Apple in court over price-fixing allegations

Accused of conspiring with publishers to raise prices.

Apple is in court today, accused of colluding with the "big five" American publishers to raise the price of eBooks. The US Department of Justice alleges that the six acted together to try and reverse Amazon's price cutting strategy, which was steadily eroding the amount an ebook was sold for.

Apple offered the publishers "agency pricing", a model where they would set the price and Apple take a cut. That's in contrast to Amazon's wholesale model: it pays a fixed cost to the publisher and then sets the price wherever it wants. Sometimes that meant it would raise it to get a share of the sale price well in excess of Apple's 30 per cent; more frequently, it meant it would aggressively cut it, selling the book at, or even below, wholesale price.

That drove the price of an ebook way down, leading publishers to fear that their profits were being permanently eroded. They existed in a world where, for the first few months of a books life, it was sold in expensive hardbacks, and they were trying to replicate that model online, charging up to £15 for an ebook. Instead, they saw prices plummeting to a level where they would be hard pressed to make a return at all.

So when Apple offered an agency model, the publishers saw a chance to start selling ebooks for more. And furthermore, they saw a chance to end Amazon's monopoly on the field, all while enable a competitor which might not be so agressive in downward pricing.

All of that is relatively uncontroversial. The issue is: did Apple and the publishers illegally conspire to raise prices for ebooks? Or was there no conspiracy, and it was just a natural offshoot of the agency model?

Steve Jobs, in his 2011 biography, suggests it may have been the former. He told Walter Isaacson, his biographer, that he went to the publishers and said "we'll go to the 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."

That's already perilously close to a conspiracy. If Apple were enticing some publishers by telling them that others had acquiesced, it could be an open and shut case. It's tricky now that he is no longer alive to explain his remarks.

There are actually three key legal issues for the court to assess. The first is the agency model itself: how does it apply to virtual goods? In a physical world, it involves the seller 'holding' goods owned by someone else, and taking a cut of their sales. Does that apply digitally, when there are no warehouses to run? Could the agency model itself be legally dubious? Without the need to maintain a standing stock, the distribution of risk is changed, and it certainly seems to represent a form of collusion.

The second involves the type of conspiracy which is alleged. Was it "hub and spoke" – Apple actively co-ordinating a united front on behalf of the publishers – or was it "conscious parallelism" – all of the publishers following each other's leads, actively trying to achieve a pricing strategy without any actual agreement. Both of those are illegal, and the Jobs quote suggests that if wrongdoing did occur, it was likely the former.

The third issue involves a specific clause in Apple's contracts, guaranteeing itself "most favoured nation" status. That lets the company guarantee that publishers will sell their books for no lower elsewhere than they do at Apple, strengthening the collusion aspects of the accusation. Such contracts aren't unusual – and are in fact commonplace in most negotiations such as these. For instance, Amazon makes heavy use of them in running its app store.

After all of that, it almost doesn't matter whether prices actually rose as a result. But analysis by the site Smashwords suggests they didn't. They can only look at a proxy of the data, because the real info is locked up by Apple and Amazon, but their preliminary research showed that average prices on the Apple iBookstore dropped 25 per cent in the first eighteen months. Whatever happened, the customer won in the end.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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The Women's March against Trump matters – but only if we keep fighting

We won’t win the battle for progressive ideas if we don’t battle in the first place.

Arron Banks, UKIP-funder, Brexit cheerleader and Gibraltar-based insurance salesman, took time out from Trump's inauguration to tweet me about my role in tomorrow's Women’s March Conservative values are in the ascendancy worldwide. Thankfully your values are finished. . . good”.

Just what about the idea of women and men marching for human rights causes such ill will? The sense it is somehow cheeky to say we will champion equality whoever is in office in America or around the world. After all, if progressives like me have lost the battle of ideas, what difference does it make whether we are marching, holding meetings or just moaning on the internet?

The only anti-democratic perspective is to argue that when someone has lost the argument they have to stop making one. When political parties lose elections they reflect, they listen, they learn but if they stand for something, they don’t disband. The same is true, now, for the broader context. We should not dismiss the necessity to learn, to listen, to reflect on the rise of Trump – or indeed reflect on the rise of the right in the UK  but reject the idea that we have to take a vow of silence if we want to win power again.

To march is not to ignore the challenges progressives face. It is to start to ask what are we prepared to do about it.

Historically, conservatives have had no such qualms about regrouping and remaining steadfast in the confidence they have something worth saying. In contrast, the left has always been good at absolving itself of the need to renew.

We spend our time seeking the perfect candidates, the perfect policy, the perfect campaign, as a precondition for action. It justifies doing nothing except sitting on the sidelines bemoaning the state of society.

We also seem to think that changing the world should be easier than reality suggests. The backlash we are now seeing against progressive policies was inevitable once we appeared to take these gains for granted and became arrogant and exclusive about the inevitability of our worldview. Our values demand the rebalancing of power, whether economic, social or cultural, and that means challenging those who currently have it. We may believe that a more equal world is one in which more will thrive, but that doesn’t mean those with entrenched privilege will give up their favoured status without a fight or that the public should express perpetual gratitude for our efforts via the ballot box either.  

Amongst the conferences, tweets and general rumblings there seem three schools of thought about what to do next. The first is Marxist  as in Groucho revisionism: to rise again we must water down our principles to accommodate where we believe the centre ground of politics to now be. Tone down our ideals in the hope that by such acquiescence we can eventually win back public support for our brand – if not our purpose. The very essence of a hollow victory.

The second is to stick to our guns and stick our heads in the sand, believing that eventually, when World War Three breaks out, the public will come grovelling back to us. To luxuriate in an unwillingness to see we are losing not just elected offices but the fight for our shared future.

But what if there really was a third way? It's not going to be easy, and it requires more than a hashtag or funny t-shirt. It’s about picking ourselves up, dusting ourselves down and starting to renew our call to arms in a way that makes sense for the modern world.

For the avoidance of doubt, if we march tomorrow and then go home satisfied we have made our point then we may as well not have marched at all. But if we march and continue to organise out of the networks we make, well, then that’s worth a Saturday in the cold. After all, we won’t win the battle of ideas, if we don’t battle.

We do have to change the way we work. We do have to have the courage not to live in our echo chambers alone. To go with respect and humility to debate and discuss the future of our communities and of our country.

And we have to come together to show there is a willingness not to ask a few brave souls to do that on their own. Not just at election times, but every day and in every corner of Britain, no matter how difficult it may feel.

Saturday is one part of that process of finding others willing not just to walk a mile with a placard, but to put in the hard yards to win the argument again for progressive values and vision. Maybe no one will show up. Maybe not many will keep going. But whilst there are folk with faith in each other, and in that alternative future, they’ll find a friend in me ready to work with them and will them on  and then Mr Banks really should be worried.