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Thursday, July 11, 2013, 06:12 am PT (09:12 am ET)

Apple's loss in e-book antitrust case likely to give advantage to Amazon

The big winner in the U.S. government's antitrust victory over Apple is Amazon, experts say, as the online retailer will now be able to price e-books however it wants.

DOJ


While Amazon is already the e-book market leader, the company will be able to continue its aggressive pricing strategy to gain further market share, market watchers who spoke with Bloomberg said. Some even believe the ruling could affect Apple in areas other than the e-book market.

"Any Financial penalty is pocket change for Apple, but this decision can have a long-term effect," said David Balto, former policy director for the U.S. Federal Trade Commission. "The government can extend this beyond books."

For her part, U.S. District Judge Denise Cote, who handed down the ruling on Wednesday, said her decision was based solely on events that occurred as Apple entered the e-book market. The judge said she does not "seek to paint with a broader brush."

The main issue for Apple in the trial was the fact that Amazon's low-price business model favors consumers, while antitrust laws are designed to protect consumers. Amazon sells titles under the so-called "wholesale model," which gives the retailer the power to set its own prices, sometimes at or below cost.

Book sellers opposed Amazon's use of the wholesale model, because it undercut their ability to have pricing parity with other e-book platforms, or even physical books. For that reason, they aligned with Apple to switch to the "agency" pricing model, which let them set their own prices — a move that brought on antitrust scrutiny from the U.S. government.

Major publishers opted to settle with the government out of court rather than fight the antitrust case, but Apple decided to hold out and go to trial. After Wednesday's ruling, the company vowed to continue the fight and appeal Cote's decision.

Apple has much to gain by pushing forward in spite of the setback, according to Reuters. In particular, Apple may wish to preserve its negotiating leverage for future content deals, especially in its ongoing talks with Hollywood studios and record companies.

According to the report, Apple's current discussions have been inspired by "aggressive forays" into the digital music and movie markets by competitors Google and Amazon. While Amazon is the market leader for e-books, Apple's iTunes remains the go-to destination for buying digital music, movies and TV shows.