On September 6 of this year, U.S. District Judge Denise Cote, from the Southern District of New York, enjoined Apple after having issued a judgment against Apple over antitrust practices in e-book pricing. Accompanying this judgment, Cote issued an injunction restricting Apple’s interactions with publishers for the next five years and ordered the appointment of special compliance auditors to ensure that Apple complies with the order of the injunction.
The State of the Empire: Amazon’s Monopoly
Up until the launch of Apple’s iPad and iBookstore, Amazon had dominated the e-book retail market, having sold nearly 90% of all e-books. Amazon launched its first e-reader, the Kindle, in 2007, which gained widespread acceptance. Amazon quickly became the market leader in the sale of e-books and e-readers.
Amazon maintained its leadership by adopting a “$9.99 or lower” retail price, making it difficult for competition within the e-book industry. At the time, Amazon had a wholesale pricing model with publishers referred to as the “Big Six” (Hachette Book Group, Inc., HarperCollins Publishers LLC, Holtzbrinck Publishers LLC, Penguin Group (USA), Inc., Simon & Schuster, Inc. and Random House, Inc.).
Amazon’s wholesale pricing model made it difficult for competition by allowing Amazon to purchase e-books from publishers at the wholesale price and then sell the e-books at a price of its choosing. This model allowed Amazon to sell New Releases and New York Times Bestsellers at a “$9.99 or lower” retail price, which often matched or was below the wholesale price. Amazon took the loss and kept its e-book retail prices at “$9.99 or lower.”