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Government complains Apple rushing e-book price-fixing case

updated 02:22 am EDT, Fri June 22, 2012

Justice Department requests discovery into next year

The US Department of Justice, which launched a surprise antitrust lawsuit on Apple and (now) two publishers in April over alleged "price-fixing" in Apple's development of an e-book marketplace, now want to extend the discovery period of the case into March of next year so it can gather more facts. Apple fired back at the request demanding a "speedy resolution" and reiterating its position that it has done nothing wrong.

Both sides will get to lay out their arguments in court in a hearing on Friday, with the government arguing that it needs the additional time to examine the full scope of the "conspiracy" and identify all the executives that may be involved as "co-conspirators." The Justice Department believes that Apple and the five major publishers acted in concert to keep e-book prices higher in an effort to break Amazon's then-monopoly.

Apple (and the two remaining publishers who haven't settled, MacMillan and Penguin Group) contend that Amazon's predatory pricing methods (it controlled over 90 percent of the e-book market prior to Apple's entrance) would have destroyed most publishers, especially smaller ones, and that in fact Apple's entry (along with the later emergence of Barnes & Noble's Nook) actually restored balance to the e-book marketplace.

Amazon, which has previously been known for bullying publishers that didn't cooperate with it, had been selling e-books at a loss in order to drive out competitors. When Apple was talking to publishers about the idea of entering the market, then-CEO Steve Jobs warned them that Amazon would eventually force royalty cuts so that it could continue to keep e-book prices artificially low, a tactic similar to the way Wal-Mart's predatory pricing closed US retail stores and manufacturers and increased US dependence on cheaper labor.

The core of the case revolves around a dispute over the "agency model" pricing Apple adopted, a long-standing practice in the publishing world. Amazon had used a "wholesale model," where publishers sell Amazon books at an agreed-on wholesale price and Amazon resells them for whatever it wants (including at a loss). The agency model lets publishers set the final selling price, and Apple gets a portion of that price (regardless of what it is).

In fact, Amazon is down to about 60 percent of the e-book market following the entry of Apple, Barnes & Noble and others. Prices have remained about the same, and in fact Apple continues to offer the only platform where users can read books from multiple and competing e-bookstores. Even competitors such as Barnes & Noble, who are not involved in the case, have sided with Apple against the DOJ's view. The Author's Guild, which represents most of the more successful authors in publishing, has also agreed with Apple's view of the case.

In its response, Apple said that its demand that the trial move forward reflects a "special urgency" because of the public interests at stake along with the harm that the charges have done to its reputation. It further argues that the "mere existance of litigation of this type creates marketplace uncertainties, which impact competitive conditions."



By Electronista Staff
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Comments

  1. Outdo

    Fresh-Faced Recruit

    Joined: Apr 2009

    0

    Amen!

    your comment

  1. Bobfozz

    Fresh-Faced Recruit

    Joined: Jul 2008

    +5

    More Incompetence from Eric Holder and...

    his gang of idiots!

    They shouldn't have gone off half-cocked and started this "probe" without gathering their facts FIRST. Any investigator knows this. Holder is looking for a WIN since he and the DOJ have had so many losses. Why not tackle a topic where some actual wrong has been done? Amazon, like Wal-Mart, has more than ONE goal and one is, to eliminate competition so they can do whatever they want.

  1. Inkling

    Dedicated MacNNer

    Joined: Jul 2006

    +1

    DOJ in Trouble

    This is evidence that the DOJ case is in big trouble. Notice that they: "now want to extend the discovery period of the case into March of next year so it can gather more facts." And this: "the government arguing that it needs the additional time to examine the full scope of the "conspiracy" and identify all the executives that may be involved as "co-conspirators."

    Criminal prosecution isn't supposed to be a fishing expedition. You must have clear evidence of a crime and know who did it before filing charges. The DOJ apparently went off half-cocked, assuming that some sort of "smoking gun" would turn up in an email or memo. None has, so now they want more time.

    From the start this lawsuit has been ridiculous. Apple at that time had 0% of the ebook market and Amazon had 90%, and yet the DOJ went after the former claiming that Apple was engaging in fixing market prices. By that sort of convoluted reasoning, they could go after you or I for the same thing, particularly if we sell a few old books at a garage sale.

    Of course, what's really suspicious is what Sherlock Holmes referred to as the dog who didn't bark. Why hasn't the DOJ filed any charges against bullying, market-dominating Amazon? And you can also ask yourself who benefits from attacking Apple. Everything the DOJ is doing without exception benefits Amazon and Amazon alone.

    Of particular importance are those charges of conspiracy. What the ebook market needs more than anything else is coherence. It needs an efficient system of wholesaling, so authors aren't forced to make contracts with and upload to every online store separately. It needs a common set of standards, so multiple formats don't add to costs and confuse customers. It needs some sort of structure so an ebook I buy isn't restricted to one set of hardware/software. And to do that, authors, publishers and online stores need to talk to one another, so what develops in the market isn't controlled almost exclusively by its biggest player, Amazon.

