Apple bashes Amazon, calls U.S. DOJ settlement proposal ‘fundamentally unfair, unlawful, and unprecedented’

“In a memo filed with the Southern District of New York this afternoon, Apple argues that the Department of Justice’s proposed settlement with three book publishers forces Apple to tear up existing contracts. That is “fundamentally unfair, unlawful, and unprecedented,” Apple says: It’s not settling, so it’s entitled to a trial,” Laura Hazard Owen reports for paidContent.

“‘Apple is taking a bold stance by ignoring the Judge’s admonition to the parties not to oppose the settlement, other than submitting comments,’ attorney and RoyaltyShare CEO Bob Kohn, who is seeking permission to file an amicus brief in the case, tells me,” Owen reports. “[Kohn said], ‘Apple makes a good point that the proposed settlement terminates Apple’s agency contracts without a trial and that would be an unprecedented violation of Apple’s right to due process.'”

Owen reports, “In a footnote, Apple says that many of the public comments on the proposed settlement ‘expressed concerns about the possibility that the Government has unwittingly placed a thumb on the scales in favor of Amazon, the industry monopolist. Amazon was the driving force behind the Government’s investigation, and it told a story to the Government that has yet to be scrutinized. Amazon talked with the Government repeatedly throughout the investigation, even hosting a two-day meeting at its Seattle headquarters. In all, the Government met with at least fourteen Amazon employees—yet not once under oath. The Government required that Amazon turn over a mere 4,500 documents, a fraction of what was required of others.'”

Read more in the full article here.

MacDailyNews Take: The U.S. DOJ is plainly inept.

[Thanks to MacDailyNews Readers “Fred Mertz,” “Dan K.,” and “Arline M.” for the heads up.]

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40 Comments

  1. Apple can finally be held responsible for anti-competitive behavior. Just because the DOJ is doing its job on behalf of consumers doesn’t make it “inept”. If Apple molested children, MDN would defend it.

    1. They are not inept. It seems like there is money changing hands under the table. Nothing about the DOJ case makes any sense to me. Amazon has the monopoly not Apple, and now the DOJ steps in to make sure their monopoly stands. How does this protect the consumers?

      The DOJ cannot be this inept, something else must be going on.

      1. MDN is being nice by calling the DOJ inept. It sure looks to me like a “shake down” by the gov’t looking for large campaign donations from Apple. I bet that $117 billion in the bank has a few politicians drooling.

    2. Finally the government can lock out competition and force an anti competitive monopoly and force the future of all books to be from a single source: Amazon.

      After you pull your head out of your ass you may want to get some baby wipes to clean it off.

    3. So MS should sue apple because it competes with the PC business? Apple should sue Amazon for its music store? McDonalds should sue Burger King.. Subway sue Jimi Johns??? Shell sue BP?

    4. If you think Apple’s behaviour was uncompetitive, you are either deranged, certifiably stupid, or actually working for Amazon. Amazon had a total monopoly on the ebook market, only broken when Apple got involved. You are openly advocating the re-introduction of a situation involving Amazon that you accuse Apple of. Does the word ‘hypocrite’ ring any bells with you?

  2. Apple should realize that Jeff Bezos has ties going very high up into the government. How else can a company maintain a P/E ratio of 285 unless it has some very powerful backers. Amazon appears to be very well-protected company.

  3. Here are two clear examples of people that have no idea what anti-competitive behavior is. Wozniyack and Renaldo.

    Apple entered into a distribution agreement that gave product pricing to the manufacturer. Whatever the price Apple gets a 30% fee for maintaining the online presence, collecting payments, paying merchant (credit card) fees and paying for delivery (Akamai Networks).

    The result is that book publishers are able to make a profit, unlike their relationship to Amazon, wherein Amazon set the price and because it was an online monopoly, dictated the price it would pay (50% of the price Amazon set).

