The Trust on E-Books

The term "trust" [1] started to appear around the late 1800's in U.S. history, when post-Civil War industrialists [2] took advantage of the troubled South to prop up their businesses.  Efforts to rebuild the South allowed industries such as railroads, steel, and oil to thrive.  The Carnegie Steel Company, for example, managed to take over the entire production process for its steel, allowing it to cut out middlemen and offer high-quality steel at lower prices than its competitors.  However, these "big businesses" were typically not very beneficial.  John D. Rockefeller, for example, established a trust, in which he'd merge with other businesses to slowly force competitors into bankruptcy, and then charged excessive rates once he owned a monopoly over the oil industry.

Or, as William Henry Vanderbilt colorfully put it: "The public be damned!" [3]

With the emerging market on E-books, it's easy to see the same patterns.  A trio of publishers (Hachette's Book Group, Simon & Schuster, and HarperCollins) were charged with forming a trust on the market -- collaborating with Apple and it's marketing system through the iPad to raise prices.

The market started with the development of Amazon's Kindle.  New E-Ink technology allowed users to read books without the use of a backlight, preventing retinal deterioration.  The innovation spawned an industry of digital books, which previously was not practical or intuitive.

Amazon set a maximum price for its books at $9.99.

Then came Apple, jumping on the bandwagon with iBooks, in which users could purchace E-Books through the iPad.  They allowed publishers to price their books higher than they could through Amazon.  Many publishers quickly began to collaborate with Apple instead, draining Amazon's profits.  They were eventually forced to follow suit, allowing publishers to set their price, and such began the trust on E-Books.

Just as the Sherman Anti-Trust Act began breaking up "bad" trusts, a settlement was recently achieved in which pricing agreements between publishers and Apple were rendered void. [4]  To restore competition, publishers were forced to allow retailers to adjust prices as they saw fit.

Judge Denise Cote, when deciding the case, placed emphasis merely on the destruction of monopoly-building between retailers and publishers.

It's very likely that this settlement will allow cleaner competition throughout the E-Books market.

OH NO SCALE: Not so bad

[1] http://en.wikipedia.org/wiki/Trust_%28monopoly%29
[2] http://en.wikipedia.org/wiki/Robber_baron_%28industrialist%29
[3] http://en.wikipedia.org/wiki/William_Henry_Vanderbilt
[4] http://money.cnn.com/2012/09/06/technology/ebook-settlement/index.html