Apple e-books trial defense: A guilty verdict would send chills across Internet industry

“Apple lawyers on Thursday closed their arguments in a federal antitrust trial with fierce warnings that a guilty verdict would sends chills across the Internet industry,” Cecilia Kang reports for The Washington Post.

“After three weeks defending Apple against Justice Department charges that it led an e-books price-fixing conspiracy, the company’s attorney said Apple acted legally when it aggressively pursued business deals with publishers,” Kang reports. “‘The government is taking perfectly sensible business agreements to infer sinister conduct,’ Apple attorney Orin Snyder of Gibson Dunn said in his closing remarks at U.S. District Court in Manhattan. ‘If Apple is found liable… that precedent will send shudders throughout the business community,’ he said.”

Kang reports, “Apple has vowed to appeal any loss. Chief executive Tim Cook said Apple did not settle on principle because it rejects allegations it was the ‘ringleader’ of a conspiracy to raise e-book prices.”

Read more in the full article here.

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22 Comments

  1. Why dare the judge…what need is there to say anything other than you didn’t break the law and you proved it. Seem like lawyer grandstanding to say it’ll chill the industry.

    1. It is a common lawyerly tactic: get the judge to refrain from setting a bad precedent.

      Personally, I agree with you. Argue the case on its merits.

      Apple did not force the publishers to raise prices. In fact, Apple insisted that Apple not set any price minimums at all. Apple insisted that PUBLISHERS set the prices. Therefore if there was any price fixing it HAD TO BE among those that had the ability to set the prices. Apple, who had zero control over prices, could not have forced any rise in prices.

      Done.

      1. No, wrong.

        Apple tried to fix and inflate eBook prices by COLLUDING with industry.

        “Let’s create a $12.99 and $14.99 eBook market”. Steve Jobs.

        “Prices went up after we entered the eBook market.” Eddie Cue.

        Apple’s contract had it that publishers could not sell for less or MORE than what they sold it on the iBookstore for. This is price fixing full stop.

        This was bad for the industry. Think about it. Imagine you were a new player with an eBookstore, and you wanted to compete with these big guys like Apple and Amazon. You then say, well, we’re much smaller with less overhead so let’s offer great prices on eBooks and make a go at it. We’ll make less money but we have to start somewhere.

        Then you realize that none of the publishers who signed with Apple, which includes the largest publishers in the world along with many others that you’ll need content from, allow you to sell for any less.

        Then you get the idea to help them spice up the content and sell for MORE. Then you realize that you’re not able to do that either.

        It’s brutal for the competition in the market and it’s terrible for consumers.

        This is the problem. It’s anti-competitive and Apple should be punished for it.

        1. Boy are you so far out in left field!
          In a word, yes prices were going to rise, but what you and the DOJ are looking at are the wrong things: WHY! And you are leaving Amazon out! Amazon started this by hosting a 2 day event with the DOJ telling them that Apple was trying to force the rasing of prices.

          Wellllll, Amazon forgot to say that they were creating a monolopy by selling the books at a loss to even them. A loss of $3.00 on every book for the sake of Kindle sales. This act alone would prevent ANY newcomers to book sales. It was wiping B&N out.

          Once Amazon cornered the market and had a monopoly of book sales with the Kindle, YOU SFGH better believe that the prices would NOT stay the same, and with one company, Amazon, in control. The Apple suit has brought back control to the publishers and the court is about to announce that. Now others can join in the frey to sell books and others can compete. The cheaper prices of Amazon were short term, but then you can’t see that.

          1. occasionalposter1:

            Oh god, another one. So according to you, Amazon was losing $3 on the sale of every Kindle book?

            That is the biggest load of shit today. Go get that data and bring it back to demonstrate this.

            You are so full of shit.

            1. No it is not you delusional idiot.

              I will Paypal you $200,000 if you provide the data to back up this bullshit claim.

              You’re full of shit.

              Shut up.

            2. “So according to you, Amazon was losing $3 on the sale of every Kindle book?”

              That would be ridiculous, wouldn’t it? So tell me, sfgh, if it turns out to somehow be true that Amazon was selling at a $3 loss would that change your opinion?

          2. Don’t feed the stupid troll. He’s paid to stir the pot and nothing you will say will make a dent in his thick skull. He is rabidly anti-Apple and obviously makes money ignoring logic, the facts, and the law. I’m certain he posts on other forums with other four letter user names to keep his comments and lies straight about where he posted them. I’ve seen several variations of four letter nonsense user names that post in exactly the same style, using many of the same phrases on other sites. Ignore him.

