Apple is already fighting Amazon in the ebook price wars
Apple would prefer agency pricing on ebooks — that, we know. In fact, Apple is likely to appeal the DOJ's ebook pricing settlement with HarperCollins, Hachette and Simon & Schuster, which was approved last week.
Context & Ripple Effects
The arc here runs from spring through summer 2012: settlement talks first surfaced in March, the DOJ signaled it might sue Apple over ebooks as early as April, and Apple held out while the settlement neared. By late August the DOJ was framing the case starkly, comparing Apple and the publishers to big oil.
Now the settlement with HarperCollins, Hachette and Simon & Schuster has been approved — leaving Apple as the party that never signed, still committed to agency pricing, and reportedly weighing an appeal (unconfirmed). The story matters because it isolates Apple as the last defender of the agency model against Amazon's wholesale-pricing status quo.
First-order effects
- HarperCollins, Hachette and Simon & Schuster are now bound by the approved settlement's terms, ending their agency-pricing arrangements under DOJ supervision while Apple alone carries the legal fight forward.
- Apple's iBookstore loses its publisher-aligned pricing structure on three major houses' catalogs, forcing it to compete directly against Amazon on retail price for those titles.
Second-order effects
- Amazon regains latitude to discount the settled publishers' ebooks below cost as loss leaders, squeezing Apple's margin position in a store where content selection was already thinner.
- Publishers still outside the settlement face pressure to accept similar terms rather than remain aligned with Apple's agency stance, since the DOJ has demonstrated it will extract concessions.
Third-order effects
- If the pattern holds, ebook distribution reverts toward the wholesale model Amazon pioneered, with most-favored-nation clauses and resale-price maintenance across digital media drawing standing antitrust scrutiny.
- The case becomes a template for how regulators treat platform-publisher pricing agreements in other digital-content markets, where a hardware maker's cut of sales is traded for price control.
The trend: Digital-content pricing is swinging from publisher-set agency models back toward retailer-controlled wholesale pricing, with antitrust enforcement accelerating the reversal.