In pretrial view, judge says leaning toward U.S. DOJ over Apple in e-books case

“In an unusual move before a trial, a federal judge expressed a tentative view that the U.S. Justice Department will be able to show evidence that Apple Inc engaged in a conspiracy with publishers to increase e-book prices,” Nate Raymond reports for Reuters.

“U.S. District Judge Denise Cote, who is set to oversee a trial on June 3, gave her view during a pretrial hearing on Thursday,” Raymond reports. “While she stressed that the view was not final and that she had read only some of the evidence so far, her comments could add to pressure on Apple to settle the lawsuit, in which the Justice Department accuses the company and five publishers of conspiring to fix e-book prices.”

Raymond reports, “‘I believe that the government will be able to show at trial direct evidence that Apple knowingly participated in and facilitated a conspiracy to raise prices of e-books, and that the circumstantial evidence in this case, including the terms of the agreements, will confirm that,’ Cote said. Orin Snyder, a lawyer for Apple, said in a statement, ‘We strongly disagree with the court’s preliminary statements about the case today.'”

Read more in the full article here.

MacDailyNews Take: Prejudice.

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30 Comments

  1. Funny how prejudge and prejudice seem like the same word. How do you fairly judge on the evidence when you have taken a position before you have seen the evidence? This “judge” now has skin in the game, a vested interest in the outcome. She should recuse herself immediately and seriously consider resigning if this kind of behavior is the best she has to offer.

    1. Look, I love Apple and I don’t believe they did anything wrong but the Judge is not doing anything wrong at this point. She has already been given piles of evidence by both sides and she has simple said to Apple that things don’t look good for them based on what she has seen so far. This is her giving Apple a chance to reconsider their defense.
      The trial has not started but much happens in the pretrial faze. The Judge is doing Apple a favor giving them her opinion at this early part, trying to get them to negotiate with the Attorney General’s Office. I hope that if this goes to trial, Apple if able to give them hell and win.

      1. dab2,
        Sadly, this sounds much like the IRS scandal. Well, we kinda sorta think it might be this way.

        For a judge to lean in a case like this, can be a bad precedent. Remember the DOJ vs Microsoft case. After the case was finished, the judge said that with all the evidence, it was obvious that Microsoft was guilty. So the case got slashed in the appeals court cause the judge MUST have been siding with Apple. Our current political system is forcing itself way too deeply into the normal workings of government. It is only going to screw things up.

        Well, actually it pretty much has already. Just look at the patent trolls winning a lot of cases, but real patent infringement issues get sidelined.

        Just so sad.

    2. All the way to the supreme court !

      This judge is pre diposed and impartial without doubt.

      Conspiracy requires damning proof. There is none, nor will there ever be any.

    3. Sometimes the lack of informed opinion on this forum – both from MDN and its readers – is disheartening.

      The judge did nothing wrong here. In fact, had one of the early motions been for temporary injunction, she would be required to reach a determination like this – an assessment, based on the evidence presented to her (which I suspect could be best described as “mountainous”), of whether the government is likely to prevail in its case.

      As dab2 points out, what the judge has done is a common approach in the courts system to encourage a settlement, rather than an extended trial.

      1. Ralph, Just remember the DOJ vs Microsoft hearing. AFTER the case closed, the judge made a comment and that caused the appeals court to trash his entire judgement. If you watched the case,,,, it was obvious that Microsoft was guilty.
        But justice and politics make bad bed fellows.

        Just a thought

      2. The DoJ is not going to take the (correct) position that “We’re a bunch of dipshits that were influenced by Amazon to castrate their competition”. Therefore the only thing Apple can do with a settlement is try to keep the sack and have some nuticles placed in it. Some deal.

  2. Everyone has the same “terms of the agreements”. Apple gets the same percent take of the sale. If the e-books are FREE than Apple gets nothing for distributing the file. If the e-Book is FREE than they are FREE on iTunes. If they are sold then Apple gets their percentage of the sale.

    To my knowledge, every e-Book has the same terms. The price of the e-Book is the seller’s choice.

    This is just another government shake down and harassment of Apple!

