By Therese Poletti, MarketWatch
A digital book on an iPad.SAN FRANCISCO (MarketWatch) ? Did Apple Inc. really go too far during its negotiations with book publishers over pricing for electronic books to be sold on the iPad?
Even though a federal judge ruled on Wednesday that it did, that issue will remain at the crux of the price-fixing case against it, as it seeks an appeal. Apple /quotes/zigman/68270/quotes/nls/aapl AAPL +1.56% ?said on Wednesday it plans to appeal Wednesday?s ruling by the U.S. District Court of the Southern District of New York. The court said Apple ?played a central role? in helping publishers conspire to raise the prices of e-books? as book publishers sought to raise the $9.99 price for e-books set by Amazon.com Inc.
How Apple can spin its e-book ruling
A judge found Apple guilty of price-fixing in the e-book market. How can the company get out of a public-relations mess? Michael Robinson, executive vice president at Levick, a crisis-communications firm, joins digits.
At least one attorney thinks Apple has a good shot in its appeal.
?It didn?t smell bad,? said Ankur Kapoor. a partner at Constantine Cannon in New York who focuses on antitrust litigation. ?During the early 19th century when they passed the Sherman Act, you had all the robber barons getting together and fixing prices.? Kapoor said he did not get any sense of that kind of conspiracy during this case that Apple conspired with the five publishers as a group or a cartel.
In fact, the findings of the trial arguably showed that Apple walked into an existing collusion ? one that it didn?t create. The heads of the major book publishers had been talking for months, meeting in private rooms in New York restaurants, about how to break Amazon?s /quotes/zigman/63011/quotes/nls/amzn AMZN +2.51% stranglehold on the e-books business. Apple shrewdly sized up the situation as something that it could play off of to get its own deal.
That deal was also far from a slam-dunk, as the publishers were pushing back on Apple?s proposed 30% cut, and a cap on e-book prices that otherwise could have seen publishers trying to charge as much as $20 for some e-book titles.
U.S. District Court Judge Denise Cote, in her 160-page ruling, anticipated this theory, which was a key point in Apple?s defense.
?Finally, Apple argues that the contentious nature of the negotiations ? particularly with respect to the caps on the price tiers ? proves that there was no meeting of the minds to raise prices and therefore no conspiracy,? Cote wrote in her ruling. ?But the fact that provisions, even key provisions, in the agreements were the focus of hard-fought negotiations does not preclude a finding of liability.?
Much as Craig?sList and its free ads decimated the classified ad business for newspapers, Amazon?and its low prices has similarly wreaked havoc on book publishing. Book publishers were looking for a way to relieve the hits to profit margins caused by the low prices of e-books when Apple came along with its iBook store for the iPad.
Apple offered book publishers the chance to price e-books slightly higher than Amazon, as shown in an email from former CEO and co-founder Steve Jobs, who wrote to News Corp.?s /quotes/zigman/18008448/quotes/nls/nws NWS -1.55% ?James Murdoch that he could ?[t]hrow in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99.? News Corp. owns publishing house HarperCollins as well as MarketWatch.
Apple ruling won't push down prices
Prices of many best-selling e-books had already come down before Wednesday's ruling against Apple. Jeffrey Trachtenberg explains why on the News Hub.
Apple clearly took advantage of the beleaguered publishers, and its notable that all of them have since settled with the government.
But it also seems pretty clear from the trial ? which lasted almost four weeks ? that Apple?s ultimate aim was not to raise e-book prices. Rather, it simply did not want to find itself in a price war with Amazon, which has a long history of under-cutting its competitors, so Apple played off the publishers? anger to grab a deal that it believed would ensure a level playing field for book content.
Of course, Kapoor?s view that Apple has a good shot in an appeal may be a minority view. The Wall Street Journal?s Law Blog wrote that Apple has a tough legal road ahead, and the odds of reversing the ruling are long. An appeal may not be heard for at least a year or possibly two. Until then the company faces a hearing on injunctive relief or damages.
The publishing industry will not likely be impacted by the case, since the all the firms have since stopped demanding that they set the retail prices for e-books known as the agency model.
?The impact on the publishers has already happened. They have settled and they agreed to let Amazon negotiate its own terms,? said Mark Patterson, a professor at Fordham University?s School of Law. Patterson also believes that Apple will lose in an effort to appeal.
?The judge did a good job of going through the evidence, and explaining why she thought Apple was involved in an orchestrated agreement,? Patterson said.
Still the case is not over yet. So far investors have mostly shrugged it off, not fearing too much about any damages Apple might have to pay. The results of the appeal could end up being mostly of interest to legal and antitrust scholars, because by then market dynamics may have changed.
/quotes/zigman/68270/quotes/nls/aapl
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Market Cap$394.92 billion
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Therese Poletti is a senior columnist for MarketWatch in San Francisco. Follow her on Twitter @tpoletti.
Source: http://www.marketwatch.com/story/did-apple-really-go-too-far-in-e-book-talks-2013-07-11
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