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Friday, May 17, 2013

DOJ, Apple Prepare for Price-Fixing Battle

Since all the publishers involved in the e-book pricing lawsuit have settled, Apple has become the lone target for the Department of Justice (DOJ), which released court documents depicting the computer giant as the leader of the alleged conspiracy.

The government contends Apple and five publishers—HarperCollins Publishers, Simon & Schuster, Hachette Book Group, Macmillan, and Penguin Group—conspired to force Amazon to raise its prices from $9.99 for an e-title through its agency pricing plan. Apple is portrayed as the driving force behind the model that let each publisher set the e-title price instead of the traditional wholesale pricing model, where retailers buy the title at wholesale and charge whatever they want, even if it’s at a loss.

Government documents point to e-mails from late Apple CEO Steve Jobs that talk about creating a market for e-books at the higher prices and messages that suggest Apple threatened to block e-book apps from Random House if it did not take part in the plan. The court documents also quote Penguin CEO David Shanks as saying Apple was the “facilitator and go-between” in arranging the agreement.

Apple paints a very different picture in its court filings. It said the publishers were already trying to find ways to force Amazon to raise its e-book prices independent of Apple, that it only became involved after approaching the publisherswith the iPad and its online bookstore, and that it required separate and different agreements with each company.

“Early—and constant—points of negotiation and contention were over Apple’s price caps and 30% commission,” Apple said in its 81-page findings of fact. “After Apple sent draft agency agreements to each publisher CEO on Jan. 11, each immediately opposed Apple’s price tiers and caps.”

Even some Mac enthusiasts are even having a hard time buying the Apple line, in particular, MacNewsWorld columnist Chris Maxcer.

“I’m betting that Apple knew that the way forward was to reset customer expectation on the value of an e-book at a reasonable and stable price,” he wrote. “This worked with music and movies. Why not with e-books, too?

“However, this price was higher than what Amazon (and the e-book average selling price) was at the time. Effectively, Apple’s entry raised the price of e-books for consumers—hence the gaze of the DOJ.”

The case is scheduled to go to trial on June 3.

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