    Absence that coherence, all the advantages go to Amazon. Absence any standards, customers are forced to buy from the company whose size makes its proprietary formats, which no one else can copy, a sort of pseudo-standard. That's what I mean by

    I do recognize that this may not be the result of a secret deal between Amazon and Eric Holder's corrupt, Chicago-machine DOJ, meaning one in which money changes hands. But for the life of me, the only alternative to that seems to be that these DOJ lawyers are as stupid as tree stumps.


  1. gprovida

    Fresh-Faced Recruit

    Joined: Feb 2006

    +3

    Businesses at risk due to Gov't action

    Apple's insistent for rapid closure is driven by urgency to resolve what appears to be flawed and weak case. Apple is being sued based on this case and publishers are under pressure to cave.

    I applaud Apple and sympathize. Now is not the time for a fishing expedition through discovery. Apple was fully open at the beginning.

  1. Ratdude

    Fresh-Faced Recruit

    Joined: Oct 2010

    +1

    Incompetence

    You line the ducks up in a row, then you shoot. Essentially the government has admitted they are incompetent and want to foist this fiasco off on the new administration coming in January. Before they pull the trigger again, they better be prepared to be the ones who are going to deal with it and not waste OUR money in pursuit of blue sky allegations. If there was not clear cut evidence with a probable successful outcome they are wasting resources. This is malfeasance in office. Apple is correct to request a speedy resolution.

  1. testudo

    Forum Regular

    Joined: Aug 2001

    0

    sorry guys

    This is more of a "Apple is trying to rush the case so they can catch the prosecution off-guard" then the gov't not having a case. It is far easier for Apple to whip out a memo that they know about to counter some gov't claim before the gov't has a chance to know the memo even existed or be able to produce a response to it.

    But I'm sure if Samsung or Motorola was trying to speed up a Apple brought, and Apple was balking, you all would be saying how Apple was trying to find that smoking gun. Oh, wait, you'd claim that Samsung was trying to hide information and rush Apple in hopes they'd miss something. Well, guess it depends on who's on what side of the complaint, right.

  1. testudo

    Forum Regular

    Joined: Aug 2001

    0

    Re: DOJ in Trouble

    From the start this lawsuit has been ridiculous. Apple at that time had 0% of the ebook market and Amazon had 90%, and yet the DOJ went after the former claiming that Apple was engaging in fixing market prices.

    They aren't going after Apple alone, they're also going after the publishers, since they're all part of this deal. And I love your solution: Wait until the competition is destroyed by the price-fixing, then go after them. As they say, the law is the law. And the whole point is that the publishers are trying to fix their prices by colluding together. Oh, but let's ignore that.

    You continue to think they're just after apple. They are not. Apple was just the 'organizer', if you will, of the publishers.

    Of course, what's really suspicious is what Sherlock Holmes referred to as the dog who didn't bark. Why hasn't the DOJ filed any charges against bullying, market-dominating Amazon? And you can also ask yourself who benefits from attacking Apple. Everything the DOJ is doing without exception benefits Amazon and Amazon alone.

    It benefits any company selling ebooks. Amazon is one of them. By your argument, if such a case would benefit another company, then it must be a conspiracy. So what are you saying, BTW? That the DOJ is being paid by Amazon?

    Of particular importance are those charges of conspiracy. What the ebook market needs more than anything else is coherence.
    Maybe. Maybe not.

    It needs an efficient system of wholesaling, so authors aren't forced to make contracts with and upload to every online store separately.

    Why? We survived without this for music. For video. But books is different? Is that because Apple's being sued?

    It needs some sort of structure so an ebook I buy isn't restricted to one set of hardware/software.

    How does Apple help in this? Oh, right, they DON'T! In fact, they restrict you more than Amazon. You can't read an Apple book on anything not running iOS. You can read kindle books on many devices, including computers and the iOS. In fact, Amazon has been far more helpful in this than anyone will expect Apple ever to be.

    And to do that, authors, publishers and online stores need to talk to one another, so what develops in the market isn't controlled almost exclusively by its biggest player, Amazon.

    Except the whole reason behind the deals Apple has wrought was so that it could help the publishers topple Amazon's "hold" (as in their desire to charge less for books, single-price them, etc., you know, the same things Apple did with music). But also so they can get their foot into the game and use their iOS market power to take it over.

    Absence that coherence, all the advantages go to Amazon. Absence any standards, customers are forced to buy from the company whose size makes its proprietary formats, which no one else can copy, a sort of pseudo-standard. That's what I mean by

    What the h*** are you talking about? Amazon's "proprietary" formats? Oh, right, as compared to Apple's "open" format, locked down by their "proprietary" DRM. And since Apple has never shared their DRM (to the point that any old music you bought from the ITMS is still limited to your iPod or iTunes), how is this deal going to 'change' things?

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