    Since Apple entered the digital book market, Amazon has lost its monopoly, and is now charging prices (and earning profits) similar to Apple’s.

    The book publishers are no longer on a money losing track, and more product is being made available to the consumer (a very important issue).

    1. Unfortunately you don’t understand the model under which Amazon is operating.

      Amazon pays a preset amount to the book publisher which is typically about 50% of the “suggested retail price”. However, it is not always 50% of that “suggested retail price”. Sometimes more, sometimes less. However, it is very, very rarely 50% of the actual sales price.

      The real point is that Amazon can set the sales price (the price to the consumer) at anything they want. Amazon can give the books away for free if they want thus killing off any chance of competition. Amazon could sell the books at cost it it wants, again killing off any competition that does not have pockets deep enough to compete. Finally, the publishers have no control over what price their books are sold.

      A publisher’s flagship book around which they may invest heavily in advertising and expect to sell worldwide through many different sources may be sold by Amazon for next to nothing just to increase Amazon’s sell through (and Amazon therefore increases their marketing data bases for sales for other products — of which the publishers get no access at all). In this case the publisher has the large expense and Amazon gets all the benefit through increased sell through and increase in their future marketing efforts.

      Apple did not want to try to get into a price war with an established company. Apple had virtually no chance of winning that battle unless it wanted to “invest” billions in giving away e-books virtually free. Therefore Apple said, “We don’t care what price you set for your books. We get 30% of that sale price. You can give them away for free if you want to and we’ll get 30% of nothing. However, you have to guarantee Apple’s customers the best price anywhere. (Note: this is NOT the same as guaranteeing the best price to Apple. In fact, by guaranteeing the lowest price to Apple’s customers this actually minimizes Apple’s income!)”

      The control over what price the book is sold for to the consumer (and therefore indirectly how many are sold and what profits are realized) passes to the publisher in the iBooks model — not Apple, not Amazon.

  4. I can understand how everyone is clearly seeing Apples’ side in this issue, and I can even understand how Apple’s side may be the legal and correct, and Amazon’s side is the monopolist side.

    However, what I can’t understand is how nobody here is capable of seeing the extremely simple reason why DOJ decided to pursue this. Under Amazon, eBooks were cheap; under Apple’s model, eBooks became more expensive, and Amazon seems to have been forced to follow the same model. For DOJ, the bottom line was harm to consumers (the eBook prices going up). DOJ clearly doesn’t care about the possible long-term consequences of Amazon’s model (after all, it is all just speculation). For them, the only relevant point is defending the business model that gives consumers the best deal, even if that means creating a monopoly (don’t forget: monopoly IS NOT illegal abuse of monopoly is). Obviously, someone at Amazon made sure that DOJ doesn’t notice that such a model has excellent potential (and likelihood) of monopoly abuse (“you can only sell through us at prices that we set, and you aren’t allowed to sell through them as well”).

    1. Apple has made valid arguments. They are asking for a trial. Shouldn’t they be allowed a fair trial rather than be manipulated by the DOJ who appears to be in bed with Amazon somehow?

  5.  I would just like to register my opinion — my passionate opinion, by the way — as a longtime member of the Authors Guild and a nonfiction author of nearly twenty books, including a number on ethics.
    Amazon.com is the party guilty of price-fixing — and of becoming a monopoly — and of contributing to the demise of brick and mortar stores, such as Borders, which provide readers and writers alike (and others) a place to peruse through titles, compare one book to another and even to schmooze. Such brick and mortar stores, including and especially the local neighborhood ones that are as much risk because of amazon’s price fixing policies, are essential to our very culture, to our society, our freedom, and our intellectual property.
    ~ Susan Neiburg Terkel

     I am amazed that the DOJ is going after the small guy with action that encourages the monopolist to grow more powerful. Amazon is a run-away tyrant, using its clout to squash the competition. The DOJ’s action in this case is encouraging Amazon to grow even stronger. The DOJ is on the wrong side of the issue, here. A healthy, competitive book market is vital to our culture. It’s not in the public interest for the government to help Amazon use e-books to target traditional brick-and-mortar bookstores.
    ~ Sam Rosenthal

