Good overview of the legal battle over eBooks

You will find it here, by Tim Carmody, and there are more issues involved than I had thought:

Knebel says there are three major points of law at stake in both the class-action suit and the Justice Department investigation against Apple and the five publishers:

  1. Whether and how the agency model applies to virtual goods;
  2. Whether Apple and publishers engaged in a “hub-and-spoke” conspiracy or simply “conscious parallelism”;
  3. The status of the “most-favored nation” clause, common to many legal contracts today, which Apple used to ensure that books could not be sold elsewhere at a lower price than in the iBooks store.

On the latter point there is this:

The last point at issue is Apple’s agreement with publishers that their books be sold at the same price to all other competitors. In contract law, this is called “the most-favored nation” clause.

“The most-favored nation clause has been suspicious under antitrust laws for years,” says Knebel. But at the same time, it’s extraordinarily common. “Most law firms, including mine, will agree to charge one client the lowest possible price for the same services,” he says.

So even though Apple’s insistence that HarperCollins, Hachette Book Group, Macmillan, Penguin Group Inc. and Simon & Schuster Inc all charge the same prices for their books at all e-book stores is what seems on its face the fishiest about the whole affair, it’s actually the part that, in the absence of a conspiracy, is most hallowed by practice. A change in its status under federal antitrust law would require the largest revision to current legal agreements, in industries widely separated from publishing and software.

My view is simple, namely that in the face of massive disruptive innovation, antitrust law rarely does a good job.  The law should stay out of this.  In any case the prices of books have been falling for some time.


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