Apple Appeals Last Year’s E-Book Antitrust Ruling

Although Apple was found liable for conspiring with seven book publishers to fix e-book prices, the company will begin its appeal of the verdict. As Daniel A. Crane, associate dean for Faculty & Research and professor of law at the University of Michigan Law School, points out, the record suggests that Apple’s actions may have actually benefited e-book customers rather than harm them (via Re/code).

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The court found Apple’s moves to be anti-competitive, because Apple conspired with publishers to switch to a new agency model and negotiated a so-called Most Favoured Nation deal, which prohibited publishers from offering better terms than Apple’s.

Crane says the court’s decision was questionable:

There are important distinctions in antitrust law between vertical and horizontal agreements and collective and unilateral decisions. Horizontal price-fixing agreements among competitors are considered illegal per se — they are condemned without any inquiry into the actual effects of the agreement. On the other hand, vertical agreements — as between a publisher and a distributor — are adjudged under a flexible “rule of reason” that considers all of the relevant facts about whether the restraint harmed or helped competition and the welfare of consumers. Here, there was ample evidence that Apple entered into a series of vertical agreements with the book publishers that were in its individual self-interest, regardless of any alleged conspiracy among the publishers.

The professor believes that the court mistakenly condemned Apple’s conduct as per se illegal. More importantly, the court failed to pay attention to evidence that suggested the shift from the wholesale model to agency model resulted in a drop in the average price of e-books.

Also, the court failed to consider that Amazon was strategically using low and “arguably anti-competitive” e-book prices to “entrench the entire Kindle ecosystem.” The iBookStore and the iPad brought healthy competition, as consumers benefited from the introduction of the iPad and the Nook.

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