        2. Incorrect. The MFN clause (which has plenty of precedents in American business history) simply requires publishers to match their price on Apple store if they chose to lower on another store. Nobody precludes publishers from selling their product at HIGHER prices than on Apple store; they just can’t sell it for less. So, yes, your startup e-Book store can sell for more without problems.

          1. This is where you’re wrong.

            You have not done the research. You don’t have the contracts these publishers have signed. Therefore, it’s impossible for you to make the statements you are because you don’t have the information.

            You’re just arguing because you’re trolling.

            If you don’t know where to find the contracts that these large publishers signed with Apple, then nobody can help you. They are not a matter of public record. They are confidential agreements.

            1. So….. If they’re confidential how do *you* know?

              You insist others show their proof. Where is yours? None of the press coverage I’ve read supports your claims.

              If amazon wasn’t selling at a rediculously small, or negative margin, then why wouldn’t apple argue for the same deal? Why *force* the publishers to do anything but continue the status quo? It is most plausible that it was the publishers alone looking to increase the price of ebooks, and use a new major entrant to the market as their leverage.

            2. Doug:

              You see, here’s the problem. People like you, and you’re nowhere near as bad as most other people, are arrogant. This becomes worse online. People posting things about a trial that involves tens of thousands of documents.

              You don’t have the background or experience to really make an informed conclusion about any of this, other than reading the media that just repeats itself and who repeat each other, cherry picking a headline.

              The evidence is there and this stuff has been answered over and over.

              The coverage does support the claim that Apple tried to fix and inflate eBook prices.

              “Let’s create a $12.99 and $14.99 eBook market”. Steve Jobs.

              All of you fucking idiots outright deny this statement by Steve Jobs. There is no misinterpreting this. Jobs/Apple wanted best sellers and new releases to be exactly $12.99 and $14.99. Not higher, not lower. Jobs stated in Emails that they could not sell for MORE, not just not sell for less outside the iBookstore.

              When the iBookstore launched, prices were in fact $12.99 and $14.99 for new releases and best sellers.

              “Prices did go up after we entered the market”. Eddie Cue.

              “Why would anyone pay you [$14.99] for an eBook when they can buy it on Amazon for $9.99?” Walt Mossberg to Steve Jobs. “The prices will be the same.” Steve Jobs.

              Then, a publishing exec became outraged that Jobs said this publicly and clamoured that he just revealed their conspiracy. She essentially then called him stupid.

              Apple gathered all of the world’s largest publishers and ensured that they all were exposed to each other and that they agreed to this new way of doing business. Not sell for any less or any more anywhere else. This was focused on new releases and best sellers. AND move the industry to agency.

              Apple had things in the contract that made it very difficult for these larger publishers to have their content selling for less anywhere else. In other words, after signing with Apple, there was little room to move on price outside the iBookstore, even though it seemed like Apple would be allowed to match competitors’ prices…

              But that wasn’t what the contract expressed. It basically locked down these prices for a 7 month period barring the content from being sold anywhere else for less or more.

              And then with the push to the agency model, the whole industry would be reduced to fixed prices because everyone would be operating off of the exact same business model. The trick here is to understand the crux of the problem.

              The iBookstore was where all the price fixing revolved around. You start with A, and A says that you can’t sell a widget for any less or more than you sell with them anywhere else. So ergo, whatever price you sell if for on A, it will be the EXACT same price EVERYWHERE ELSE. Not a penny more not a penny less.

              I was privy to seeing the contract. Having seen many contracts in my life, the only contracts worse than this are from the government that basically give you no rights.

              Is Amazon controlling the market any better? My opinion and what I’m seeing in this business that it’s SLIGHTLY better, but Amazon has issues too. But the big difference is they don’t block you from selling for less or more anywhere else, and they don’t care what model others are using.

              We’re very happy Apple can’t control the pricing. We are much more free to make deals with publishers and not worry about them being locked into some price fixing scheme with Apple. It’s way, way better for business and this industry. It allows new players to enter the market and compete. It fosters innovation and it promotes fair competition and good prices for consumers.

              Amazon’s agency is actually very innovative and fair. Sell for $9.99 or less, and you get 70% of the price you set, NO MATTER WHAT THEY SELL IF FOR. So if you set a $9.99 price, and they sell it for $7, you get 70% of $9.99 and they just reduce their margin. They lose, not you.

