July 23, 2012

Apple And The DOJ, Sitting In A Tree

Michael Harper for - Your Universe Online

Apple and the Department of Justice have been exchanging harsh words in the ongoing ebook price-fixing investigation.

In May, Apple accused the DOJ of siding “with monopoly, rather than competition” when they sued Apple and 6 other publishers for allegedly adjusting their prices to beat out Amazon´s $9.99 e-book price point.

Today, the DOJ has released a document, calling Apple´s actions “self-serving” and ill-founded. They´ve also pointed to other e-book sellers, notably Google and Microsoft, as evidence that Amazon isn´t the only e-bookseller around, a point which Apple has made in the past, claiming they´re finally bringing options to a previously all-Amazon world.

These arguments address 868 public comments filed in response to the April settlement between the DOJ and three other publishers. In the settlement, the three publishers– Hachette Book Group, HarperCollins and Simon & Schuster– agreed to change their pricing policy in accordance with the DOJ´s demands.

Despite these public comments, the DOJ is refusing to change any parts of their previous settlement agreements.

As for why the DOJ signals out Apple so extensively in the statement, they say Apple´s “central role” in the alleged price fixing events are what led to “enforcement action.”

The DOJ also took time to quote Steve Jobs when he allegedly told the other publishers, “the customer pays a little more, but that´s what you want anyway.”

In response to their settlements, Apple accused the DOJ of forcing a business model on publishers which favored Amazon and condemned choice. The DOJ apparently took offense to this accusation, saying, “Nothing in the proposed Final Judgment would force Apple or Barnes and Noble to exercise discounting authority–they are free to carry out their own businesses exactly as before. What they may not do is continue to rely on a conspiracy to restrain their competitors.”

As a part of the new settlements, Apple and the other publishers must put an end to any existing “Apple Agency Agreements” within 7 days of the settlements final approval. Afterwards, the publishers will then be able to sign new contracts, though they cannot sign any new contracts which limit the retailers right to discount.

Apple´s agency style pricing is at the center of this debate, which allows publishers to set their own prices for their books. In return, Apple asks for 30% of the cover price. Amazon´s pricing model, on the other hand, sold the books at a flat $9.99, a move which had publishers concerned that they would become too large and powerful.

As proof that the DOJ doesn´t feel as if Amazon has become a monopoly, they´ve cited recent agreements between Microsoft and Barnes & Noble to the tune of $300 million. The DOJ also pointed to Google´s new Nexus 7 tablet, saying that competition in the tablet market is still alive and healthy.

Now, the proposed settlement between these publishers and the DOJ must go before Judge Denise Cote who will decide whether to approve it, delay it or deny it altogether. While the settlement case is pending, the case between Apple and the DOJ continues onward.