree , the justice department proposal because will give too much power to Amazon Company. After careful consideration, the terms could have allowed Amazon to recover the monopolistic power it enjoyed before the introduction of the agency model. The president of the authors guide, Scott Turow, thought critically when he argued that Amazon pricing were designed to move traditional bookstores out of the business and supported that the agency model is reducing Amazons monopolistic power on e-books by instituting stiff competition (Hovenkamp, Janis and Lemney 61). Amazon used e-book discounting as a weapon to destroy bookselling, which made it less costly for bookstores to be kept open. Two years after the introduction of the agency model, Amazon is losing its monopolistic powers on the e-book industry. It has lost its market share from 90% up to 60%. Brick and mortar who have formed a partnership witogle have starting to compete such that the loyal customers can purchase books from those sights with similar price as that of Amazon. The business has also benefited the direct selling authors because Amazon had doubled its royalty rates to beat competition. There is an irony in the sense that the government is trying to cut down the genuine competition in the industry by taking sides with the Amazon Company. The Amazon spokesperson said that they would use the winning strategies to cut down the competition. The kindle owners will lower the prices of the kindle books (Rubini 518).There should be an equivalent e-mail to a smoking gun that ultimately surfaces, probably those quips from Microsoft directors during the 1990s that rudely cut down the air supply of Netscape’s and were used as evidence in the department of justice antitrust case. Therefore, the department of justice should prove that Apple Company was involved in the original arrangement. In a civil antitrust complaint, the Justice Department assumed that CEOs of the publishing firms met frequently in hotels and private dining rooms to discuss on how to deal with discounted e-books by the Amazon Company. The suit states that they raised e-book prices to $12.99 or $14.99.The government alleges that the defendant also fixed the prices of e-books (Evans 456). Electronic books can be transferred anywhere within seconds. The publishers want to keep their role as the gatekeepers to ensure that the trade associated with the books is profitable. Companies in the United States face private class action charges pending in the court and could increase the damages. The damage estimates of dollars range from tens of millions to more than hundreds of millions currently. This was according to the Consumer Federation of America. According to the lawsuit, none of the publishing companies could solely force Amazon to admit to the new proposal. A single business would be at a risk of exploitation by Amazon and could lose its sales if it were to raise individual prices. Apple executive gave the other publishers solidarity and assurance in 2009 and 2010. Apple Chief Executive Officer wrote in a December 2009 e-mail that the company’s goal was to ensure that Amazon returns to the desired sales practices. He added that for them to succeed, the other publishers should join them (Page and Lopata 277). The government argued that the publishing firms were aware that they were not doing the right action but also went ahead and communicated with instructions to “double delete” email. The suit stated that as Amazon started reaching out to the authors. A publishing executive said that he was not interested in the potential completion and will therefore “screw Amazon”. The United States complaint contained variety of omissions and misstatements. In conclusion, the major question is to if the Apple Company will survive in the business if it matches with the Amazons discounted prices. It has also less market share as compared to the Amazon and immaterial to its business. It is suggested that it may be willing to abandon the entire group to Amazon. They are also likely to change their pricing policy (Sarah Rotman Epps, an analyst with Forrester Research). Apple customers will be in a position to read e-books on the company’s devices whatever the case happens to their bookstore (Hovenkamp,Janis and Lemney 52). Although Forrester argues that more than half of individuals who own iPads use them to read e-books, most of them use third party iPad application like the Kindle application. The resolution allows publishing companies to agree on the limits on the number of retailers to discount and ensure that they cannot lose currency generally on e-book sales. Besides, Amazon may be vigilant about across-the-board discount rates because of its thin profit margins. Works Cited Banks, Theodore. Distribution Law: Antitrust Principles and Practice. New York: Aspen Publishers Online, 1998. Print. Ceruzzi, Paul. History of Modern Computing. 2 edn. New York: MIT Press, 2003. Print. Eisenach, Jeffrey and Lenard, Thomas M. Competition, Innovation and the Microsoft Monopoly: Antitrust in the Digital Marketplace. New York: Springer, 1999. Print. Ellig, Jerry. Dynamic Competition and Public Policy: Technology, Innovation, and Antitrust Issues. London: Cambridge University Press, 2001. Print. Evans, David. Microsoft, Antitrust and the New Economy Selected Essays. New York: Springer, 2002. Print. Gordon, Richard. Antitrust Abuse in the New Economy: The Microsoft Case. London: Edward Elgar Publishing, 2002. Print. Hovenkamp, Herbert, Janis and Lemley, Mark. Ip and Antitrust: An Analysis of Antitrust Principles Applied to Intellectual Property Law. Volume 1. New York: Aspen Publishers Online, 2001. Print. Page, William and Lopata, John. The Microsoft Case: Antitrust, High Technology, and Consumer Welfare. New York: University of Chicago Press, 2007. Print. Rubini, Luca. Microsoft on Trial: Legal and Economic Analysis of a Transatlantic Antitrust Case. London: Edward Elgar Publishing, 2010.Print. Read More