Apple, Publishers Sued Over Claims They Fixed Prices of Electronic Books

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nPrice fixing is a conspiracy between market competitors who set their prices in order to sell or buy services and goods at a particular price point. It benefits individuals or businesses that are involved in the conspiracy since prices are artificially stabilized, fixed or discounted. Price fixing is illegal under federal and state competition legislations (Pindyck, & Rubinfeld, 2011). These laws prohibit corporate collusion. This is because price fixing prevents favourable market competition in an open market. Additionally, it is illegal because it breaches competition laws since it controls demand and supply of goods and services as well as controlling market prices.

nCompanies can make a secret agreement that affect the third party. This is referred to as collusion and it usually illegal and unethical. Although there are set rules and legislation to control collusions, such secret agreements still occurs in business activities such as sales, advertising, and purchasing (Pindyck, & Rubinfeld, 2011). Collusion forces buyers to pay more than they would do in a free market. This is because the competing companies/business attempts to destabilize each other.

nApple Inc. conspired with five publishers in attempt to limit competition with Amazon. This conspiracy would benefit Apple Inc. because higher prices of e-book would enable it to enter into the market (Rosenblatt, 2011). In addition, the e-books at Amazon stores would be sold at higher prices while at Apples store the retail prices would be available in the lowest price. Therefore, apple would not compete for price while selling e-books. Additionally, publishers would let Apple become the agent of selling e-book hence it would benefit with 30 per cent commission on each sale (Rosenblatt, 2011). On the other hand, Amazon would be using wholesale model in which it would buy e-books at higher prices and sell them at lower prices hence making losses.

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nPindyck, R., & Rubinfeld, D. (2011). Microeconomics (1st ed.). Upper Saddle River, N.J.: Pearson Prentice Hall.

nRosenblatt, J. (2011). Apple Accused in Suit of E-Book Price Fixing With Publishers. Bloomberg. Retrieved 5 August 2014, from HYPERLINK “http://www.bloomberg.com/news/2011-08-10/apple-publishers-sued-over-claims-they-fixed-prices-of-electronic-books.html”http://www.bloomberg.com/news/2011-08-10/apple-publishers-sued-over-claims-they-fixed-prices-of-electronic-books.html

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