The Justice Department maintains that an agreement brokered by Apple with major publishing companies, including Penguin, Simon & Schuster and HarperCollins, constitutes a disincentive for competition in the e-book market. While the government has tried to settle the case, Apple continues its legal battle, prompting the Justice Department to remark that its objection is “a naked attempt by Apple to have its competitors’ ability to compete on price constrained – to take away the nearly unfettered ability to discount that a retailer who desires to compete would embrace but Apple fears.”
What’s the Big Idea?
The agreement which Apple struck with major publishers, in response to Amazon’s pricing all e-books at $9.99, has become known as the ‘agency model.’ Under the agreement, publishers were free to set their own prices so long as Apple was given 30% of e-book sales. Apple has received, however, the support of the influential New York Senator Chuck Schumer, who argues that the agency model has “introduced more competition, offered readers other platforms from which to buy books and was, ultimately, in the long-term interest of the publishing industry.” If no settlement is reached, a trial is expected next summer.