  3. I don’t follow court issues much. If the judge is voicing an opinion before having seen all the evidence (by her own admission) shouldn’t we be asking how much of the evidence has she looked through and was there some sort of ordering to that evidence? If she has only looked through DoJ evidence I would certainly hope they’ve made things look bad for Apple, but so what? Had she only looked through Apple’s evidence she should have the opposite opinion.

    We should also look into her background and experience to know if she is of the caliber to remain silent until she really has gone through a preponderance of the evidence.

  4. Since DOJ originated the suite, of course the judges are prejudiced against Apple. They want to extract their pound of flesh from Apple because of whomever is pulling their strings to destroy iBooks.

    Apple Corporation created a cost ceiling for iBooks and has modified its agreement at least twice since we published our own iBooks. They are not artificially setting book prices higher, but they are encouraging us to lower our prices. They have a range for pricing within which we as publishers decide the books are worth. How is that price-fixing?

  5. Can’t Apple just sue the DOJ directly for contributing to the delinquency of the book market Amazon loss leader monopolist? When is the evidence and consequences of this inevitable outcome going to come back and slap the DOJ upside the head hard and dizzying?

  6. All of you saying this is bullshit should shut up. None of you know what you’re talking about. Like there’s some conspiracy against Apple you fanboys.

    Are you ready to go to school again? Here I am explaining the facts again. I feel like none of you have any adults around to supervise you and lead you through life.

    So here it goes again.

    Apple artificially inflated the price of eBooks to around $12.99 vs. $9.99, a price that is more pervasive on Amazon. Amazon will charge self-publishers much HIGHER royalties on anything over $9.99, so they drive retail prices down by motivating publishers to sell at $9.99 or less. Of course publishers will try and get as much as they can so you’ll see a ton of $9.99 prices on Amazon.

    Apple has a flat 30% take, nothing tiered like Amazon. What Apple did was force publishers who published with them to not be able to sell their eBooks anywhere else for cheaper then they were on the iBookstore. This is how they ensured that the increased price would be to their benefit and force publishers to stick with that price no matter what. So none of them could sell their eBooks on say Amazon for any less than $12.99. But $12.99 is a magic number because that’s what Apple wanted most of the novels to start at, not $9.99 like Amazon.

    This is bad for consumers and only good for Apple. But it wasn’t in the end good for Apple because other publishers that aren’t huge didn’t want to engage in such an agreement. And then Apple lacked some content.

    Amazon, for instance, is a much better place to sell eBooks: people regularly sell about 99 times more eBooks on Amazon than they do on the iBookstore. And Amazon can actually reduce the retail price of your book where you still collect royalties on the FULL retail price you set. This isn’t necessarily that great either in that it can drive down eBook pricing too low, but as a publisher you’re going to get your royalties off of the full retail price, which is good.

    There’s likely evidence of collusion, etc. and this judge is warning Apple that it doesn’t look good.

    So now that you understand how this works and why Apple is facing huge fines kindly shut your fanboy asses up and go do something productive.

    1. “This isn’t necessarily that great either in that it can drive down eBook pricing…”

      This was exactly the publishers’ problem with Amazon. Sure you get the full royalty… until Amazon (a monopoly at the time) says otherwise. As the Jobs email said, “they have shareholders, too.”

      1. eN:

        Yes, Amazon has its problems too. But we’re talking about Apple. Apple artificially inflated the price of eBooks full stop. This is a fact. Whether they get fined for that, etc. is not really my problem and out of our control.

        But if someone asked if I think they should get fined? Yes. Because if you ever engage in contracts with large companies you’ll know just how draconian those contracts can be and how oppressive and bad it can be for the other party and the industry as a whole. Price fixing/inflating is bullshit and should be stopped. There’s strict laws against it. Apple went too far forcing people to not sell for less anywhere else.

        And then you’re going to say well screw you! It’s Apple’s platform! Ya, who gives a fuck about the iBookstore when Amazon owns 70% of the eBook market.

        I’m just waiting for something similar to crop up with their App Store. But when it comes to their App Store, there isn’t really an alternative for developers.

        1. You finally hit the key point, sigh…the contract clause that prevented publishers from selling to anyone else at a lower price than they sold to Apple. I believe that is going to be a key issue in this trial.

