Apple? Anticompetitive?

Smile0523 writes:

I stumbled across this article and thought it was interesting because allegations are being made against Apple by the EU as to whether their so called “agency agreements” can be considered monopolistic. In 2010, Apple started encouraging agency agreements which allow publishers to set the price at which online bookshops sell e-books to consumers. Before then, publishers sold e-books at wholesale, and the retailers were able to set the price at which they wished to resell the e-books.
The investigation also alleges that Amazon was forced to abandon its discount pricing model and adopt this agency model as well in order for its’ Kindle to better compete with Apple’s iPad. Many believe that Apple purposely did this because they feared the competition with Amazon and wished to neutralize the e-book market by imposing the agency agreement on publishers. What do you think? Is this an issue that can be considered a violation of antitrust legislation?
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About Mark P. Holtzman

Chair of Accounting Department at Seton Hall University. PhD from The University of Texas at Austin. Worked at Deloitte's New York Office. BSBA from Hofstra University.

6 comments

  1. I wouldn't really call it monopolistic. I think this is just a part of how things will work online. Essentially, Apple has provided a direct relationship between a publisher and reader. The publishers will see that as an attractive option that is something that is going to happen if it is apple, Toshiba, Sony or whomever. Apple also provides individuals the opportunity to publish their own book without the use of a publisher through iTunes Connect. Eventually authors will have the ability to bypass a publisher completely, and it will not be the fault of Apple. It is the eventual obsolescence of publishers.

  2. I'm reading a great book now called Infinite Jest by David Foster Wallace.Anyway, the book (written in 1996) takes place in a dystopian near-future where the US has partially annexed Canada and Mexico.A good part of entertainment has been taken over by a single company, called "InterLace Entertainment." InterLace has a complete monopoly on all film entertainment. The company sells apparatus that replaced television, phones, VCR's, cable TV, etc. The viewer can select any film (which can be a movie, TV show, sports game, etc.) and watch it on demand. Viewers can also buy "cartridges," which I guess are like DVD's.Anyway, the whole system is not unlike Apple. After all, Apple has a dominant market position in music, film, iPods, smartphones, and more.By the way, I highly recommend "Infinite Jest" for very patient and unsqueamish people with a lot of time on their hands.

  3. Apple does have market share in a number of markets as mentioned above, but I feel that in regards to e-books their strategy doesn't cause for decreased competition. I feel this way because all Apple did was provide a way for publishers to sell directly to readers. Bookstores won't like this strategy, but in the e-book market Amazon and Barnes & Nobles have the market share. Apple is ow just another player and increases competition. The result of this is a decreased price for readers. Apple bypassing the middle man and allowing publishers to directly sell to readers is a great cost saving strategy. Amazon is just mad they didn't think of it first.

  4. This is a reply to Dr. Holtzman's comment on the book he is reading. While the US hasn’t annexed Canada and Mexico and there is not a company that single-handedly controls all the media, Carlos Slim’s empire, resembles that reality to a certain extent. Mr. Slim is Mexican Telecommunications mogul who completely dominates Mexico and Latin America’s telecommunication companies and according to an independent study by the “Organization for Economic Co-operation and Development”, charges among the highest usage fees in the world to countries where per capita income is under $14,000. Mr. Slim has been named the richest person in the world for five years. It’s kind of scary when life imitates art and a science fiction book in where one company controls all media doesn’t sound too far-fetched. Regarding Apple and its practices, I don’t think they are monopolistic, they are just practical. Europe always has issues with what they perceive to be “monopolies”, which quite frankly, no other developed nations seem to have (The EU made multiple allegations against Microsoft, Nike, Apple, now the Big 4, etc.) Amazon dropping its discount pricing model and adopting this agency model is not the byproduct of monopolistic competition, it’s just an adaption to a game where Apple is now a major player.Blackswan87

  5. In this type of market, I do not think it's fair to accuse apple of being monopolistic. The reality is that they are just doing smart business and by creating a direct link between the publishers and the readers, they are actually helping consumers. If this is forcing companies to rethink their business models, in particular Amazon, then that means that business is going as it should in a capitalistic society.

  6. I think there is a very fine line between vicious competition and antitrust issues in business. This is particularly apparent in the technology sector where constant innovation is completely essential to success. The same practices that drive a company such as Apple to consistently create and innovate are the same methods and acts that can eventually be construed as unethical and unfair. As Apple looks to dominate each market it enters, it is going to engage in any action and partake in any business arrangement allowed by law that is going to get them a larger market share. It is this insatiable desire to dominate markets that not only makes Apple the powerhouse it currently is but also leads to suspicions of unfair practices.

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