     As a historian of the United States, I find the logic of this antitrust charge against the publishers quite at variance with the anti-trust tradition of the United States, going back to the Jacksonian period of our history. The objection was always to monopolization of the market by an overlarge and powerful economic actor. Although as a government agency, this was the underlying logic of Jackson’s bank veto and, in a private example, the Charles River Bridge case. (It was also the issue in the B&0 Railroad and C&O Canal decision in the Chancery Court of Maryland at the same time. The idea was that our society flourished with a maximum number of economic actors. That was also the case in more modern times with the breakup of Standard Oil and AT&T. Amazon is the equivalent of AT&T and Standard Oil. They publishers are not, even a group that may or may not have discussed a common strategy. The nearest thing to Standard Oil, not only in structure but also in ruthlessness, is Amazon. The suit is pointing toward the wrong target.
    ~ Thomas Bender University Professor of the Humanities and Professor of History, New York University

     I’m a journalist, author of four books. I could literally not believe it when I first read in the NY Times (my alma mater) that DOJ was suing publishers and trying to protect Amazon’s predatory pricing of e-books. You will kill off the remaining bookstores. And that will destroy writers, and our literary culture.
    Is that a proper role of government?
    What are you guys thinking? Or drinking? Or smoking?
    Is this a case of ignoring real, destructive crimes that are committed by the powerful (financiers) and going after the weak instead? Shameful!
    ~ Ann Crittenden, former economics reporter for the NY Times

    We believe that the proposed settlement between the Justice Department and the three major publishers in the e-book collusion suit is irreparably unsound, will stifle competitive growth, is not to the benefit of the general public and will seriously diminish the value of the intellectual property of authors in general.
    ~ Timothy F, Knowlton, Chief Executive Officer, Curtis Brown

     I support the AAR’s position not only as a literary agent who wants to protect the value of my clients’ intellectual property from Amazon’s unfair and predatory discounting, but also as a reader and consumer who would like to choose from various retailers and e-booksellers in a healthy marketplace. The proposed settlement would threaten the book community, harming publishers, booksellers, and our writers who depend on book sales to earn a decent living. I very much hope you will consider the book co unity plea against this settlement.
    ~ Miriam Altshuler, Miriam Altshuler Literary Agency

     I’m one more bestselling writer who thinks striking down the agency model will help only the bad guys. Please reconsider this decision. 
    ~ Josh Bazel

     My name is William C. Dietz and I am a New York Times bestselling author. I have published more than 40 books. A healthy, competitive book market is vital to our culture. It’s not in the public interest for the government to help Amazon use e-books to target traditional brick-and-mortar bookstores. 
    ~ William C. Dietz

     When I opened my store, the state expected me to collect and remit sales tax — and I do. I think we should expect the same of any online retailer that has a physical presence in the state, via a store, office, warehouse, or online affiliates that act as sales agents. Clearly, the surest way to level the playing field for Main Street retailer like mine is to support the proposed federal legislation. These bills would leave no room for a judge or lawmaker to misinterpret sales tax law.
    ~ Suzanne Droppert, Liberty Bay Book

     I wish I could say that I understand why the Department of Justice has seen fit to launch this lawsuit and thereby aid Amazon in its efforts to wipe out every shred of competition. Given that Amazon was forcing publishers to sell their books at a loss, I don’t really see that publishers had any other choice except to protect their interests and for Amazon to institute agency pricing. If Amazon wins this suit, it will be a disaster for brick and mortar book stores, for publishing, and ultimately for the consumer. Amazon is set to become the Standard Oil of the marketplace and history tells us that monopolies do not breed healthy competition, which is essential to making the market place fair to both buyers and sellers. Please be conscious of the effects of your decision.
    ~ Laraine Flemming

