The U.S. government filed a lawsuit against Apple, Inc., and five major publishers on Wednesday, claiming they have colluded in the price-rigging of e-books. The agreement among the companies allegedly occurred in 2012, before Apple launched the iPad. It was aimed to limit Amazon’s ability to discount ebooks. To achieve this, the conspirators switched the price-setting from the sellers to the publishers.
Steve Jobs described Apple’s strategy in setting the retail price: “We’ll go to [an] agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway.” Each publisher defendant entered an agency contract with Apple, effective April 2010. The iPad was released April 3, 2010.
Not only did the publishers and Apple conspire to raise prices, they “took steps to conceal their communications with one another, including instructions to ‘double delete’ e-mail and taking other measures to avoid leaving a paper trail.” This indicates they knew what they were doing was wrong and unethical, yet they were too tempted by the prospects of higher profits to resist.
“Defendants’ ongoing conspiracy and agreement have caused eBook consumers to pay tens of millions of dollars more for e-books than they otherwise would have paid,” the government lawsuit said. Instead of letting the market naturally set the retail prices, Apple, along with five of the largest publishers in the U.S., have set the prices much higher, and subsequently profited immensely at the expense of their customers.
On Tuesday, Apple's worth surpassed $600 billion, ranking it as the world’s most valuable firm. However, it is now clear they achieved some of this success through violation of U.S. antitrust laws, conspiring with the major publishers in the U.S. and forcing Amazon to drive up its prices on e-books.
This lawsuit is a prime counter-argument to the advocacy of deregulation of the government in the market place. The government is essential to ensuring the protection of its citizens as consumers and ensuring companies to do not violate laws, such as the antitrust laws.