Tuesday, March 13, 2012

Apple fixing book prices?

So says the US Department of Justice, according to WSJ.  What we cannot dispute: as Apple was introducing the iPad in 2010, it signed a contract with five leading book publishers under which (1) publishers could set whatever price they wanted, (2) Apple would take a 30% cut, and (3) publishers would not allow rival retailers to sell at a lower price. 

One might view the last item as an attempt to fix prices, although it would be subject to voluntary contracts between publishers and retailers.  In an op-ed yesterday, WSJ's Gordon Crovitz provides some context.  At the time of the iPad launch, Amazon had 90% of the e-book market and was selling e-books at a loss to encourage sales of Kindle.  It is difficult to see how Apple had much monopoly leverage in this setting.  Given the massive changes in marketing practices and business models that are still taking place in publishing, it may difficult to come up with evidence on harm to consumers, especially if you compare prices of e-books to printed books.

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