19 Apr

Is Apple Fixing Prices?

by in Articles
Steve Jobs

Over the next three weeks, the U.S. Justice Department will try to prove that Apple, one of the worlds most globally visible companies, has been price fixing e-books for the last four years.

The trial stems from an antitrust lawsuit that was brought to the Justice Department last year. The original lawsuit accused Apple of scheming with large publishers to raise prices of e-books just prior to the iPad’s release. The allegations stated that Apple attempted to force Amazon.com, the marketer of the Kindle e-book and Apple’s main competitors, to raise their prices on e-books. The government claimed that, “Apple wanted to sell e-books to the public, but did not want to compete against the low prices Amazon was setting.” Further, that “Apple knew that the major publishers also disliked Amazon’s low prices and saw Apple’s potential entry as a pathway to higher retail prices industry wide.”

The government claims that this scheme has cost consumers millions of dollars and estimates that the scheme added somewhere between $2-$5 to the price of every e-book sold. The most significant evidence against Apple came from Apple’s creator, Steve Jobs. The former CEO “conceded the price-fixing conspiracy when, the day after publicly announcing Apple’s forthcoming iBookstore, he explained to his authorised biographer that Apple had told the publishers ‘we’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway,’” the government says in court papers.

US District Judge Denise Cote, will be presiding over the case in federal court in Manhattan. The trial began on June 3rd, however, Judge Cote has already stated she “believes that the government will be able to show at trial direct evidence that Apple knowingly participated in and facilitated a conspiracy to raise prices of e-books, and that the circumstantial evidence in this case, including the terms of the agreements, will confirm that.” Judge Cote has stated that her views are not final, but her comments have put an incredible amount of pressure on Apple, who has denied all allegations of price fixing.

As mentioned, Apple has denied every claim made against them. Their lawyers have stated that the claims are “mere allegations, faulty assumptions and unfounded conclusions.” Defense papers offered by the company explain that the company, “set forth the terms of Apple’s business relationship with each publisher; they placed no constraints on how a publisher should deal with other retailers, including Amazon.”

Though Apple remains steadfast in their denial of wrongdoing, Judge Cote has urged Apple to settle. In fact, she has gone as far to suggest that Apple’s chances of prevailing in this case are very slim. In my opinion, Apple’s attorneys have huge mountain to climb. Only time will tell!

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Written by Vishakha P. Patel, 1L New England Law | Boston.