Apple [AAPL] seems set to take the stand to argue DoJ charges it conspired to introduce an agency price model for eBooks, raising online book prices by up to $3 for a period subsequent to launch of the iBookstore.
Big mouth strikes again
The DoJ seems to have decided to litigate against Apple for this primarily on strength of a statement made by former CEO, Steve Jobs, to his biographer:
"We'll go to the agency model, where you set the price, and we get our 30 per cent, and yes, the customer pays a little more, but that's what you want anyway."
In an email to the Washington Post, Apple says it looks forward to arguing its case in court. It claims publishers had already decided to do what they could to break the power imbalance giant retailer, Amazon, had built over their industry.
Unfortunately the original clutch of iBookstore publishers were also targeted in the DOJ investigation (Penguin, Macmillan, HarperCollins, Simon & Schuster and Hachette) all of which have now reached settlement on the matter. Apple has now been left in an isolated position as it tries to argue its position.
"Apple engaged in "individual, one-on-one, and at times contentious negotiations" over the draft contracts with each publisher throughout January 2010," it claimed as reported by Computerworld.
In addition to which: "The average retail price of e-books in the alleged relevant market, trade e-books, has decreased since the implementation of Apple's first agency agreements on April 1, 2010," it said in its filing.
Here's a handpicked selection of details regarding this affair:
“In a filing dated April 26 and released on Tuesday, Apple said that the major publishers were at the time locked in a battle with online retailer Amazon over selling books cheaply. But Apple said the publishers had decided, independent of Apple, to eliminate discounts on wholesale book prices of e-books, to sell lucrative hardcover books first to bookstores in a practice called windowing and to take other measures to push Amazon to raise prices."
Diane Bartz, Reuters.
"Apple said Amazon also considered the agency model and spoke in detail to publishers who at one point offered an exclusive arrangement that would cut out Apple."
Cecilia Kang, Washington Post.
Apple played hardball
"..throw in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99."
Steve Jobs email to News Corp's James Murdoch.
"An Apple executive counseled him that the publishing company could threaten to withhold e-books from Amazon to force Amazon to accept the higher prices."
NYTimes cites ex-Random House head, Markus Dohle.
Was it business as usual?
"Apple contends that the email 'reflects two executives wrestling with the realities of the e-books business,' but the DoJ calls that argument unconvincing, citing 'Mr. Jobs' acute awareness' that companies were unhappy with Amazon's pricing plans as proof that Jobs was aware of the publishing houses' plans for agency pricing. It calls Apple's defense 'untethered from both precedent and logic.'"
The Department of Justice, via The Verge.
Why it matters
“This case has a huge impact on competition as everyday consumers are being hit in the pocketbook when they want to buy e-books. This not only sets the standards for digital books but also on Internet conduct on retailing. It ensures the Internet prospers and that consumers benefit.”
David Balto, a former policy director for the Federal Trade Commission, via Washington Post.
Quote of the day
"Its legal arguments do not really explain why Steve Jobs basically admitted the price-fixing conspiracy. It would appear that the DoJ thinks it has enough evidence without having to call in Jobs' biographer or conducting a court room séance."
Nick Farrell, TG Daily.
Apple's ready to roll
“We helped transform the eBook market with the introduction of the iBookstore in 2010 bringing consumers an expanded selection of eBooks and delivering innovative new features. The market has been thriving and innovating since Apple’s entry, and we look forward to going to trial to defend ourselves and move forward."
Apple spokesman Tom Nuemayr to the New York Times.
I think Apple will face a tough time fighting this corner, partially as result of Steve Jobs' contentious statement within his biography.
It does seem unfortunate that Jobs will be unable to answer these charges himself, and I can easily believe it possible his biographer, Walter Isaacson, may be dragged into this affair, if only to share the eBook-related portion of his transcript of his talks with Jobs.
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