January 20, 2022

Apple Fights Back in E-Book Antitrust Case

That is one of several factors that seem to be motivating Apple’s vigorous defense against a Justice Department antitrust lawsuit accusing the company of conspiring with five of the largest publishing houses to fix prices on electronic books, according to people close to the case.

Unlike the five publishers, all of which have settled the case, filed in April 2012, Apple is aggressively disputing the government’s assertions that Apple and the publishers wanted to force Amazon, which controlled 90 percent of the e-book market before Apple entered it, to raise its prices, according to court papers filed this week. A trial is scheduled to begin June 3 in Federal District Court in New York.

Among other defenses, Apple says that both Amazon and the publishing companies were already contemplating a move to a different pricing model in 2009, before Apple entered the e-book business. Apple cites one Amazon executive who referred in an e-mail to the idea that Amazon got publishers to accept what it wanted all along as “Jedi mind tricks.”

Apple, whose 2010 introduction of the iPad corresponded with its opening of a digital bookstore, denies that it tried to convince publishers to enforce a regime that would allow them to set their own retail prices for books, above the $9.99 price that Amazon was then charging.

In addition, Apple says that the Justice Department has selectively edited and distorted e-mails between executives of Apple and the publishers.

“Apple injected much-needed competition and innovation into the e-book business,” said Orin Snyder, a lawyer at Gibson, Dunn Crutcher who represents Apple. “The DOJ’s case is based on fictions and incomplete quotations. The actual evidence proves that Apple did not conspire to fix prices in the e-book business. We look forward to trial.”

The Justice Department accuses Apple of its own selective quotation. And, it said, the evidence shows that the publishing companies threatened to withhold books unless Amazon allowed them to set higher prices and that Apple “encouraged them to do so.”

Apple seems particularly peeved about the government invoking e-mails of its former chief executive, Steven P. Jobs, to assert its case, saying the government’s selective editing of those e-mails deliberately distorts Mr. Jobs’s intentions.

The government’s court papers quote from an e-mail that Mr. Jobs sent on Jan. 24, 2010, to James Murdoch, who as head of News Corporation oversaw its publishing company, HarperCollins. That was three days before the introduction of the iPad, as Apple was furiously negotiating deals with publishers that would allow it to introduce its bookstore on the same day.

Apple says the government left out of its papers the fact that Mr. Jobs said Amazon might have the right price for e-books already, at $9.99. “Maybe they are right and we will fail,” Mr. Jobs wrote.

Taken in total, Apple said, the e-mail “shows a new entrant with no market power proposing an alternative business model to HarperCollins, and candidly recognizing that Apple has no power to predict or influence other retailers,” Apple said in pretrial papers.

Sarah Rotman Epps, an analyst at Forrester who follows the publishing industry, said Apple still has a relatively small share of the e-book market.

“Even though they have a big brand, their actions have had relatively little impact on the overall industry,” Ms. Rotman Epps said.

Since Apple’s entry, e-book prices have gone down, the company said, with the average retail price of an electronic book falling 63 cents since April 2010, from $7.97 to $7.34.

However, Michael Cader, the creator of Publishers Lunch, an industry publication, said that at least part of the decline reflected older books, self-published books and books from an array of small and digital-only publishers, many of which are often sold for as little as 99 cents to $3.

Edward Wyatt reported from Washington, and Brian X. Chen from San Francisco.

Article source: http://www.nytimes.com/2013/05/17/business/apple-fights-back-in-e-book-antitrust-case.html?partner=rss&emc=rss

Media Decoder Blog: Awaiting Merger With Random House, Penguin Settles E-Book Case

Penguin, trying to ensure a clean slate before its planned merger with Random House, announced on Tuesday that it was settling a lawsuit brought by the Justice Department over the pricing of e-books.

In a statement, the company said, “Penguin has always maintained, and continues to maintain, that it has done nothing wrong and has no case to answer.”

Nevertheless, the company said, it was agreeing to settle because of the impending merger of Random House, a division of the German media company Bertelsmann, and Penguin, a division of the English conglomerate Pearson. That deal, in which Bertelsmann will assume 53 percent control of the new company, was announced in October. The publishing industry is beginning to consolidate to try to better meet the online challenge from Amazon.

The company wrote in its statement, “It is also in everyone’s interests that the proposed Penguin Random House company should begin life with a clean sheet of paper.”

In April, the Justice Department filed a lawsuit accusing five major publishing houses and Apple of conspiring to fix the price of e-books. These five had moved from a wholesale pricing model that allowed retailers to charge what they wanted to a system that allowed publishers to begin setting their own e-book prices, a model known as “agency pricing.”

The publishers had looked for a way to prevent Amazon from pricing books below their actual cost, which they said would hurt the industry over time. But the government said the publishers conspired in e-mails, in telephone conversations and at lavish dinners to keep e-book prices artificially high.

Three big publishing houses — HarperCollins, Simon Schuster and Hachette — settled with the Justice Department, but Penguin, Macmillan and Apple decided to fight the charges, until Penguin reversed course on Tuesday.

In the terms of a settlement that a judge approved in September, the three publishers that settled agreed to end contracts with Apple and with e-book retailers that contained restrictions on their ability to set prices, and agreed not to make such restrictive contracts for the next two years.

In May, when Penguin filed its response in United States District Court in New York, it said that Amazon treated books as “widgets.” It described Amazon as “predatory” and “monopolist,” and said that the government’s case was based on “innuendo.”

Penguin said that it still believed that agency pricing was legitimate. “Penguin continues to believe that the agency pricing model has encouraged competition among distributors of both eBooks and eBook readers and, in the company’s view, continues to operate in the interest of consumers and author,” the company said in its statement.

The terms of the settlement were not available, but people with knowledge of the details said that they were the same as those received by the other three publishers.

This post has been revised to reflect the following correction:

Correction: December 18, 2012

Because of an editing error, an earlier version of this post carried an erroneous byline.

Article source: http://mediadecoder.blogs.nytimes.com/2012/12/18/awaiting-merger-with-random-house-penguin-settles-ebook-case/?partner=rss&emc=rss