E-Book
Judge Weighs Restricting Apple E-Book Negotiations
The federal judge who found Apple Inc. liable for fixing the price of e-books said Friday she is considering an order that would prevent the technology company from negotiating with more than one publisher at once.
By doing so, U.S. District Judge Denise Cote would eliminate the possibility of coordination among publishers as they enter into agreements to sell their e-books on Apple devices.
Judge Cote made the proposal during a hearing Friday in federal court in Manhattan, roughly a month after finding that the Apple provided five of the largest publishers "with the vision, the format, the timetable and the coordination that they needed to raise e-book prices" in violation of federal antitrust laws when the company entered the market in 2010.
Under Judge Cote’s proposal, Apple would be forced to stagger its negotiations with publishers over the course of several years.
For two years, none of the publishers would be able restrict Apple’s ability to discount e-books. After that, Apple could begin negotiations with one publisher, and then after an interval of months to years, it could negotiate a new agreement with another publisher, and so on.
Judge Cote said she would make a decision after the parties had time to consider her proposal. A hearing could take place later this month.
Judge Cote said she was seeking to impose conditions on Apple that would ensure price competition for e-books without disrupting innovation at the second-most valuable company in the world.
"I have no desire to regulate the App Store," Judge Cote said.
Apple denies wrongdoing and plans to appeal her finding that it violated antitrust laws, which followed the company’s high-stakes gamble to go to trial even though the publishers settled similar charges.
Judge Cote declined Friday to suspend her ruling pending the outcome of the appeal.
Apple faces another trial to determine the amount of damages it owes in a lawsuit against the company brought by 33 state attorneys general, who are seeking to recover money on behalf of consumers who paid higher prices for e-books.
In its civil antitrust lawsuit, the Justice Department said Apple rallied the publishers around a pricing model that resolved a threat to their already thin margins: Amazon.com Inc.’s $9.99 price for best-selling and newly released e-books.
Apple’s agreements with the publishers let them set the price of their e-books, unless one of Apple’s rivals was selling an e-book for less. In that case, the publishers had to offer the lower price in Apple’s store, taking a hit on their margin.
Rather than discount Amazon titles in Apple’s store, the publishers approached the e-retailer and demanded that it also switch to the so-called agency model, threatening to withhold e-books if it didn’t, an Amazon executive testified during the three-week trial. Amazon relented, and in short order e-book prices for many new titles and best sellers jumped to $12.99 or more.
(Published by The Wall Street Journal – August 10, 2013)