          But Amazon is no saint, either. Amazon wanted low ebook prices in order to increase sales of Kindle hardware and solidfy its dominant position in the ebook market. Amazon ebook prices were not low to help the consumer. Amazon forced companies to accept lower pricing in order to increase sales to benefit Amazon on the hardware side. Amazon effectively squashed competition in the ebook market through its dominant position. Just because it happened to result in lower ebook prices (at least temporarily) does not mean that it was right.

          Apple stepped in and said, set your ebook prices as you see fit (agency model). We will take 30% of the sales revenue for hosting, distribution, payment collection, advertising, administrative overhead, etc. You get the rest. There is nothing wrong with that. It is the clause that prevented the publishers from selling at a lower price through another venue that is causing the problem, IMO.

          1. Right. But Amazon actually doesn’t force you to sell at a lower price. They just give you an incentive to do so (they take a lower cut).

            Apple forces you to not sell lower anywhere else, and this screws over your ability to sell on Amazon because anything over $9.99 and Amazon’s taking a huge cut. And, even if you sell it for the same price on Amazon as what it is on the iBookstore, Amazon can and will dump your price at their will and choosing. If it goes below say $12.99 it’s bloody complicated how the terms smack each other in the face.

            Make no mistake about it. This was Apple’s strategy to compete against Amazon. It was always about Amazon. It was always about getting a stake in this industry. And it’s not legal to inflate prices like this and force the industry into a model such as theirs.

            But never mind any of this. Nobody needs iBooks anyway. It’s nice, but there’s lots of other games in town. Amazon, Kobo, Sony, B&N, and many more.

          2. kingmel. re: “the contract clause that prevented publishers from selling to anyone else at a lower price than they sold to Apple.”

            Actually, this is not exactly the issue. It is just “best in class” pricing terms. They are not illegal. And they are common. Why would a merchant buy from a vendor if they knew they did not get the best terms available for their class of trade? It is a perfectly reasonable condition for a business contract.

            per the WSJ, 4-11-12, T Catan, J Trachtenberg, and C Bray: “The suit contends Apple …offered [publishers] a switch to agency pricing on the condition they imposed the same arrangement on Amazon and other retailers.”

            Agency pricing allows publishers themselves to set retail prices for their e-books, with vendors earning a commission on each sale. This is different from the existing wholesale pricing model, in which publishers sell to vendors at a given “wholesale” price, but then the vendor can re-sell at any retail price they want. This allows Amazon to sell a $15 e-book for $9. Why would Amazon sell an e-book at a $6 loss? Because they can make more than that elsewhere. Either from Kindle and other e-book sales or from future e-pubishing business, in which Amazon is in direct competition with the publishing houses. It makes no business sense from the publishers’ perspective to do business with Amazon this way and to have their existing business undercut.

            It is not so much about pricing, as it is about business competition between the publishing houses and Amazon’s publishing enterprise.

    2. No. Amazon was selling e-books at a loss, for less than they paid the publishers. They were doing it to weaken all other e-book sellers so they could become the dominant force in e-book sales and then be able to dictate to publishers how much they would pay. It’s called a monopsony, one buyer. Amazon had the cash to do this because they sell so many products with enough margin to subsidize their e-book plot.

      Apple said to all of the publishers “We’ll be your agent and sell AT THE PRICE YOU SET as long as you don’t allow any other seller to sell for less than us.” Simple as that. In response, the DoJ has aided and abetted Amazon in its scheme for domination of the e-book market. Long term it means thinner margins for publishers and less income for authors, resulting in fewer books being written. Good job, DoJ. Low prices don’t always indicate the best outcome for consumers.

      1. No not as simple as that you idiotic fanboy.

        You cannot fix pricing like this in an industry. It’s illegal. And no, Amazon didn’t sell hardly any books below cost you bullshitter. They just put some books on sale, and a couple of loss leaders, but the publishers still get the full royalty off of the set retail price.

        Like Amazon, Apple is subject to the same rules and market conditions. All they wanted to do was inflate the prices to increase the margins. If your competitors are selling for less, too fucking bad for you. That doesn’t give you a right to engage in a price fixing scheme. If Apple doesn’t like the market and the margins, that’s too bad for Apple.

