Will the Apple e-book price-fixing case be turned upside down?

During an appeals court hearing on the Department of Justice's price-fixing case against Apple, some judges argued against the DOJ, asserting that Apple was simply challenging 'predatory' pricing from rival Amazon.

Kimberly White/Reuters
In 2010, Apple CEO Steve Jobs announced that several big US publishers would be licensing e-books on the iPad. In 2012, Apple and the publishers were accused by the US government of conspiring to fix prices of e-books and limit retail price competition.

The Department of Justice faced tough questioning from a judge who questioned Apple's conviction in the e-book price-fixing case in which the DOJ sued Apple and five publishers for conspiring to fix e-book prices in competition with Amazon.

During an appeals court hearing Monday, some judges took a hostile stance toward the DOJ's case, arguing that Apple was simply challenging "predatory" pricing from rival Amazon.

Judge Dennis Jacobs, openly critical of the decision, questioned why the DOJ was after Apple, then a new entrant to the e-book market, when an established "monopolist" (Amazon) was maintaining a monopoly on the market with "predatory pricing."

"What we're talking about is a new entrant who is breaking the hold of a market by a monopolist who is maintaining its hold by what is arguably predatory pricing," Judge Jacobs said, according to a report from the AFP.

“It’s like all the mice getting together to put a bell on the cat,” Judge Jacobs added.

At the time Apple entered the e-book market, Amazon held between 80 percent and 90 percent of the market. The Justice Department sued Apple in 2012 for antitrust violations. After a three-week trial, U.S. District Judge Denise Cote in Manhattan ruled last year that Apple was liable for "facilitating and encouraging" a collective effort by the publishers to end price competition for e-books.

Theodore Boutrous, an attorney representing Apple, told the appeals court Monday that Cote's ruling was "a roadblock that chills innovation and competition." The decision discourages new entrants into a market, "which the court has said is the essence of competition," he said.

But Malcolm Stewart, an attorney with the DOJ, said Apple's entry into the market raised e-book prices for many consumers.

He argued that Amazon's policies were not "predatory pricing," but that its standard $9.99 price on many bestsellers was "good for consumers."

The sharp challenge could foretell a change in the decision on the price-fixing case – and change a precedent in e-book pricing models.

If Apple loses the appeal, it would pay $450 million, most of it to e-book consumers, as part of a settlement in the DOJ's lawsuit.

But it's too soon to tell which way the appeal will go, as Mac Observer cautioned.

"The first thing to keep in mind is that interpreting questions from a judge at the appellate level or higher is risky business," it said. "A judge might be hounding one side or another because they disagree with that side in some way, but judges have also been known to press an attorney – or be openly critical – because they're wanting to make sure that side's argument hold[s] water, are thorough, or just to play devil's advocate."

The appeal court's ruling is expected in 2015.

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