updated 02:22 am EDT, Tue July 31, 2012
Attorney for author says plaintiffs on a fishing expedition
Steve Jobs' biographer Walter Isaacson will not have to turn over notes as possible evidence in the case of a class-action lawsuit filed by lawyers allegedly representing unnamed "consumers" said to have been "harmed" by Apple's alleged e-book price-fixing conspiracy, a court has ruled. Hagens Berman Sobol Shapiro LLP have had their attempt to force Isaacson to turn over notes related to a portion of a quote in Jobs' biography rebuffed by Judge Denise Cote.
Cote, who has previously expressed opinions that indicate that she believes Apple to have conspired with other publishers to raise e-book prices, agreed with Isaacson's attorney Elizabeth McNamera that Isaacson did not have to hand over source materials used due to reporter's privilege, and because Isaacson through his attorney told the court that none of the taped recordings with Jobs discuss e-book pricing.
The case, which is separate from a similar federal case being prosecuted by the Department of Justice and a parallel case involving 31 states, alleges that Apple and the five major publishers conspired to break the Amazon near-monopoly on e-book pricing (the "wholesale model") by adopting the so-called "agency model." In the latter system, the publisher sets the suggested retail price, and the distributor (in this case Apple) gets a cut, generally at or above 30 percent. In the former system, the distributor (in this case Amazon) buys books at a discounted rate, and sets its own price (which can be at a loss).
The agency model has been the standard for booksellers long before e-books arrived on the scene, while the wholesale model (also used by "big-box" stores like Wal-Mart) has been seen to put ever-increasing downward pressure on prices, which eventually drives smaller suppliers out of business or forces them to relocate production to foreign countries where production costs are lower.
Apple's decision (and eventual persuasion of other publishers) to use the agency model for e-book pricing is seen by some as a conspiracy to raise prices or block Amazon -- which had a monopoly on e-book selling at the time -- from selling e-books at a loss in a move to drive out competitors. Jobs himself indicated that consumers would have pay "a little more" for e-books under the agency model, but Apple has vigorously denied any conspiracy, and said that without the agency model not only would Amazon (which has been known to publishers as "a bully" in negotiations) have a monopoly which would be harmful to consumers, but that most smaller publishers would be driven out by the price pressure of competing with entities that could afford at least a short-term loss, reducing options and consolidating the publishing industry, again to the detriment of consumers.
The plaintiffs in this case could try again, Judge Cote ruled, "when it can show that it meets the test for disclosure of nonconfidential material." The test the judge refers to is very difficult; plaintiffs would have to prove or at least provide a convincing case that Isaacson's notes are likely to be highly relevant and necessary to the case, in spite of Isaacson's denial. For his part, Isaacson said that he is willing only to authenticate quotes that appeared in the published biography itself.
Since Apple (and shortly afterwards, others such as Sony and Barnes & Noble) launched its own e-bookstore and adopted the agency model, Amazon's share of the e-book market has fallen from over 90 percent to around 60 percent, with several options for readers beyond the iBookstore and Amazon's Kindle store. Average e-book prices have risen slightly, but the market has grown tremendously.
Three of the five major publishers have since accepted a settlement offer from the DOJ that forces them to abandon the agency model, but the formal agreement is still being hammered out and should appear later this summer. The federal trial between the DOJ and Apple, MacMillan and Penguin is scheduled to begin next summer, in June of 2013. The late start date is the work of the DOJ, which claims it needed nearly a year to gather evidence of the conspiracy from the wide range of executives allegedly involved. All five publishers along with Apple are named in the class-action suit before Judge Cote. [via Publisher's Weekly]