The United States has Sued Apple Inc. (NASDAQ:AAPL) in an Anti Trust Suit pertaining to the company's book store. The suit, filed by the Department of Justice in New York District Court, was filed against Apple, HarperCollins, Penguin, Hachette, Simon and Schuster and Macmillan. The companies deny that they colluded to fix prices in the book market and instead claim that their pricing actually improves competitiveness in the market. The suit, if concluded clearly, could form the basis for much of online media publishing law for some years to come.
The model that the Apple iBooks store uses is different from the former preeminent online book store. Apple allows publishers to set their own prices and takes a 30% margin as their revenue for providing the platform. Amazon buys books wholesale from sellers and sets the book prices itself, a model much more analogous to a traditional book store. Apple calls its system the agency model. The model's possible infringement of Anti Trust law first came to light in March when the Justice Department warned Apple and the publishers that they would be sued over it. Information yesterday warned that the process of preparation was to end and the Justice Department were ready to file the suit.
The reactions of the companies have been quite different. HarperCollins, Hachette and Simon and Schuster are all in settlement talks with the Justice Department while Apple Macmillan and Penguin seem ready to contest the accusations in court. The mixed reactions from the defendants shows this case could be quite complex and there probably won't be any cut and dry ruling for some time. Apple is no stranger to long court battles. It is currently in litigation with Android phone and tablet manufacturers around the world over patent infringement allegations. This new suit could go on for a long time due to its importance to Apple's business.
The law suit will be very important to Apple as the company vies for control of several types of media in the online marketplace. The company has long maintained a high level of control of the online music with its iTunes platform and with the release of its mobile devices is seeking to control distribution of different types of media. The company, which has seen a blistering run recently, will certainly be stressed by the most recent anti trust law suits as they look to legal vulnerabilities in its other media platforms.