Apple allegedly showed Amazon some love before allegedly colluding against them. This week, the Department of Justice’s (“DoJ”) complaint against Apple and six publishing houses primarily asserted a per se violation of the Sherman Antitrust Act.
Three of the six publishers named in the lawsuit, Hachette, HarperCollins and Simon & Schuster, settled with the DoJ immediately. The other publishing defendants, MacMillan, the Penguin Group, the Penguin Group USA, in addition to Apple, have vowed to fight.
The DoJ’s complaint reads like a script for an episode of the TV show White Collar. The lawsuit describes how the publishing and Apple executives met to confer “in private rooms for dinner in upscale Manhattan restaurants,” and tried to conceal communication through “double-delete” e-mail techniques, while constantly complaining about Amazon’s power over the e-book market.
The lawyers and public relations team representing Apple maintained their client’s sleek and simple brand with a sleek and simple answer: a four sentence response. The allegations hinge on whether publishers and Apple agreed to adopt a policy that unlawfully coordinated the price of newly released e-books in Apples’ iBookstore. Apple, around the time it launched its iPad, was trying to confront the Amazon Kindle’s dominance of the e-book market.
Will the DoJ prevail against Apple? I don’t think so; we’re likely going to see a settlement. Apple was a new entrant to the digital book market in 2010 and was trying to compete with the only major player, Amazon. Apple will assert that it was actually being competitive by its actions rather than anti. Moreover, the DoJ likely will have difficulty proving Apple spoiled competition when 90% of the e-book market was controlled by Amazon at that time, and since Amazon still maintains 60% of the market today.
Furthermore, antitrust liability likely can only be attributed only to the publishers, rather than Apple. The publishers all operate in the same sector and are supposed to compete with one another. Industry price fixing and secret price policies are what federal antitrust laws were created to prevent. If Apple devised or coordinated the scheme, they would share liability with the publishers. However, if the publishers merely conjectured on Apple’s desires, or if the Apple link cannot be established, Apple’s potential liability would diminish dramatically.
The DoJ is filled with smart lawyers and they know their case is nowhere near a slam dunk. There likely will be extensive negotiation between the litigating publishers, Apple and the DoJ. I bet we see a settlement that all parties can accept.
Emboldened by the lawsuit, Amazon declared: “We look forward to being allowed to lower prices on more Kindle books.” We’ll see how long that lasts.