Newspaper article The Christian Science Monitor

E-Book Trial: Why Is Apple in Court Yet Again?

Newspaper article The Christian Science Monitor

E-Book Trial: Why Is Apple in Court Yet Again?

Article excerpt

The Apple e-book trial, U.S. v. Apple, continued Thursday with testimonies from the Google director of strategic partnerships, Thomas Turvey, the VP of Kindle content, David Nagar, and Kindle's general manager, Laura Porco.

In the trial, Apple is accused of colluding with five publishing companies -- Hachette, HarperCollins, Simon & Schuster, Macmillan, and Penguin -- to raise the prices of e-books back in 2010, when the media giant first entered the market.

This means that Apple would have created a horizontal price- fixing, says Harry First, the director of New York University Law School's Competition, Innovation, and Information Law Program. While it would be legal for the company to set a firm price independently with multiple companies, Apple allegedly set standard prices in simultaneous dialogue with five different publishing.

"It's a hub and spoke conspiracy," Mr. First says. "Apple is in the center and then five publishers make up the spoke," connected by Apple.

In 2009, Amazon controlled 90 percent of the e-book market, according to Reuters. The company would buy books wholesale from publishers and then resell them at a baseline price of $9.99. Even though this retail model sometimes meant that Amazon lost money on book sales, the hope was that Kindle would be able to corner the e- book market before raising prices, says Jim Millet from Publishers Weekly.

Even though the model did not directly hurt publishing companies, which still received the same payment from Amazon regardless of how much money Amazon charged, publishers were concerned that Amazon's lower prices would "devalue the price of the print book, causing the total revenue to shrink," Mr. Millet says. Overtime, consumers might turn to e-books, forgoing the hardcopies, taking away a profitable area of sales for the companies, he says. While this could be damaging to publishers in the long run, hardcopy books are only a fraction of Amazon's assets, meaning that in the long run, Amazon doesn't care about the damage it might do to book publishers, Millet says. …

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