The government’s case against book publishers and Apple, pursued in the name of antitrust, ended up increasing prices and limiting choice

See ‘United States v. Apple’ Review: In Competition We Trust by L. Gordon Crovitz. He reviews the book United States v. Apple by Chris Sagers. Excerpt:

"Apple had set about licensing music, video and games so that consumers would have reasons to buy its iPad. Apple realized that, for digital goods, there was no reason to follow the wholesale model. It could simply set up a revenue-sharing formula. Content owners and app developers—think of an iPad or iPhone game, such as “Minecraft” or “Fortnite,” that offers premium features—could pick their own price, even choosing to offer content free, and Apple would take 30% of any sales as a commission.

When Steve Jobs decided to include e-books on the iPad in 2010, Kindle had a 90% market share. So book publishers were again delighted—that Apple would be entering the market with its revenue-share model and letting publishers set the prices for their e-books. The largest publishers met among themselves to agree on the terms for licensing their books to Apple. The government sued, claiming an unlawful conspiracy masterminded by Apple.

Mr. Sagers sees this as an open-and-shut case of an unlawful pricing conspiracy and expresses surprise that there was so much support for the book publishers and Apple. He rightly dismisses the self-serving argument that books are so culturally important that publishers and Apple deserved an antitrust exemption. He is also right to note that Amazon was not, despite its huge market share, an unlawful monopolist—big is not always bad.

This view contrasts with the argument of some academics and politicians, such as presidential candidate Elizabeth Warren, who want to reverse the long-standing aim of antitrust law: to maximize benefits to consumers. Their crusade, sometimes cheekily labeled “Hipster Antitrust,” would ignore the economic analysis of antitrust and redefine the law to prosecute companies for supposed social or political sins, even if the result harms consumers. Whatever the frustrations with Facebook and Google, it is surely better to address them by leaving antitrust law alone and instead enact digital-era privacy rules and clarify the property rights of individuals to their own data.

Mr. Sagers believes that opposition to the Apple case shows that Americans are ambivalent about competition. There are times, he says, when “competition seems destructive.” When antitrust law requires firms to compete in such circumstances, then “antitrust itself has seemed like a failure.” The government claimed that Apple conspired with book publishers, risking higher prices, but the case was perceived as a government favor to Amazon, which it was.

Indeed, people objected to the Apple case because it was ill-advised—limiting consumer choices and blocking lower prices. Appeals Court Judge Dennis Jacobs made this point, writing in his 2015 dissent that Apple’s conduct “immediately deconcentrated the e-book retail market, added a platform for reading e-books, and removed barriers to entry by others.” With Apple in the game, Amazon’s 90% market share fell to 60%. Now it’s back up to 83%, according to the latest industry estimate. As competition decreased, prices increased. The typical price for a Kindle best seller is now in the range of $14.95.

Punishing Apple also suppressed innovation. Newspapers and magazines now offer digital versions with interactive features and enhanced premium products. In contrast, almost all e-books are still print books posted online. Judge Jacobs noted the opportunity cost. The iPad “integrated cutting-edge functions and applications,” and it was “impossible to know the likely course of innovation” if courts had left the iPad free to develop new kinds of e-books."