On Wednesday, Judge Denise Cote ruled that Apple had violated antitrust law by coordinating an effort among five leading publishers to raise e-book prices. Randal Picker is a professor of law at the University of Chicago and a leading antitrust scholar. We spoke by phone Wednesday afternoon. The transcript has been edited for length and clarity.
Timothy B. Lee: Judge Denise Cote described Apple coordinating a price-fixing conspiracy among the major publishers. Do you think that’s a good way to think about the case?
Randal Picker: Judge Cote tells a good story about how Apple was a co-conspirator in what seems a crystal-clear conspiracy by the publishers. But I think the case is vastly more complicated than that.
There’s a simple story about publishers wanting to change prices and failing until the white knight appears in the form of Steve Jobs. But there’s a flip side to that. Apple would say: “we didn’t do anything here that we didn’t have an independent interest in doing, independent of whatever happened in e-book prices.
“We’ll run a platform. We don’t want to set prices. We wanted the same [30%] deal we do in the app store. We just don’t want to be at a competitive disadvantage when we sell e-books. If those books are at different prices, we’ve got a problem. We want to those prices to be the same.”
TBL: But there seems to be a lot of evidence that Apple expected e-book prices to rise as a result of its agreements, right?
RP: I wish the opinion cited to the record more, but based on [Judge Cote's] rendition of the evidence, it seems very clear that Apple should have known, probably did know, that publishers would try to raise e-book prices. But Apple also wanted to make sure they didn’t go too high. If they went too high, people weren’t going to buy e-books at all.
The tier structure was intended to be sure that the pricing flexibility that the publishers had would not push those prices too high. Apple should have known that those prices were going to go up and didn’t want them to go up too much.
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