Apple Inc. (NASDAQ:AAPL) has been in a battle for its reputation as an anti-competitive entity of late, and it is considering taking that battle tto court next summer in an e-book price-fixing case of which a federal judge has approved a settlement proposal from the Department of Justice with three of five publishers mentioned in an antitrust lawsuit.
Apple Inc. (NASDA:QAAPL) has been ardently fighting the settlement, saying that it is innocent of any attempt to fix e-book prices to take market share away from Amazon.com Inc. (NASDAQ:AMZN). Apple, Macmillan and Penguin Group are all opposed to the settlement, and Apple has threatened and is considering appealing the settlement and taking its collusion charges to court in a trial slated for June. The settlement offer by the Department of Justice was approved by three publishers and signed off by U.S. District Judge Denise Cote late Thursday afternoon.
Apple Inc. (NASDAQ:AAPL) was targeted for antitrust litigation just after the iPad was introduced in 2010, when the DOJ alleged the collusion began. The charge was that Apple worked with the five publishers to change the pricing model of e-books to an “agency model,” where the publishers set the prices of e-books – prior to 2010, retailers like Amazon.com Inc. (NASDAQ:AMZN) set the prices. Many publishers and authors bemoaned the “wholesale model,” saying that Amazon and other retailers deliberately priced e-books at a loss to eliminate competition and thus it left the authors and publishers to take losses on e-books.
Under the settlement approved by Judge Cote, the three publishers who agreed – HarperCollins, Hatchette Group and Simon & Schuster – would allow retailers t set prices of e-books for up to two years and the publishers were required to void their contracts with Apple Inc. (NASDAQ:AAPL) and other retailers with which they operated an “agency model” on pricing.
Though Apple Inc. (NASDAQ:AAPL) is fighting the collusion charge, Walter Isaacson’s biography of the late Steve Jobs mentions part of the conversation Jobs had with the heads of the publishing companies mentioned in the lawsuit.
Certainly Apple Inc. (NASDAQ:AAPL) seems to have a public-image crisis to encourage, but will pursuing this track for another 18 months make a difference in the long run? How investors see the company moving forward will likely be of interest by observers, especially investors like hedge-fund manager Julian Robertson of Tiger Management, who had more than 16 percent of his portfolio invested in Apple stock at the end of June (about $59 million).