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Apple claims US government sides with monopoly in e-book case

Apple denied in a court filing that it had conspired to fix e-book prices, and said it had no interest in price increases

By John Ribeiro
May 24, 2012 01:35 AM ET

IDG News Service - The U.S. government has sided with monopoly rather than competition in bringing a case of e-book price-fixing against Apple, the company said in a filing on Tuesday before a federal court.

The Department of Justice filed in April an antitrust lawsuit against Apple and five large publishers, accusing the companies of working together to raise prices of e-books, in retaliation for competitor Amazon.com pricing most e-books at $9.99 beginning in late 2007.

Three publishers - Hachette Book Group, HarperCollins and Simon & Schuster - agreed to settle the lawsuit, the DOJ said.

Apple's reply to the court is in line with a statement issued by Apple in April after the DOJ filed its case, in which it said that "the launch of the iBookstore in 2010 fostered innovation and competition, breaking Amazon's monopolistic grip on the publishing industry." The company added: "Just as we've allowed developers to set prices on the App Store, publishers set prices on the iBookstore."

The government's complaint does not allege that all e-book prices, or even most e-book prices, increased after Apple entered the market, the company said in the filing before the U.S. District Court for the Southern District of New York. Apple had in fact no interest in seeing price increases, it said.

The government's complaint against Apple is fundamentally "flawed as a matter of fact and law," Apple said. The company said it has not conspired with anyone, was not aware of any alleged conspiracy by others, and never fixed prices.

At the time Apple entered the market, Amazon sold nearly nine out of every ten e-books, and its power over price and product selection was nearly absolute, Apple has stated. The company's entry helped grow the number of e-book titles, the range and variety of offerings, sales, and improved the quality of the e-book reading experience.

Instead the government focuses on increased prices for a handful of book titles, Apple said.

Apple offered any publisher interested in the iPad platform and its iBookstore the ability to sell its e-books directly to consumers, rather than dealing only with a single dominant buyer, Amazon, it said.

One of Amazon's most successful marketing strategies was to lower substantially the prices of newly released and best-selling e-books to $9.99, a price that the defendant publishers saw as a challenge to their traditional business model, according to the DOJ lawsuit.

The defendant publishers feared that lower retail prices for e-books would result in consequences such as lower wholesale prices of e-books and lower prices for print books. The publishers wanted higher retail e-book prices across the industry before the $9.99 price became an "entrenched consumer expectation," the DOJ said. The publishers then allegedly teamed up with Apple to push up e-book prices.

Reprinted with permission from IDG.net. Story copyright 2014 International Data Group. All rights reserved.
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