updated 01:16 am EDT, Tue June 26, 2012
Date a compromise between Apple, DOJ requested dates
Judge Denise Cote of the United States District Court for the Southern District of New York has set the e-book antitrust bench trial, which pits the Department of Justice against Apple and two of the five major book publishers, to June 3, 2013. The date is much later than Apple wanted, but much earlier than the Department of Justice wanted. Apple was hoping to get the trial underway as soon as possible, citing a cloud over the industry and damage to its reputation. The DOJ had pushed for a much later start date, claiming that Federal investigators needed until March 2013 just to gather evidence, and that Apple was rushing the case.
Department of Justice officials argue that Apple's deal with the publishers is keeping e-book prices artificially high, echoed by consumer groups. Only Apple, Macmillan, and Penguin remain in the Department of Justice suit, as the other named defendants (Harper-Collins, Simon & Schuster, and Hachette) have settled. The three remaining parties claim no wrongdoing in the case. Terms of the ex-defendant's settlements will be finalized before the end of the summer, but revolves around each of them giving up the "agency model" of e-book pricing.
The agency model allows publishers to set prices, rather than a single party controlling the market pricing, such as Amazon. Apple and MacMillan's stance is that the agency model isn't price fixing, but allows publishers and authors more flexibility in pricing. Amazon's Kindle model, sometimes called the "wholesale" model, allows books to be sold at prices of a dominant seller's choosing, often at a loss. For now, Amazon continues to pay royalties at established rates based on the book's "cover" price, but publishers wary of Amazon's past behavior towards recalcitrant publishers, have the long-term view that they will be forced to accept payouts on what the book sold for, which they have no control over.
Apple considers the suit "fundamentally flawed" and argues that the suit will harm consumers and return the e-book monopoly to Amazon. Apple has pointed out in the past that Amazon has had to cease "predatory pricing" and still has 60 percent of the nascent market, forcing it to complete more fairly than its previous 90 percent marketshare.
The original alleged conspiratorial group, Apple, Hachette, Harper-Collins, Macmillan, The Penguin Group, and Simon & Schuster, are still facing a class-action civil suit filed on behalf of e-book customers, regardless of settlements with the DOJ and involved states. Judge Cote refused to block the civil suit (seen below), saying that Apple assisted the publishers in avoiding an open market and "helped the suppliers to collude, rather than compete independently."
Judge Cote's Refusal to Dismiss Unmarked)