Cengage Advantage Books: Business Law Today, The Essentials 11th Edition by Roger LeRoy Miller

تمرين 1

ADAPTING THE LAW TO THE ONLINE ENVIRONMENT
The Justice Department Goes After E-Book Pricing
In 2012, the U.S. Justice Department filed a lawsuit against five major book publishers and Apple, Inc., charging that they had conspired to fix the prices of e-books. According to the complaint, publishing executives met "in private rooms for dinner in upscale Manhattan restaurants" to discuss ways to limit e-book price competition. As a result, the Justice Department alleged that consumers paid "tens of millions of dollars more for e-books than they otherwise would have paid."
The E-Book Market Explodes
E-books were only a niche product until Amazon.com released its first Kindle e-book reader. To sell more Kindles, Amazon offered thousands of popular books for downloading at $9.99 per e-book. Amazon kept 50 percent and gave 50 percent to the publishers, who had to agree to Amazon's pricing. Although Amazon lost money on its e-book sales, it made up the losses by selling more Kindles.
Enter Apple's iPad
When the iPad entered the scene, Apple and the book publishers agreed to use Apple's "agency" model, which allowed the publishers to set their own prices while Apple kept 30 percent as a commission. Apple was already using this model for games and apps for its iPhones and iPads.
The agency pricing model has been a standard sales approach in many industries and has been upheld by federal courts for years. Nevertheless, the Justice Department argued that because the publishers involved in the arrangement chose prices that were relatively similar, price fixing was evident and "would not have occurred without the conspiracy among the defendants."
A Federal Court Finds Apple Liable for Conspiring to Fix Prices
Ultimately, a U.S. district court ruled that the agency model is per se illegal and held Apple liable for violating the Sherman Act. Apple appealed, arguing that the judge should have applied a rule-of-reason analysis rather than a per se analysis, but a federal appellate court
affirmed.
The federal appellate court held that Apple's agreement with publishers to raise e-book prices was a per se illegal price-fixing conspiracy. As a result, Apple was ordered to pay $400 million to consumers and $50 million in attorneys' fees.
Critical Thinking
The publishing business is in dire straits today, with retail bookstores going bankrupt and publishers laying off hundreds of employees. Why do you think the declining book business was worthy of so much attention from the Justice Department