The US Supreme Court (the top level court in the US) has denied an application from Apple to hear an appeal from a federal Court of Appeal decision that held Apple liable for price-fixing.
The basis for the Court of Appeal decision was that Apple’s “agency” model – coupled with the agreement of publishers not to sell their books elsewhere at a lower price than granted to Apple – was anti-competitive, particularly in light of the role that an Apple vice-president played in negotiating the model with major publishers.
In trying to convince the Supreme Court to hear the appeal, Apple argued that – far from being anti-competitive – its actions in fact had enhanced competition, by providing consumers with a new e-book platform. Apple also stated that, “Following Apple’s entry, output increased, overall prices decreased, and a major new retailer began to compete in a market formerly dominated by a single firm”.
The Court of Appeal decision has been hugely contentious in business and publishing circles, because the conduct that the court found was anti-competitive was clearly aimed at breaking the almost monopoly power of Amazon in relation to the sale of eBooks. That power was built on a model of selling e-books at less than wholesale price, in order to boost sales of the Kindle reader (and had led to giving Amazon an all-but-unassailable market share – estimated at the time Apple entered the market at 90%.
As one commentator (in Forbes magazine) has recently written, the Court of Appeal decision means that “an innovative 21st-century business model fell victim to 19th-century antitrust law“:
If you need advice on anti-competitive conduct under Australian law, or on whether any co-operation you engage in with trade rivals might put you in breach of Australian provisions about anti-competitive conduct, contact Adam Simpson or Ian McDonald at Simpsons Solicitors.