Department of Justice on weak ground with Apple price fixing complaint

L. Gordon Crovitz for the Wall Street Journal:

Whether it’s news, games, apps or books, Apple’s position is the same. The market determines the price, and Apple gets 30%. The Justice Department fails to acknowledge anywhere in its 36-page complaint against Apple and book publishers that this is the standard approach. (Indeed, the government complaint inaccurately refers to “30% margins” for Apple. Operating margins are very different from sales commissions.) The government says this “agency model” is inherently wrong (“per se” wrong, in legalese) and “would not have occurred without the conspiracy among the defendants.”The problem for the government is that there’s nothing wrong with the agency model, which has been upheld by federal courts and is common across many industries. This approach by Apple and the publishers (including HarperCollins, a unit of News Corp., which also owns The Wall Street Journal) replaced the “wholesale model” that market leader Amazon preferred, which had allowed it to sell e-books at whatever price it wanted, including as loss leaders to protect its Kindle against competition from other e-readers.

Bear in mind that Crovitz is the former publisher of the Journal, and that he himself complained to Apple about the 30 percent figure when they met in 2011. Eddy Cue, who runs the Apple’s Internet Software and Services, told him that Apple wouldn’t treat newspapers or magazines any differently than game publishers.

Crovitz raises an excellent point about letting the market decide the price of ebooks. “Consumers should decide, not Amazon or the Antitrust Division.”