        Just like it’s too bad for Apple’s competitors who can’t compete on the price of their made in china shit because of Apple’s lock up of materials and scale. You have no sympathy for Apple’s competitors and they have no sympathy for Apple or you.

        Welcome to capitalism.

        1. Who is the competitor to the publisher of a book and why can the publisher not set the selling price for their goods?

          OBTW, if you have to have an insult as the first words out of your mouth, it usually indicates a lack of a factual position. And it’s a reflection on your mother.

    3. No. You are wrong. Apple did not artificially increase the price of e-books to $12.99 from $9.99

      Amazon bought e-books from publishers at about $15 and re-sold them to retail customers for $9.99. (Ken Auleta, “Paper Trail”, The New Yorker, June 25, 2012)

      Why? Not to help consumers. And not to make money on the transaction, since Amazon loses $6 per book. It only makes economic sense to sell at a loss unless gains can be obtained elsewhere. Perhaps by bolstering sales of Amazon’s Kindle e-reader and subsequent sales of profitable e-books, and/or by growing Amazon’s own publishing enterprise in direct competition with publishing houses. Amazon is willing to subsidize these e-book loss sales using profits gained (or to be gained) elsewhere, all to the long-term detriment of publishers.

      It is called predatory pricing. And it is illegal.

      Which came first? Amazon’s predatory pricing? Or Apple and publishers attempts to re-establish fair pricing?

      1. Tom:

        No, you are wrong. Jesus here we go again. Another day another fanboy to be sorted.

        Ready?

        Nobody gives a shit about anyone here but Apple in this instance. I am so sick of fanboy losers who call out every other company for some perceived or real wrongdoing whenever Apple is caught doing something wrong, illegal, negative, etc.

        Let me illustrate: this is a pretend Google fanboy site. “Google appears before senate to discuss its trying to inflate eBook prices on its Google Play Store. Emails and other evidence exist.”

        Google fanboy: “Whatever! Look at what Apple did and Amazon! Why pick on Google? They have our best interests in mind”.

        Apple fanboy: “Google is evil! Destroy them!”

        Back to reality…

        Other companies and industries have “loss leaders”. What Amazon does by selling items, and it’s not just books, at a loss, is use them as loos leaders to get people in buying other things.

        Restaurants do this. Department stores do this. Electronic stores do this. There is nothing illegal about this you idiot. But there is a lot illegal about price fixing, which is what Apple did by forcing anyone who publishes with them to not sell for less anywhere else.

        No for the real kicker. 27 of the top 100 selling eBooks on Amazon’s Kindle store are self-published. That means they have nothing to do with big publishers. And the same practice applies here even today. They can sell your books for whatever retail price they feel like but you get royalties on the price you set.

        There is nothing illegal about it you bullshitter.

        And here’s a good response to that New Yorker article you cite:

        “It is clear from Ken Auletta’s article on Amazon’s fraught relationship with publishers that the company is an unchallenged and imperfect giant, but it’s one that gives independent presses and self-publishers a fighting chance to promote and sell books (“Paper Trail,” June 25th). Without Amazon, thousands of publishing entrepreneurs and innovators would have no centralized way to access customers. We should celebrate anything that enables independent publishing to stay alive. The six large publishers all have corporate cultures that block the kind of expansive thinking that would have allowed them to develop their own digital devices. The rapid rise of the Kindle caught the Big Six in a complacent coma of their own making. Amazon is the sole player to nurture innovation and understand the market. The Big Six are subservient to Amazon for reasons that are plain to see. Corporate overseers and billion-dollar catalogues can sustain the Big Six for a long time. Ironically, that safety net is also their undoing; it buffers them from understanding the need to make serious structural reforms. No one should feel sorry for them.”

        Look, I’m not saying Amazon is good either. I’m in this industry by the way… Amazon has done a ton of good things for publishers and self-publishers. It’s where all of the action happens and sales. No, I don’t like how they drive down prices by offering sales. But that’s life in EVERY SINGLE DAMN INDUSTRY IN THE WORLD. And it’s not illegal.

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