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Antitrust Practices And Market Power Essay

668 words - 3 pages

Antitrust Practices and Market Power
Apple was investigated and subsequently ruled against in United States District Court giving the US Justice Department an antitrust victory. The case alleged Apple had colluded with five major publishers to fix the prices of electronic books (e-books). In 2010 Apple introduced an in which the publishers set retail prices in return for a commission paid to Apple. The publishers were under a contract which said in the price of an e-book available through Apple’s iBookstore changes the publishers were required to match the change. The e-book prices subsequently went up. Apple was charged with conspiring to fix e-book prices.
Apple was investigated under the Clayton Act because the publishers were required to match the price of competitors who also provide e-books to Apples iBookstore. The Clayton Act section 2 prohibits price discrimination between different purchasers if it lessens competition. Contracts requiring a customer to change their agreed upon price in relation to competition prices degrades competitive nature of business. This clause in the contacts Apple had with these publishers would force the publishers to change prices as the competition changed regardless of possible profit or loss to the publisher. Apple would still receive a commission without respect to the publishers benefit.
The Justice Department is asking for reparations consisting of the termination of Apple’s contracts with all five publishers. The government wants to ban Apple’s ability to enter into agreements with e-book suppliers, music, movies, and television shows if the agreement may cause an increase in the price competitors must charge. Other competitors such as Amazon and Barnes and Nobles are allowed to sell e-book for their iPad and iPhone applications for two years free of commissions to Apple.
Monopolies and oligopolies are not always a benefit or a hindrance to society. The poor judgment of the upper management controls the effect on society of the company’s impact on society. Incessant need to...

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