The DOJ Dismisses Commenters, Vows to Forge Ahead with Apple Anti-Trust Suit

Jul 24, 2012

Article ImageConsumers may have been furious (and vocal) about an April settlement that allowed three publishers - HarperCollins, Simon & Schuster, and Hachette - to settle out of court in regards to an antitrust lawsuit brought against several publishers and Apple for allegedly "price-fixing" ebooks, but that doesn't seem to bother the DOJ. Many people who filed comments with the U.S. District Court in New York have criticized the DOJ for essentially giving Amazon a leg up in the ebook market by taking on its competitors.

After all, the lawsuit alleges that Apple and the publishers - which also include Penguin and MacMillan, which have decided to fight in court - colluded to keep ebook prices high.

As EContent previously reported: "According to their filing, the DOJ believes that in early 2010 publishing executives colluded together and with Apple to create and maintain a uniform ebook pricing structure for all retailers that would stifle competition through a most-favored nation status (wherein no one else could charge a lower price than Apple's iBooks). Publishers were concerned about Amazon's drastically lowered ebook prices becoming a consumer expectation. Apple wanted in on ebook sales but wanted to nail down the pricing before agreeing to anything. Steve Jobs can't be called as a witness, for the obvious reason, however he was quoted in Walter Isaacson's recent biography as saying, "We told the publishers, ‘We'll go to the 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."

The DOJ, for its part, isn't impressed by the outcry against its suit. According to The Washington Post, the DOJ "wrote that critics of the agency's enforcement action have ‘an interest in seeing consumers pay more for e-books, and hobbling retailers that might want to sell e-books at lower prices.'"

In other words, the DOJ has no intention of backing down, despite the criticism of, among others, Barnes & Noble, authors, and publishers - all of whom, of course, have a vested interested in making sure cheap ebooks don't cannibalize hard copy profits.  

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Last month I mentioned the rumors that the Department of Justice was preparing to file antitrust charges against Apple and five publishers regarding "agency pricing," wherein publishers set a specific price for an ebook and the retailer receives a certain percentage of that price. (Author royalties are paid on cover price in a similar manner.) Yesterday the hammer fell.
In the ebook conspiracy case against Apple, the company will need to prove it negotiated pricing arrangements separately with each of the five publishers named in the U.S. Department of Justice's lawsuit, avoiding group gatherings.