Antitrust judge refuses to suspend Apple ruling, accuses Apple and publishers of "danger of collusion"
A U.S. District Court judge on Friday refused Apple's request to temporarily suspend her own ruling that Apple violated antitrust laws. She also admonished Apple and ebook publishers for what she calls a "seriously continuing danger of collusion," according to the Associated Press.
In July U.S. District Judge Denise Cote ruled that Apple conspired to raise ebook pricing with ebook publishers and called for a damages trial.
Since then the U.S. Department of Justice proposed extreme solutions to address the price fixing issue: requiring Apple to terminate its current deals with the "big five" ebook publishers and make third-party ebook apps able to link to external stores, something against Apple's current app policy. An antitrust monitor would also be appointed.
Apple maintains its innocence, and has protested the Department of Justice's decision as "draconian," calling them "wildly out of proportion" to what Apple was found guilty of doing. The five publishers currently in business with Apple submitted court papers this week, claiming the proposal will "effectively punish" them instead of Apple instead - that raised Cote's ire, and she's taking it out on Apple.
Judge Cote said that any order she signs will be focused on evening the playing field between publishers and retailers, and said that it was clear the five major book publishers don't compete with each other on price.
Before Apple introduced the iPad, Amazon had a stranglehold on the ebook market - 90 perent marketshare. Amazon controlled the pricing too, wholesaling book sales from publishers. Apple's deal with the big five instead used a model called agency pricing, whereby the publisher, not Apple, set the price, and Apple took a portion of each sale.
From Apple's standpoint, they wanted to give publishers a reason to do business with them and customers a valid option besides Amazon's Kindle. This was good for the publishers and the authors, but it ended up costing consumers more - and that's the crux of this case. The Department of Justice's remedy is worse than the disease: as proposed, its plan would effective kill Apple's ability to sell iBooks for the next five years.
And with Apple cut off at the knees from competing in the ebook business, Amazon can resume its monopoly unabated. Do you really think Kindle ebooks are going to remain cheap forever? Amazon's like Walmart - they disrupt other retailers from competing by offering prices too low to match, growing marketshare at the cost of profit. Eventually, though, it becomes time to pay the piper, and you have no alternative but to pay more for the same thing because there's no other option.
It's the boiling frog analogy - changes over time go unnoticed if they happen slowly enough, and by the time you do notice, it's too late to do anything about it.
Why that hasn't raised the eyebrows of the Department of Justice is anyone's guess. Why, exactly, is the government turning a blind eye to blatantly predatory, anticompetitive behavior from Amazon?
One thing is for certain - it doesn't end here. Apple will appeal the ruling, and it'll be a long time before we see an end to this.
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