            3. What a load of lies and half truths. You are truly an idiot. Amazon’s “innovative” Agency model is ripped off completely from the Apple Agency model that Apple has been using for music, apps, and Mac software for OSX long before it opened the iBook store. There is NOTHING innovative about it.

              Everything else you posted is taken completely out of context or misrepresents the facts, such as “Apple gathered all of the world’s largest publishers and ensured that they all were exposed to each other and that they agreed to this new way of doing business.” NEVER HAPPENED! That came out in the testimony at trial. You made that up and are revealed as a LIAR. The rest of your postings are of a similar grade of bull shit. Worthless.

        3. “Apple’s contract had it that publishers could not sell for less or MORE than what they sold it on the iBookstore for.

          Wrong. They could most certainly sell for more. They could sell for whatever they liked. Apple was simply allowed to match the low price. I’m sure Apple would be delighted if they sold for more… sorry, “MORE” as you put it.

          “This is price fixing full stop.”
          Full stop? Not even a brief pause. Price matching happens every day.
          The market was in an unnatural and unstable state. Prices were lower only because Amazon was en route to establishing a monopoly though predatory pricing. The agency model restored the market to a stable and natural one, where books were sold at a profit instead of a loss.

          1. Hey Jimmy C:

            You’re about to get the idiot of the day award. Are you ready? I know you are and I know you’ll keep reading because you’re a sucker for punishment.

            “Wrong. They could most certainly sell for more.”

            Wrong idiot. NO THEY COULD NOT SELL FOR MORE. It was a stipulation in the contract. Yes, Apple could price match but the contract is way more complex. Apple didn’t want the price of eBooks to be that of hard covers so they capped the price of eBooks at $14.99. Since publishers weren’t allowed to sell for any MORE than the cap including other places, the price was effectively capped at $14.99 no matter where they sold.

            “The market was in an unnatural and unstable state. Prices were lower only because Amazon was en route to establishing a monopoly though predatory pricing. The agency model restored the market to a stable and natural one, where books were sold at a profit instead of a loss.”

            First, demonstrate how the market was in an unnatural and unstable state. Quite the contrary. It was and has been following a steady, healthy growth curve with lots of innovation.

            And Amazon was NOT establishing a monopoly. There is no evidence for that. And there is no evidence that the agency model “restored” anything. In fact, idiot, the agency model had been around long before Apple was around with KDP. Apple DID NOT introduce the agency model to eBooks, Amazon did with KDP.

            If the agency model is correlated with people making more profit on eBooks, then thank Amazon for it. 27 of the top 100 Kindle books were at one time self-published through KDP. All agency model stuff. Authors sell 100 times more books on Amazon than they do on Apple.

            Where were you when Apple had 80% of the MP3 market? Why weren’t you screaming monopoly? Instead, you were sadistically revelling in the dominance. But another company in another market dominates and all of a sudden they should be lynched because they have a monopoly.

            You’re a delusional fanboy hypocritical idiot.

            1. So let’s see… you believe that Apple wrote a contract forbidding the sellers from giving Apple the best price. And you believe that Amazon was not selling at a loss.

              You have no idea of the actual facts. All you can do it type and rant and invent your own private truths.

            2. Jimmy C:

              Here we go, you delusional uninformed idiot.

              “…you believe that Apple wrote a contract forbidding the sellers from giving Apple the best price.”

              No, obviously quite the opposite. The whole scheme would have completely levelled the entire eBook industry into the same prices everywhere. Do you realize there are several eBookstores in the world? Kobo is big in Canada and expanding out to international markets. Their business along with many others did and would continue to hurt if Apple’s contract stayed in place… because they’d lose control over pricing for new releases and best sellers. Repeat this last bit to yourself and try to imagine yourself in this industry.

              That control is thankfully gone, and publishers are much more free today to sign contracts with each eBookstore in ways where they’d be limited if Apple was hanging around. Apple’s contract LOCKED in prices of new releases and best sellers for $12.99 and $14.99 for starters for 7 months. Yes, locked in. Fixed. You either agreed to this or you couldn’t sell on Apple. But this is a derivative of a larger issue the DOJ is focused on.

              The problem is that with companies like Amazon on a wholesale model as it relates to larger publishers, it smacked in the face of what Apple was trying to do. And Jobs saw this. And that’s part of why he said he didn’t think they’d be competitive if Amazon and others didn’t move over to the agency model.

