Apple is in court again Monday, this time to challenge a federal judge s ruling in the e-book price fixing case.
At issue is whether Apple broke the law when it made agreements with five of the six top publishers as it was entering the e-book market in 2010, as the Wall Street Journal recounted.
The three-judge panel of the Second U.S. Circuit Court of Appeals in Manhattan will likely look at a narrower question: Are companies permitted to make favored nation clauses with each other, which can include a guarantee of a lower price between manufacturers and distributors?
Apple argues that vertical price fixing agreements are not per se illegal, Fortune noted. What Apple should be judged by is a more forgiving standard, known as the rule of reason, the company said in legal filings.
George L. Priest, who teaches antitrust law at Yale, wrote in a Wall Street Journal op-ed that in her ruling against Apple, federal Judge Denise Cote ignored the realities of the market. Amazon dominated the sector with Apple as the upstart trying to break in to introduce competition, he wrote.
What Apple had coordinated was hardly a typical price-fixing conspiracy. The publishers had chosen Apple s terms—including a cap on prices—even though the terms reduced the returns they would receive from e-book sales. The court entirely ignored what really mattered: the platform competition between Amazon and Apple.
At stake for Apple is as much as $450 million it would have to pay to consumers who bought books at higher prices.
But also at stake is the Department of Justice s reputation, which brought and won its case against Apple. Should the appeals court rule in Apple s favor, the DOJ s antitrust department may face more appeals from other targets.
Above: An Apple Store in New York. (DON EMMERTDON EMMERT/AFP/Getty Images)
