Apple's appeal in Judge Denise Cote's ruling that it engaged in a conspiracy to artificially raise ebook prices goes to court today. For Apple, it's a chance to clear its name, but for the book industry the outcome represents a chance to end what amounts to Amazon's government sanctioned monopoly on the book market.
Apple set to appeal ebook antitrust ruling today
The U.S. Department of Justice filed a lawsuit against Apple and several major book publishers alleging they colluded to drive up book prices by forcing retailers to change from the wholesale model where stores set book prices to an agency model where publishers set the price. Apple, Penguin, MacMillan Simon & Schuster, HarperCollins, and Hachette Book Group where all named in the suit. The publishers all settled out of court to avoid potentially crippling fines, leaving Apple to face off against the DOJ on its own.
Amazon was selling books below cost at the time and forcing its competitors out of the market because they couldn't compete in a market where they lost money on every sale. Publishers were looking for a way to restructure how books were priced, and the iPad and iBook Store came along in 2009 at just the right time to make that a possibility.
Apple went to each publisher in hopes of swinging deals to bring ebooks to its unreleased iPad, although the company wasn't pinning its tablet launch on whether or not books were available. Penguin CEO David Shanks testified at Apple's trial saying the company had a "take it or leave it attitude" towards the ebook market.
Apple claimed it was really Amazon abusing monopoly power by pricing books well below cost to drive competitors out of the market. The company presented what seemed to be a compelling case, but Judge Cote ultimately sided with the DOJ, calling Apple the ringleader in a campaign to take the ebook market from Amazon.
That ruling included restrictions on Apple and book publishers that essentially gave Amazon carte blanche to do as it pleases in the market. With its government-endorsed monopoly in place, Amazon delayed book shipments to force Hachette into lowering the prices it pays.
Apple vowed to fight Judge Cote's ruling, and that's exactly what's happening today. Apple will present its case in the Federal Appeals Court where it hopes its arguments are more convincing this time around.
Considering how strong Apple's case seemed to be, it was something of a surprise that Judge Cote ruled completely in the DOJ's favor and went so far as to place a court appointed monitor inside the company to oversee contract negotiations.
The appeals court has the opportunity to overturn Judge Cote's ruling—assuming it buys Apple's arguments—and potentially break Amazon's monopoly control over the book market.
Overturning Judge Cote's ruling isn't the only option open to the court. It could uphold her ruling, or send the case back to the lower court for review, which would drag out any potential resolution even longer.
Until then, Apple and the book publishers are essentially hamstrung while Amazon keeps its tightfisted control over the book market.