              With Amazon and others buying at their own agreed to wholesale prices, the retailer is sort of in much more control over what they buy the books for and what they can sell them for. Amazon might get a better deal than someone else, and then they can sell for less. Other companies may not be able to match Amazon’s price and therefore wouldn’t be able to sell for as little as them unless they wanted to reduce their profit margins or even go so far as to lose money on some titles.

              Jobs/Apple tried to break this and enter the market through a scheme that positioned pricing power more solely with the publisher. If you haven’t figured it out yet, both the wholesale model and the agency model have their problems. Apple went too far in that it fixed and inflated the prices of best sellers and new releases through collusion where the contracting terms were prohibitive for publishers. Again, and this came out in the trial, Amazon was faced with the fact that the publishers who signed with Apple had to hold back new releases for 7 months because of the contracting terms with Apple: These titles could NOT be sold for less than $12.99 and $14.99 anywhere else. New releases specifically.

              But it was like an almost stalemate because on the one hand, publishers wanted to throw down with Apple and fix and inflate the prices. On the other hand they’d be screwed because their wholesale agreement with Amazon would see Amazon with the legal right and ability to price these books at pretty much whatever it wanted, and some might be lower than on the $12.99 and $14.99 on the iBookstore.

              And that flew in the face of the contract they had with Apple fixing in new release prices for 7 months. So the only three options seemed to be, either pull out of Amazon (And Jobs wrote this in an Email), keep selling with Amazon and forget Apple (short term gain), or move Amazon to an agency model so the whole scheme would work.

              Apparently one of world’s largest publishers went to Amazon to give the ultimatum and apparently Amazon removed all the buy buttons from their books on their store within 24 hours.

              Amazon ultimately caved and supposedly got some of these guys over to the agency model literally 24 hours after Apple’s iBookstore went live.

              I don’t have a problem with the agency model, and I don’t necessarily have a problem with the wholesale model either, but Apple went way to far colluding with the entire industry to gang up on Amazon. But forget about Amazon. What it did was give Apple way too much power in the publishing world where innovation would be stymied and smaller players would struggle. These latter were NEVER the case with Amazon. Amazon doesn’t control or attempt to control any of your agreements with ANYONE else. They don’t give a fuck, and they shouldn’t.

              The market should decide itself what business models work best and consumers should decide with their wallets. This shouldn’t be decided by Apple, but that’s what Apple was essentially doing here. And I’m not even sure they knew just where to draw the line and the all the negative effects it would have.

              And this most favoured nation bullshit is for parts supply agreements. Some idiot in the media wrote an article about this part of the contract and you all eat it up.

              In supply, it makes sense. Apple shouldn’t have to pay $1 million per chip when MS only pays $1. But those are parts. We’re talking about consumers and the price THEY pay for products. Apple engaged in anti-competitive behaviour by restrictive contracting terms and industry collusion to move the industry over to one business model. That’s myopic and bad for the industry. And it’s wrong.

              Second:

              “And you believe that Amazon was not selling at a loss.”

              What I believe is irrelevant. I don’t have any data that shows Amazon has sold even 1 Kindle eBook at a loss. I assume you’re referring to eBooks. Because if you’re not your comment is completely irrelevant. All we’re talking about here are eBooks. The difference between Amazon and Apple is Amazon also sells physical books. But that’s not relevant. Only eBooks.

            3. So even your own little made-up world is inconsistent. One moment you think sellers could not sell for more, then the next moment “quite the opposite.”

              I’ll bet in your real world people are rather uncomfortable in your presence. You think it’s because they’re “idiots” who “just don’t get it,” but what is really happening is that they sense your attachment to reality is slight, and you alternate between being frightening to merely amusingly off-putting.

              You have no real friends, save one or two sycophants who suffer from issues similar to your own. They can stay because they never question your “insight” and help support your delusions.

              You truly believe you have insightful opinions, but you come to your conclusions first and find some way, any way, to justify them. You can’t recall the last time you admitted your opinion was mistaken.

            4. You keep claiming things that are patently UNTRUE. Of course, the publishers could sell an ebook for more than the iBook Store was selling it for. There is NOTHING in the contract that prohibits it. They just would not because of market pressures. Apple cannot prevent that. They can, however, require that they be allowed to sell for the price that any competitor undercuts the price to. . . because that IS in the control of the publisher who is now the agency price setter. They can also agree on target pricing at an upper level. . . but they cannot control some seller from demanding more. If they do, their customers will go to the lower priced retailers, benefitting Apple, so why should Apple care? You really don’t understand business or micro-economics do you?

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