Write an analysis with a short summary about the article Apple loses and how it relates to one of the following: strategic management decision making, competitive advantage, opportunity in a market or global strategic management.
Apple loses federal appeal in e-books case a federal appeals court on tuesday upheld a 2013 decision finding apple inc. Http://quotes.wsj.com/aapl
Liable for conspiring with publishers to raise the price of e-books The 2-1 ruling tuesday by the second u.s. Circuit court of appeals in manhattan follows three years of litigation, millions of dollars in legal fees and a bold decision by apple to challenge the u.s. Department of justice to a trial, even after all the publishers with which it was accused of colluding had settled their cases. The iphone maker is expected to pay $450 million, most of it to e-book consumers, as part of a november agreement with private plaintiffs and 33 states that joined the justice department’s 2012 lawsuit accusing apple of violating civil antitrust law. The deal hinged on the outcome of the appeal. The penalty amounts to less than 3% of the cupertino, calif., company’s profit in the quarter that ended in december. “we conclude that the district court correctly decided that apple orchestrated a conspiracy among the publishers to raise e-book prices,” wrote second circuit judge debra ann livingston. The conspiracy “unreasonably restrained trade” in violation of the sherman act, the federal antitrust law, the judge wrote. The case laid bare apple’s efforts to gain a foothold in a market thatamazon.com inc.http://quotes.wsj.com/amzn commanded in 2010 with between 80% and 90% of all e-book sales. At the time, publishers were dissatisfied with amazon’s aggressive discounts.
Apple’s agreements ceded the power to set prices to the publishers, in what’s known as an agency model. But there was an exception: if another retailer was selling an e-book at a lower price, the publisher would have to match that price in apple’s bookstore. With a new outlet for their e-books, the publishers had the leverage they needed to reclaim some pricing power from amazon, justice department lawyers said.
Change was inevitable: the publishers couldn’t afford to sell their e-books in apple’s store at amazon’s discounted prices of $9.99 for best sellers. Prices on many e-books increased immediately. Lawyers for apple said the company unwittingly facilitated the push against amazon by the publishers. But the second circuit majority said the evidence showed the technology company knew what it was doing. “apple understood that its proposed contracts were attractive to the publisher defendants only if they collectively shifted their relationships with amazon to an agency model—which apple knew would result in consumers facing higher e-book prices,” judge livingston wrote in a decision joined by judge raymond j. Lohier jr. Apple could ask the second circuit to rehear the case or ask the u.s. Supreme court to review it. “Apple did not conspire to fix e-book pricing and this ruling does nothing to change the facts. We are disappointed the court does not recognize the innovation and choice the ibooks store brought for consumers,” apple said. “while we want to put this behind us, the case is about principles and values. We know we did nothing wrong back in 2010 and are assessing next steps,” the company added. Judge Dennis Jacobs, writing in dissent, said that the trial judge who found apple liable for price-fixing in 2013 viewed the case through the wrong legal lens. He said antitrust law couldn’t hold apple plainly responsible for a conspiracy among publishers on a different rung of the supply chain. “On the only horizontal plane that matters to apple’s e-book business, apple was in competition and never in collusion,” he wrote. “So it does not do to deem apple’s conduct anticompetitive just because the publishers’ horizontal conspiracy was found to be illegal.”