Apple warns: If it loses the ebook case, businesses will weep

Apple claims there will be grave consequences if the tech giant doesn't have its way.

Credit: CNET

Apple, the alleged orchestrator of a price cartel on ebooks, has warned that losing the court case will have serious consequences for business competition and innovation.

As reported by Reuters, the tech giant said that an adverse ruling will have a "chilling effect" on businesses trying to crack open new markets, sending "shudders through the business community."

The company's lawyer, Orin Snyder, said on the last day of the trial that the "ordinary" negotiations firms undertake to enter new markets will become a thing of the past, and will set a "dangerous precedent" for the future.

The U.S. Justice Department accused the iPad and iPhone maker of working with five major international publishers to fix the prices of ebooks -- consequentially raising them for consumers and placing pressure on rival firms including Amazon over a year ago.

Macmillan, Penguin, Lagardere's Hachette Livre, News Corp.-owned HarperCollins, and CBS-owned Simon & Schuster (Note: ZDNet is also owned by CBS) are also being sued for their involvement with Apple’s claimed e-book cartel.

The department claims that Apple forced publishers to move to a model which not only harmed consumers, but demonstrates anti-competitive behavior on the tech giant's part. Known as an "agency" model, iBooks allows publishers to set the price for their work, whereas Amazon at the time set prices for ebook downloads at $9.99.

Some publishers believed the price for new and bestselling books was too low. At the time, Amazon claimed approximately 90 percent of the ebook market. When Apple's iBooks platform gave publishers the option of setting prices up to $12.99 and $14.99 in exchange for 30 percent commission, publishers were able to rely less on Amazon, which forced the online retailer to alter its business model in response.

As a result, industry prices rose across the board by nearly 10 percent. Justice Department lawyer Mark Ryan argues that only a "united industry front" could prompt this change.

During the trial's closing arguments, U.S. District Judge Denise Cote asked Apple if it "understood publishers were willing to work together to put pressure on Amazon." Snyder replied that there was "no evidence" to suggest publishers were conspiring together at the time of iBook's construction, and the tech firm was unaware of publishers meeting.

"There is no such thing as a conspiracy by telepathy," Apple's lawyer commented.

If Apple loses to the Justice Department, then the agency will seek an injunction to prevent Apple using the agency model for two years, in addition to a five-year prohibition against the use of price-parity contract clauses.