Apple in Troubled Waters

Photo: Prabir Das

Price-fixing charges expose the complexities of the e-book market and increasing competition between platforms and content providers

Just as its dogfight with Samsung has been affecting the development and marketing of smart phones, Apple's latest legal issue promises to dictate the future course of e-books. This time, though, Apple finds itself starting the fight on the defensive early. This week a New York court heard that Apple conspired with major publishers to drive up the price of e-books in a scheme that cost consumers hundreds of millions of dollars.

This time Apple's rival is Amazon, the dominant force in the e-book market, although the legal trouble is between the late Steve Jobs' company and the US authorities.

The US Department of Justice told the court that Apple and five of the six largest American book publishers had "consciously committed to a scheme to raise e-book prices throughout the industry". The alleged price-hike conspiracy came as Apple prepared to launch the iPad and take on Amazon, and was encouraged by Jobs, the court heard.

There is some technicality involved, but the crux of the issue is the question of whether Apple has been trying to "protect" the publishing industry from Amazon, as Apple lawyers claim, or conspiring with major publishers at the expense of e-book consumers. Amazon was able to sell e-books at relatively cheaper prices, but the publishers didn't like it, even complaining that the online retail giant was destroying the e-book industry as a whole.

US authorities claim in court papers that Apple wanted to sell e-books but didn't want to compete against the low prices Amazon was setting. The alleged conspiracy was conceived because Apple knew that the major publishers also disliked Amazon's low prices and saw Apple's potential entry as a pathway to higher prices industry-wide.

Apple's main defence is that there was nothing wrong in trying to bring competition to a market dominated by Amazon. The tech giant's lawyers, however, will have to prove how more competition has benefited or will benefit consumers, who, as of now, enjoy finding cheaper content to download to their reading devices.

An underlying issue here is whether cheap e-books might really destroy the industry. It's possible that "poor" business returns might in the long run affect the quality of the content, but advocates of cheap digital content argue that commercial logic calls for cheaper products if the costs are reduced.

To publish an e-book, the publisher doesn't need to invest in conventional printing materials or methods, while delivery is also much cheaper. The marketing cost is also lower if managed through the new technology as well as the social media.

The alleged price-fixing conspiracy helped the giant publishers - Macmillan, Simon & Schuster, Hachette, HarperCollins and Penguin. Apple apparently does not have consumers on its side on this one. While it is obvious that cheap prices affect key industry players, Apple lawyers will have to prove that low-price products have little or no positive potential. After all, cheap e-books can encourage more people to read and thus buy more books. Additionally, cheap, legitimate products can also be the answer to the widespread problem of piracy.

This brings us to the one issue that is always a thorn in everybody's side when debating what the late Steve Jobs created or achieved: the question of price. Apple's tools and content, no matter how brilliant, have not "democratised" the technological playground as they should have. The aloofness of their prices has kept a large population of tech consumers at bay, and we have copycat makers to thank for enabling poorer people to use cheap MP3 players and iPad look-alike tablets.

Again, the current legal controversy, no matter how different from the wars against Samsung and other Apple rivals, has at its root the issue of consumers' interest. And as always, Apple's principles concerning this core issue are clashing with those of others.

— Editorial Desk
ANN/The Nation