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What the e-book scandal means for Apple

Apple is under fire from the DOJ. So how will the next few months shake out for the tech giant? 

By Matthew Shaer / April 12, 2012

An Apple retail store in Carlsbad, California.

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Yesterday, the Department of Justice filed a complaint in US District Court against Apple and five major publishers. The DOJ says Apple and the publishers conspired to raise the prices of e-books by as much as $5 – a move allegedly intended to prevent Amazon from locking in the price of e-books at 10 bucks. Hachette, HarperCollins, and Simon & Schuster agreed immediately to settle. Penguin, MacMillan and Apple will likely fight on. 

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So hey, what does this mean for Apple? (We should make clear here that Apple has not officially signaled its strategy vis-a-vis the DOJ, but until we know otherwise, we're assuming that Apple – like Penguin and MacMillan – has no intention of backing down.) 

Well, for one, it could bruise Apple.

"Apple does hurt itself when it thumbs its nose at the courts, the American system, and that could hurt it," Jeffrey Durgee, a professor at Rensselaer Polytechnic Institute in New York, told US News and World Reports this week. Apple's "brand personality," he added is that of "a maverick, but not outside the law." 

On the other hand, even if the baseline price of an e-book does return to $10 – which is exactly where Amazon wants it, while publishers want a higher price – Apple might not actually sustain any real damage. Writing for The New York Times, Nick Wingfield argued that it was "doubtful" that Apple would try to meet Amazon at the $9.99 price point. 

"That, in turn, would hurt Apple e-book sales but do very little direct damage to Apple’s overall business," Wingfield added. "In the holiday quarter, Apple reported $2 billion in revenue from Internet services – about 4 percent of total company sales – with an undisclosed, but most likely small, percentage of that coming from e-book sales." 

But more than that, Geoffrey Manne, an antitrust scholar at the Lewis and Clark Law School in Oregon, told CNET, "it's a harder case against Apple than the publishers."

That's partly because Apple reps were not present at the various London and Manhattan gatherings where the collusion allegedly took place. 

For more tech news, follow us on Twitter @venturenaut. And don’t forget to sign up for the weekly BizTech newsletter.

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