Apple is currently in court over alleged e-books price fixing. Something the Department of Justice isn’t too happy with. The big issue here is that before iBooks became a reality, Apple forced publishers to sign contracts stating that they would not offer lower prices to other retailers such as Amazon, Barnes&Noble etc. Such a stipulation is regarded as being anti-competitive and is frowned upon.
The first publishers CEO to testify was David Shanks of Penguin who revealed pretty much what Apple has been accused of. He stated that the clause in Apple’s contract was a major factor in the company deciding to change its contracts with others to an “agency model” contract where the publisher sets the price and not the reseller.
Shanks stated that: “The fact that the parity clause was in the contract more or less made it a given we’d have to be at agency.”
If Apple’s tough 30% cut on iBooks revenue hadn’t been a factor, the chances are that publications would have gone with a slightly different approach, allowing the retailer to set the price. But, with Apple’s high cut, publishers were standing to lose money and so they decided that they would have to adopt the ‘agency model’, and then force other resellers to agree to the terms.
The case is far from over, but it’s not looking good for Apple right now.