Apple, Amazon, And The DOJ
May 25, 2012

Apple, Amazon, And The DOJ

Michael Harper for

Apple had some tough words for the Department of Justice (DOJ) on Thursday as they accused them of siding “with monopoly, rather than competition” when they sued Apple and 6 publishers for allegedly price-fixing their e-books. The DOJ filed a lawsuit in April accusing Apple and the other publishers of trying to retaliate against for offering their books at the $9.99 price point.

Three of the publishers have decided to settle with the DOJ: Hachette Book Group, HarperCollins and Simon & Schuster.

As reported by ArsTechnica, Apple isn´t going to give in so easily and has come at the DOJ swinging.

According to Apple, Amazon was the only player in the e-books market before they came into the scene. Their statements today not only echo statements from April, they also get straight to the heart of the matter.

"At the time Apple entered the market, Amazon sold nearly nine out of every ten eBooks, and its power over price and product selection was nearly absolute," Apple wrote.

“The innovations that Apple brought to the market with the launch of the iPad and the iBookstore in 2010 ushered in a new era of innovation and competition. A market dominated by simple, yet relatively expensive, black and white proprietary e-reader was transformed overnight.”

Apple then goes on to say the government started with a “false premise” in their accusations. The DOJ´s complaint, however, does not suggest that all e-book prices increased after Apple entered the market, according to a filing before the US District Court for the Southern District of New York.

The iPad maker also says the DOJ fails to describe how their agency model pricing–now used by Amazon–harms consumers, as it has been “long recognized as perfectly lawful.”

The DOJ got involved when Amazon and the publishers began to fight with one another about the prices of their books. When Amazon began selling e-books, the publishers continued to sell them the books as they had been sold all along: Publishers sold the books to Amazon for about half of the cover price. If Amazon wanted to discount them, they could. The publishers became worried when Amazon began to sell the e-books for their $9.99 price point. Suddenly, it looked as if Amazon was going to gain too much power in the e-book market and end up using it to hurt the publishers. When Apple entered the market with their iBookstore and iPad, they gave the publishers the ability to set their own price for their books, asking only for 30% of the cover price.

The DOJ´s lawsuit also calls out Steve Jobs, alleging he approved of the model which raised the price of the e-books. In court papers, Jobs is quoted as saying, "We'll go to [an] agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that's what you want anyway.”

As for Jobs´ reference to an “akido” move in his biography, Apple has said, “The Government´s reference to an 'akido move' – another selective citation to the biography of Apple´s former CEO – is flatly inconsistent with the concept of the agreement. “Akido is not a team sport like football with a quarterback directing the plays; it is a defensive martial art practiced one-on-one by individuals, requiring little strength or power, based on redirecting an attacker´s own force.”