Apple's latest setback won't bring e-book prices down

Despite Apple's defeat in the federal price-fixing suit, book publishers have won at least one battle with Amazon

Published July 10, 2013 7:22PM (EDT)

A U.S. District Court ruling against Apple today is not quite the end of the Department of Justice's e-book price-fixing suit against the tech giant and six of the largest book publishers in the country, but it's pretty close. Apple will certainly appeal, but most observers feel that there's little chance that it'll win. The five all settled before the ruling.

Judge Denise Cote affirmed that Apple "and five book publishing companies conspired to raise, fix, and stabilize the retail price for newly released and bestselling trade e-books" in 2010. On what is perhaps the most contested aspect of the case, Cote declined to say whether she thought Amazon had been "engaging in illegal, monopolistic practices" by selling most e-books at a loss in 2010. That, she insisted, was irrelevant, because "the remedy for illegal conduct is a complaint lodged with the proper law enforcement offices or a civil suit or both." Suspicion that the intent of Amazon's e-book pricing strategy was predatory or monopolistic, she wrote, does not constitute "a defense to the claims litigated at this trial."

What will this ruling change for consumers? Surprisingly little. Andrew Albanese, author of "The Battle of $9.99: How Apple, Amazon and the 'Big Six' Publishers Changed the E-Book Business Overnight," wrote in an email, "E-book prices are not going to go down, at least not as a result of this ruling."

After settling with the DOJ, publishers were allowed to continue selling their e-books via retailers using a commission-based system called the agency model. However, the agency model typically allows publishers to set the retail prices of their titles. Under the terms of the settlement, retailers are now allowed to discount these e-books, but only until 2014. "After the DoJ sanctions end in 2014," Albanese wrote, "publishers will largely have control over final consumer prices, and thus, in 2014, you will likely see e-book prices rise, depending on other market factors, of course."

Publishers were also ordered to issue e-book credits to consumers, and it's possible Apple will be obliged to do the same. This, according to Albanese, amounts to a "court-ordered promotion," since the money can only be spent on more e-books. The bizarre irony is, despite having to settle the case and even despite the defeat of Apple, the publishers got more or less what they wanted, which is a sales arrangement that allows them to control the prices at which their books are sold.

Further Reading

U.S. District Court Judge Denise Cote's ruling on United States v. Apple

Salon's primer of the great e-book price war

By Laura Miller

Laura Miller is the author of "The Magician's Book: A Skeptic's Adventures in Narnia."

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