Apple Inc. (NASDAQ:AAPL) went on trial in the U.S. District Court for the Southern District of New York on Monday in an action brought by the US department of justice alleging that the company conspired with publishers to raise the price of e-books in the US.
Though the outcome of the court battle may not result into a fine to be faced by the Apple manufacturer, it may settle what deals online retailers can enter into with content owners. The five publishers, HarperCollins, Simon & Schuster, Penguin, Hachette, Macmillan and Random House, that DOJ dealt with last year have already settled the case with the US department of justice.
Apple Inc.’s E-book Pricing Consipiracy?
The DoJ’s case depends on the fact that Apple Inc. (NASDAQ:AAPL) conspired with the publishers to adopt an ‘agency pricing’ model that could result in less competitive e-book prices. As the DoJ alleges that the reduced competition made it harder for stores to differentiate themselves on price, it sought to restrict the company from engaging into similar practice in future.
“What we’re seeing is a pricing free fall, and I don’t see any source that’s putting the brakes on that,” said Peter Hildick-Smith, president of research firm Codex-Group.
“Because e-books aren’t subject to the same economic constraints as a print book, you can publish a few thousand words and sell it for 25 cents or even free,” said Michael Norris, a senior analyst for Simba Information, a publishing market intelligence firm.
Interested in seeing the Government win this case, Amazon has already benefited from the publishers’ settlements, since that deal has returned pricing control to the retailer. Amazon.com, Inc. (NASDAQ:AMZN) has sold books on as low as $9.99, making the most of the time, accounting for about 45 percent of e-books sold.
Should Apple Inc. (NASDAQ:AAPL) lose the battle, it would deal an even more significant blow to one of Amazon.com, Inc. (NASDAQ:AMZN)’s biggest rivals.