The court ruled that Apple was guilty of anti-competitive practices in two ways. First, the company asked publishers to switch from wholesale pricing – where publishers sold in bulk to retailers, who set their own prices – to an agency model, where publishers set retail prices and retailers took a commission. The court ruled that this reduced price competition …
Second, Apple negotiated a so-called Most Favoured Nation deal, where publishers were not allowed to offer better terms to anyone else than those offered to Apple. This was also considered to reduce price competition as larger retailers – like Amazon – would otherwise have been able to negotiate better terms, passing the savings on to customers.
Apple, however, argues that its entry into the book market actually increased competition, especially since a single retailer, Amazon, was dominating the ebook market at the time. Apple also suggests that some prices needed to rise to make the ebook market viable for more publishers, and that without those price rises the ebook market as a whole would now be smaller.
Should Apple lose the appeal, the final damages sum of $450M has already been pre-approved by the court. While the sum is relatively modest in Apple terms, and some were surprised Apple continued to fight, Eddy Cue said in an interview with Fortune that the company felt that the principle was an important one.
We feel we have to fight for the truth […] You have to fight for your principles no matter what.
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