Apple goes to trial over eBook price-fixing
Cupertino iMaker faces US Justice Dept accusations of collusion with publishers
Apple Inc faces legal action initiated by the US Justice Department that alleges collusion with US publishers to break Amazon.com’s control over eBooks and raise prices, Reuters reported.
"This case will effectively set the rules for Internet commerce," predicted David Balto, who previously served as a policy director for the US Federal Trade Commission.
The Justice Department first filed its action in April 2012 against Apple, Pearson Plc's Penguin Group, News Corp's HarperCollins Publishers Inc, CBS Corp's Simon & Schuster Inc, Hachette Book Group Inc and MacMillan. The publishers named with Apple in the suit represent five of the top six publishers in the US.
However, Apple will now stand alone in a trial that begins today, after the publishers agreed to drop their practice of blocking discounts on wholesale orders and share a $164m payout that will benefit consumers. The US government is seeking an order to block similar practices by Apple in the future, rather than pushing for damage payments.
"I believe that the government will be able to show at trial direct evidence that Apple knowingly participated in and facilitated a conspiracy to raise prices of e-books," US District Judge Denise Cote, said in a preliminary hearing on May 23.
Apple entered the eBook market in 2009 with the launch of its iPad tablet. At that time Amazon dominated the industry, selling titles at a loss in order to promote its Kindle reader.
Steve Jobs, who died in 2011, told his biographer that, "we told the publishers, ‘We'll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that's what you want anyway'".
Apple claims it had no knowledge of collusion between publishers before it entered the marketplace, and argues that upon the launch of its iBookstore, prices have decreased from an average of $7.97 to an average of $7.34.