The Ongoing E-Book Lawsuit: Price-Fixing in the 21st Century

Image

Earlier this April, Time reported that the Department of Justice filed an antitrust lawsuit against Apple and five of the nation’s largest book publishers, including Hachette SA, HarperCollins, Macmillan, Penguin, and Simon & Schuster, for fixing e-book prices.

Price-fixing occurs when two or more people agree to “fix” pricing for products or services for mutual benefit. Imagine, for instance, if the foremost retailers of a given product, say a new book, agreed to set the price at suggested list, foregoing discounts and effectively eliminating price-based competition. The retailers would enjoy high margins on the book, while consumers would be forced to pay the same price everywhere. Thus, with controversial exceptions made for cartels like OPEC, price fixing is illegal in several countries, including the U.S. under antitrust law.

Apple engaged in such tactics to combat Amazon, which had been pricing new e-books at the very low cost of $9.99. As a result, there has been a strong pushback against the Department of Justice for targeting Apple and not Amazon, which critics claim forced other companies into a corner by engaging in predatory pricing.

In an op-ed published in last week’s Wall Street Journal, U.S. Senator Chuck Schumer (D-NY) said that the lawsuit against Apple and the publishers should be dropped.

The suit will restore Amazon to the dominant position atop the e-books market it occupied for years before competition arrived in the form of Apple. If that happens, consumers will be forced to accept whatever prices Amazon sets.

But the Department of Justice announced today that it will not back down. The trial is set for June 2013. The future of a burgeoning industry remains murky.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: