Apple has denied monopoly charges brought
against it and several publishers by the US Department of Justice. A
spokesperson described the allegations of collusion in fixing the prices of
books on the iBook store as ‘simply not true.’
‘The launch of the iBook store in 2010
fostered innovation and competition, breaking Amazon’s monopolistic grip on the
publishing industry,’ said Apple in a statement.
Apple’s iBook-store: triggered anti lawsuit despite failing to dominate
At the heart of the allegations against
Apple and the publishers, which include Simon & Schuster, Ilarper Collins
and Penguin, is the model used to price eBooks on the iBook store. As with Apps
on the App Store, Apple allows publishers to set their own prices for books and
takes a 30% cut of what the user pays, a pricing system known as the agency
model. This differs from the traditional wholesale pricing system, under which
publishers charge retailers around half the cover price of a book, leaving
retailers free to discount the final price.
Central to the agreement, and at the heart
of the allegations of collusion, is a clause that prevents publishers from
selling eBooks at a lower price on other platforms. Any title offered for sale
as an iBook must be priced no higher than in other outlets. This arguably meant
that publishers who chose to sell on the iBook store were agreeing to control
the prices at which their books could be sold elsewhere, preventing retailers
from setting their own prices. The publishers are also alleged to have met
privately to discuss pricing, but Apple wasn’t involved in those meetings,
which could have broken the law.
IPad owners can get Apple's iBook’s eBook software free and buy books using
the iBook store
Three days after the launch of the iBook
store, Amazon switched to an agency pricing model for its existing Kindle
eBooks offering, and prices for major new releases and bestsellers rose from
$9.99 to around $14.99. According to Sharis Pozen, heading of the DoJ’s
anti-trust division: ‘these action droves let me be clear: when companies enter
agreements that prevent price competition, which is illegal.’
Three publishers, Hachette, Simon &
Schuster and HarperCollins, settled with the DoJ within days of the charges
being brought. Amazon was quick to welcome the settlements, describing the
DoJ’s victory as ‘a big win for Kindle owners’ and adding: ‘We look forward to
being allowed to lower prices on more Kindle books.’
Writer and Author’s Guild president Scott
Turow took a different view. ‘Amazon was using e-book discounting to destroy
bookselling, making it uneconomic for physical bookstores to keep their doors
open,’ he wrote in an open letter to Guild members. Turow added that the US
Government ‘may be on the verge of killing real competition in order to save
the appearance of competition’.
Since Amazon remains the dominant player in
eBooks, it seems odd that antitrust enforcers would pursue a case that’s in its
interests and against those of other players in the market. John Sargent, CEO
of Macmillan - which, along with Penguin, intends to fight the DoJ in court -
said ‘the terms [of the proposed settlement] could have allowed Amazon to
recover the monopoly position it had been building’.
“Let me be clear: when companies enter
agreements that prevent price competition that is illegal”
