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Apple defends itself over ebook price fixing allegations

Apple defends itself over ebook price fixing allegations


Apple has defended itself over allegations of ebook price fixing by arguing that the publishers set the price on titles in its iBookstore.

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kindle ibooks

With the US Department of Justice warning of future lawsuits over alleged ebook price-fixing, a separate court filing last week gives insight into how Apple may defend itself. In asking that a class action suit be thrown out, Apple claims that it's been made the victim of conspiracy theories and over-analysis of its public statements. In particular, speculation has mounted over the nature of comments made by Steve Jobs to Walt Mossberg before the launch of the iPad, where he presciently noted that "the prices will be the same" in reference to Amazon's Kindle Store — the argument goes that subsequent price hikes in ebooks suggest collusion between Apple and publishers to raise prices across the board.

On the other hand, Apple says that since the publishers were left to set their own prices with a provision that their titles in the iBookstore would have to match digital versions elsewhere, it can't be held responsible for any increases. In short, Apple is arguing that Amazon's prices were artificially low, and using an agency model let publishers restore normality.

"Guilt by association" and sinister interpretations of Apple's public statements 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.

Another argument in the suit is that Apple's entry into the market in the first place was designed to halt Amazon's rise into the mobile space. Apple's position is that it acted in the spirit of competition by deciding to enter a market where Amazon had over 90 percent share, and that the iPad's positioning as a multifunctional device doesn't bear out the claims. The company also makes the point that the Kindle app for iPad could only drive sales of Kindle books, and that the price fixing conspiracy they are accused of would actually end up making more money for Amazon.

...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?

It remains to be seen how the US Department of Justice will view these claims, but it certainly doesn't look like Apple's going to take the accusations lying down.