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Apple's E-Book Story Still Largely Unwrit

Apple's E-Book Story Still Largely Unwrit

Any pain that Apple may feel as a consequence of losing the e-book price-fixing case isn't likely to translate into consumer gains -- at least, not in the short term. Apple's deals with publishers allowed it to become a strong competitor in the e-book space, and prices aren't likely to slide now that they've been forbidden. Furthermore, Apple hasn't given up the fight -- it plans to appeal.

By John P. Mello Jr. MacNewsWorld ECT News Network
07/12/13 5:00 AM PT

A federal court's ruling that Apple violated antitrust laws when it worked with the publishing industry to manipulate the price of e-books probably won't benefit consumers in the near term.

"I don't think we're going to see prices come down immediately as a result of this," Yasha Heidari, managing partner at the Heidari Power Law Group, told MacNewsWorld.

"What I do think you will see is some bona fide competition between the publishers now that they realize that if they try to do any of this collusion in the future, they'll get bitten," Heidari added.

All the major publishers involved in the lawsuit filed by the U.S. Justice Department in April 2012 settled with the agency out of court. They included Hachette, Harper Collins, Simon & Schuster, Penguin and Macmillan.

Unlike the publishers, Apple decided to fight the DoJ, and it lost. A federal judge in Manhattan ruled Wednesday that it had used agreements with publishers to fix the price of e-books and boost the sales of its smartphones and tablets, as well as force its major competitor in the e-book market, Amazon, to raise the prices of the e-books it sold.

Apple and Amazon did not respond to our requests to comment for this story.

Benefiting From Bad Behavior

In arguing its case before the court, Apple claimed its machinations with the publishers benefited consumers because it prevented Amazon from establishing a virtual monopoly in the market. The court rejected the notion that collusion to increase competition was justified.

"The court got it right," Joseph P. Bauer, a professor of law at Notre Dame Law School, told MacNewsWorld.

"There's no exception to price-fixing for new entrants to a market -- even in a market where the established company has 60 or 70 percent of the market," he emphasized.

"In the short run, this may work out to Amazon's benefit," continued Bauer. "Amazon may be able to reassert its position in the market because of this ruling."

However, since Apple got into the market about three-and-a-half years ago, it has established a competitive market position, he noted.

"It has benefited from its unlawful behavior over the three-and-a-half year period," Bauer said. "It's a strong, viable competitor in the market."

Supreme Court Strategy?

Apple hasn't given up on its fight with the DoJ. It has announced it will appeal the trial court decision. That's bound to delay any immediate impact the ruling might have on the market.

However, Apple's attempt to overturn that ruling on appeal could be difficult.

"As far as a substantive ruling on appeal is concerned, Apple is going to have a very hard, uphill battle," Heidari said.

That hard road of appeal may be what Apple wants, though.

"Apple's strategy may be to try and get this in front of the Supreme Court, which is more conservative," Gene Zelek, an attorney with Freeborn & Peters, told MacNewsWorld.

"If that's their long-term strategy, it's at least three years away," he added.

Full Circle

In their agreements with the DoJ, the publishers agreed to abstain for at least two years from any deal with retailers, including Apple, that "restricts, limits, or impedes the e-book retailer's ability to set, alter, or reduce the retail price of any e-book."

That prevents the publishers from forcing booksellers to accept agency agreements, under which the publishers set the selling price of the book.

If Apple drags its case out long enough in court, the agency model that got the company and publishers in hot water in the first place, could be resurrected by the publishers before the DoJ case is finally settled, which would pretty much bring things to where they were when all this litigation started.

"The big question for Apple is whether any of this will affect its other lines of business, such as its App Store, which uses an agency model," Zelek said.

"My response to that is not necessarily -- unless there was a conspiracy against app providers," he continued, "and, to my knowledge, there's none of that present."

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