Mar 092012

I have a love/hate relationship with the DoJ. I love them when they go after Google like when they did with the whole “Canadian prescription drug” thing. Good times. But now they’re allegedly going after Apple. Thankfully, it doesn’t matter if we’re talking about knock-off Android OEMs or the U.S. Government, Apple isn’t backing down in its stance regarding any iBooks-related price-fixing.

The skivvy knot is over Apple’s role in allegedly conspiring with publishers to fix the price of e-books and the evidence against Apple is pretty damning. And by “damning” I mean “anecdotal and circumstantial”. Exhibit A: Prices of e-books went up after the introduction of the iPad and its iBooks, even though Steve Jobs was quoted by Walt Mossberg that the Amazon competitor’s offerings would “cost the same”. Exhibit B: Apple would not let publishers offer an e-book for less on a competitor’s platform. Exhibit C:…

/shuffles through imaginary papers

//imagines this is the part of the Matlock episode where a judge would let Matlock fish around for 10 minutes speculating while the witness and counsel for the defense sat mute

I guess that’s it. It’s likely that the DoJ is just saber-rattling and holding back information before taking more formal action. They may want to consider releasing something that resembles actual evidence of price fixing before they go to trial, unless of course they want to come off as bigger idiots than the guy who writes the TSA’s blog. In a separate court matter dealing with the same theme, Apple released some statements relating to a currently-filed class action lawsuit. Quotes taken from The Verge:

“Guilt by association” and sinister interpretations of Apple’s public statements (Jobs’s quote to Mossberg re: iBooks “costing the same”) do not make up for basic deficiencies in Plaintiffs’ conspiracy theory. The facts depict unilateral – not conspiratorial – action by Apple. Before Apple entered the eBook market, one competitor, Amazon, the nation’s largest bookseller, had taken 90% of the market by pricing key eBooks below their wholesale cost. Having no desire to incur the losses that would flow from retailing in such an environment, Apple individually negotiated separate vertical agreements with each of the Publishers to serve as a distribution agent in exchange for a 30% commission on eBook sales. Each Publisher set its own prices – and Apple “exercise[d] no discretion” over prices but to ensure that Apple’s iBookstore would not be undercut by other sellers and that these offerings would be attractive to consumers, Apple negotiated general limits to the prices set by the Publishers, requiring that the Publishers match lower prices on key titles offered elsewhere. These were competitive, not conspiratorial, actions.

Did that man from Apple say that Amazon had 90% of the e-book market?

/hears no saber-rattling

Apple is stating that they had no desire to compete with Amazon’s pricing model by taking a loss, so they told publishers to set their prices and Apple would take 30% of whatever each of them decided – individually. That 30% is a pretty damningly round number, however. Regarding the allegations that Apple was using iBookstore agreements as a way to hinder Amazon’s entry into the tablet market:

…if Amazon was a “threat” that needed to be squelched by means of an illegal conspiracy, why would Apple offer Amazon’s Kindle app on the iPad? Why would Apple conclude that conspiring to force Amazon to no longer lose money on eBooks would cripple Amazon’s competitive fortunes? And why would Apple perceive the need for an illegal solution to the “Kindle threat” when it had an obvious and lawful one which it implemented – namely, introducing a multipurpose device [the iPad] whose marketing and sales success was not centered on eBook sales?

I would have also added “The necessity of Amazon having to use the Android operating system was a far more effective “self-squelching” strategy than anything Apple could have done.”, but I’m not a lawyer.

If this is the kind of hard line that Apple will take with the DoJ – and if you’ve been following any of the Android OEM litigation, I hear they can be real dicks – I don’t see an easy $500 million payoff in their future.

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