The People vs Apple

Apple (Nasdaq: AAPL) has been accused of acting as ringleader of a price-fixing racket, enlisting half a dozen market-dominating companies in a conspiracy to profiteer through anticompetitive practices and artificial price inflation. The market: e-books. The U.S. Department of Justice has sued Apple along with a handful publishers, accusing them of orchestrating a sales agreement that effectively changed the business model under which e-books were sold. The syndicate, according to the DoJ, pushed an agency model upon the industry, basically limiting retailers to selling e-books only for the prices named by publishers, as opposed to a wholesale model, which would allow retailers to establish their own prices. Apple rounded up the major publishers named in the suit and convinced each of them to sign functionally identical agency contracts, according to the DoJ. That would eliminate price competition and facilitate Apple's habit of taking a 30 percent cut of the total revenues earned through downloads of things like apps and e-books. Those publishers then allegedly turned around and demanded that everyone else who sold their e-books jump on the agency bandwagon too. One of the biggest losers in Apple's alleged dealings with publishers was Amazon (Nasdaq: AMZN), which lost some control over how it priced its e-books. About half the publishers named in the suit folded immediately and settled with the DoJ. But Apple and others fought on, and it seems that Cupertino may have a good shot at getting off the hook, for the most part. Even if Apple were the syndicate hub, it's not much of a book publisher itself, so it might be more difficult for the DoJ to sell a case that it was responsible -- to the same degree as publishers -- for price-fixing in an industry in which it participates only indirectly. So Apple may not have to pay as much to make this go away. The other publishers face a tougher fight. Publishing is their game, and as some of the biggest names in the business, it'll be easier to prove they were colluding to fix prices. There's also a question of just how much damage this alleged activity really caused. Apple's huge, and the publishers involved are among the biggest in their field, but price-fixing is an accusation that's usually shot at companies that are already enormously dominant in their fields. And in the field of e-books, Amazon happens to be the top player.