     The (Book Industry Charitable Foundation) Foundation believes that the Agency Model corrects a distortion in the market which, if uncorrected, will reduce or eliminate competition both on the publishing level and at the distribution level. By leveling the playing field, this model is pro-competition and enhances consumer choice, both leading to a stronger overall book industry.
    ~ Pamela French, executive director

     Amazon’s marketing of its proprietary-format e-book reader at prices significantly below manufacturing cost makes clear the company’s strategic goal: to lock consumers in to this device and thus dominate and control the e-book market. Amazon’s device is specifically designed to use a format other than theopen industry-standard EPub format. As Amazon increases its market share via Kindle, there will be less and less incentive for publishers and authors to use the Epub format, which will allow Amazon to dominate the market for e-books even further. Surely it cannot be sound public policy to encourage such a monopoly. Further, Amazon’s direct entry as a publisher itself clearly gives the company all the more reason to wreak havoc on the rest of the publishing industry by exploiting the ability to promote its own books over those of competitors and independent authors.
    ~ Henry Hamman, plateaubooks.com

     We need a healthy, competitive book market. It is vital to our culture and our country’s future. It’s not in the public interest for the government to help Amazon use e-books to target traditional brick-and-mortar bookstores. Nor, even more importantly is it in anyone’s interest that Amazon become the sole purveyor and “producer” of knowledge in our country. Because that is precisely what will happen when Only Amazon sells and produces books.
    ~ Eunice Lipton, writer and reader

     The terms of the proposed settlement are based on the false generalization that the introduction of the agency model of pricing resulted in the overall increase of e-book prices. This is true for only a small percentage of e-books, specifically The New York Times bestselling titles which generally increased from $9.99 to $12.99. This single price shift, though, is not representative of the changes to pricing and competition in the market after the introduction of the agency model. In fact, before the agency model many titles were sold by Amazon for prices significantly higher than $9.99…
    In its attack on the agency model of price setting, the proposed settlement will allow Amazon to continue its predatory pricing tactics. The settlement will enable Amazon to continue to sell front-list titles at a loss as long as vendors don’t lose money on the entire list over the course of twelve months. As a rich and well-established corporation, it is unlikely that Amazon will lose money by selling these front-list titles at a loss when it will make back that money in the market of back-list titles that it has come to dominate. Brick and mortar bookstores depend on these front-list titles to thrive; allowing Amazon to sell them at a loss will only further the company’s control over the e-book and back-list physical book markets while undercutting sales in physical bookstores.
    ~ Denise Marcil, president, Denise Marcil Literary Agency, Inc. (NY)

     I am an author, illustrator, and a designer of books (both trade and rare) who was honored in 1983 with The National Book Award. I am married to the manager (Emily Crowe) of one of New England’s (and America’s) venerable traditional bookstores: the Odyssey in South Hadley, Mass.
    Traditional bookstores in our society have been, and I hope to God will continue to be, national treasures, not unlike our National Parks. Selling them out, undermining them in favor of monopolistic, corporate interests is not unlike paving Yellowstone Park so more cars can be parked and commercial, corporate vendors can open shop to sell junk. As a society, as a people, we loose far more than we gain–since what gain there might be will not be for the commonweal but for the few Big Dogs who gather the meaty bones unto themselves. And by dint of their formidable size and rapacious appetite, the Big Dogs deny the smaller dogs even the smallest bones–leaving them to starve to death, which is precisely what is happening to independent book stores. And Big Dog cares not a whit. My life, and countless other lives, will be seriously diminished if either national parks, or independent booksellers, or any other national treasures are bought up (or eliminated) in order to serve increased corporate assets–and control.
    But, unlike the Big Dog, our government should care. Our government’s obligation, it’s sacred mandate, is to govern. Govern big and small equitably, with no unearned or privileged favor paid to either.
    ~ Barry Moser, professor of Art Smith College

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