Apple Inc. (AAPL) Loses This Fight

When more competition is bad
After everything was said and done, the net result was a precipitous increase in e-book prices throughout the market, as shown in the DoJ’s closing arguments.

The entire situation is extremely peculiar, in part because of Amazon.com, Inc. (NASDAQ:AMZN)’s disruptive ways. On one hand, this is perhaps the first time that the DoJ has filed suit against a company entering a market to challenge an incumbent with a near-monopoly position. The DoJ almost always prefers more competition to less competition. On the other hand, most companies leverage monopoly positions to raise prices instead of lowering prices to take a loss. Amazon threw out all the traditional business school books in that regard.

Instead, the DoJ is focusing on the rising e-book prices, which was a detriment to consumers even if there was technically now more competition in the e-book market. Cote has ordered a trial to determine damages, but Apple has already said it intends to appeal the ruling. Investors don’t appear overly concerned with the ruling. After a brief dip, shares promptly recovered.

Overall, Jeff Bezos is surely pleased with this ruling.

Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Amazon.com and Apple. The Motley Fool owns shares of Amazon.com and Apple.

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