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Friday, July 5, 2013

Apple Fights for Its Way of Doing Business

Apple has had its day in court in the e-book price-fixing case. So, why didn’t the computer company just settle like the five publishers also named in the lawsuit?

Apple executives have been saying throughout the process that they went to court because they did nothing wrong. Even when Macmillan finally decided to settle last February, the publisher’s CEO, John Sargent, argued it only settled “because the potential penalties became too high to risk even the possibilities of an unfavorable outcome.”

In Apple’s case, the company was also defending the way it does business. Letting its partners set the price of their product is the same approach used in both its iTunes and App Stores, so Apple needs to be able to negotiate favorable terms to compete with rivals, according to technology reporter Jessica E. Lessin in The Wall Street Journal.

“A win would help Apple maintain negotiating clout with media companies, which are searching for new ways to make money in markets shifting online,” Lessin wrote. “A loss could hamper its ability to compete with rivals like Amazon.com Inc. to land increasingly important media deals on favorable terms.”

Losing the case could also mean Apple would have to submit to regular monitoring by the government, which is also pushing to prohibit Apple from using “most-favored-nation” clauses in its contracts. Such clauses allowed Apple to match any lower price a publisher offered to other e-book distributors and is something Apple uses in its iTunes deals.

Apple CEO Tim Cook told attendees at the All Things Digital conference: “We’re not going to sign something that says we did something we didn’t do and so we are going to fight it.” But as Lessin points out, an Apple lawyer added during the trial that a ruling against the company would have a chilling effect on how companies negotiate.

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