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. Whichever way, Amazon’s behaviour, before Apple came in and changed the game, may have been bordering on monopoly abuse, but still wasn’t (Amazon wasn’t leveraging their monopoly position to prevent competitors from entering the same market).

    And now, with Apple changing the game, Amazon was forced to change theirs, too, in order to not appear abusive to publishers (giving greater share of the retail price, etc). As a consequence, consumer will be paying higher prices for books. Ultimately, both Apple and Amazon, as well as publishers, end up benefiting from the new model, at the expense of the consumer.

    1. Amazon was using the e-book, at a low, low price, to kill off hard cover and paper back books that had to be sold at cost or a loss.

      Books are books wether digital or hard copy.

      Amazon WAS leveraging their monopoly position to prevent competitors from entering the same market.

      1. That may be true, but as I had said further below, it will be very difficult to demonstrate in court convincingly enough to meet the high burden. Just remember Microsoft’s case that dragged on forever.

  2. Bahhhh I want my free and super cheap ebooks, bahhhh I don’t care what the people who write these books want to carge for it or can make a living off it… Bahhh I am a cheapskate asshole.

  3. “the only relevant point is defending the business model that gives consumers the best deal, even if that means creating a monopoly”

    So the government’s job is to use the anti monopoly laws to create a monopoly to ensure the consumers get cheap stuff.

    You must really lay off the cheap crack!

  4. The main problem here is that it would be rather difficult to argue Amazon’s monopoly abuse with their original business model. If I am not mistaken, it worked like this: publishers have had agreements with Amazon to sell e-books for a specified price (say, $10). Amazon had the right to run their own promotions, where they could discount books (on their own) and sell them at loss, if they so decided (publishers would still receive their nominal commission, from the full retail price). Since they were taking 50% of retail price, the discount could be fairly deep (compared to the price at Barnes & Noble and other physical stores) before they begin taking a hit on it. And therein lies the problem: Amazon could easily afford to offer such deep discount on bestsellers, since they have pretty large volume of back-catalogue sales which aren’t discounted. Meanwhile, brick-and-mortar stores don’t have that back catalogue to prop up the losses taken on bestseller discounts, so they simply must try to make profit on them. A consumer will gladly buy a cheaper book from Amazon. And this is where Amazon’s monopoly position on e-Books begins to approach the abusive behaviour.

    In order to make it stick, it would be necessary to demonstrate that the book market is common between e-books and physical books, and that Amazon is abusing their monopoly position in one segment of the market (the e-books; by offering discounts below wholesale price, i.e. by “price-fixing”) in order to eliminate competition in the other segment (physical books), in order to protect its monopoly position.

    This is how Microsoft was found guilty for abusing their monopoly position in one segment of the market (Windows OS) by offering a free product (Internet Explorer) and forcing restrictive contracts with OEMs (“You can’t pre-install Netscape if you want discount price for Windows”) in order to eliminate competition in another segment of the market (web browsers). I believe Ballmer had said then “I want to cut off their oxygen supply”.

    Microsoft’s case was supported by a wealth of documentation (correspondence, e-mails, OEM contracts, etc), and it took ten years for it to go through. In the end, it was rather inconsequential, other than Netscape eventually going out of business because of that.

    It will be interesting to see if there is any documentation out there that could prove Amazon’s actual intent on driving out the competition and abusing their monopoly.

  5. Let us not forget; Apple did more-or-less exactly the same thing for music with iTunes, some 10 years ago. When it was launched, all songs were a fixed $1 and albums at $10. Music labels had no say regarding the retail price. In fact, unlike the Amazon e-book model, music labels had no say even regarding the wholesale pricing. Apple determined what their product was worth, and it was worth the same for EVERY single label, song, album. This quickly resulted in a monopoly on electronic music downloads, which Apple practically continues to sustain to this day. Unlike Microsoft’s monopoly (and, to some extent, Amazon’s), Apple’s monopoly never prevented competitors from entering the market (see Amazon’s own MP3 store, as well as Google Play), nor did it harm the consumers. Yet, there were still some who wanted to sue Apple for some monopoly abuse (where there was none).

    Let us see which way this goes. Apple may end up getting its day in court and it might end up vindicating their position. Still, an anti-trust suit against Amazon is not quite likely anytime soon; it probably wouldn’t have happened even if the old model persisted.

  6. If I were Tim Cook, I’d buy a country, and then move as much of my operation there as I could. Why bother playing a game that you can’t win due to unfair rules. I’d just take my ball and go home.

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