Apple: U.S. e-book lawsuit 'fundamentally flawed'

Wed May 23, 2012 4:11pm EDT

* Apple says strategy aids competition, helps consumers

* US alleges collusion cost consumers millions of dollars

* Apple says Steve Jobs comment on pricing mischaracterized

* Three of five publishers have settled antitrust case

By Jonathan Stempel

May 23 (Reuters) - Apple Inc is rejecting charges that it conspired to fix prices of electronic books, calling the U.S. government's antitrust lawsuit a "fundamentally flawed" endeavor that could discourage competition and harm consumers.

In a filing in U.S. District Court in Manhattan late Tuesday, Apple said it has not conspired with anyone or fixed prices for e-books in an effort to thwart Amazon.com Inc's dominance of that fast-growing market.

The Justice Department accused Apple in April of colluding with five publishers to boost e-book prices in early 2010, as the Silicon Valley giant was launching its popular iPad tablet.

Amazon, which makes the Kindle e-reader, had long sold e-books for as little as $9.99. The government complaint quoted Apple's late co-founder Steve Jobs as wanting to offer publishers a means to boost prices, and "create a real mainstream e-books market at $12.99 and $14.99."

But Apple argued that its foray into e-books has actually fueled demand for e-books by forcing Amazon and rivals, including Barnes & Noble Inc, to compete more aggressively, including by upgrading e-reader technology.

"Apple's entry into e-book distribution is classic procompetitive conduct" that created competition where none existed, Apple said in its court papers.

"For Apple to be subject to hindsight legal attack for a business strategy well-recognized as perfectly proper sends the wrong message to the market," it added. "The government's complaint against Apple is fundamentally flawed as a matter of fact and law."

Apple also denied that the government "accurately characterized" the comment attributed to Jobs.

A Justice Department spokeswoman referred a request for comment to the announcement of the April 11 lawsuit, when Attorney General Eric Holder said the alleged collusion cost consumers millions of dollars on the most popular e-book titles.

The publishers Macmillan and Penguin Group, which are respectively units of Verlagsgruppe Georg von Holtzbrinck GmbH and Pearson Plc, are fighting the antitrust case.

News Corp's HarperCollins Publishers, CBS Corp's Simon & Schuster and Lagardere SCA's Hachette Book Group settled the case.

The case is U.S. v. Apple Inc et al, U.S. District Court, Southern District of New York, No. 12-02826.

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Comments (4)
Nirmalanow wrote:
What does Apple have to gain by pursuing its defense of
this lawsuit now that 3 of the 5 publishers have settled? The
majority of ebook pricing will now revert to the wholesale model
no matter what the results of the lawsuits. So does Apple really
want this matter in the news for 4-5 more years to protect its
pricing model with the remaining 2 publishers? Agency pricing gave
Apple a foot in the door in the ebook market, but now they will
have to find another way to compete with Amazon.
Are the remnants of agency pricing really worth it to Apple
if it means having everyone discussing whether they did
something illegal for several more years?

May 23, 2012 6:37pm EDT  --  Report as abuse
Moe-Smith wrote:
I suppose it is the principle … Apple is working eBooks like they work everything else – software, games, etc…

Amazon does have a monopoly – or did … and the publishers want what they want. I suppose time will tell, what is right and what is wrong. The courts do not have much of a clue, but that often does not matter. For some time, people thought Wall Street knew what it was doing…

May 24, 2012 3:07am EDT  --  Report as abuse
Moe-Smith wrote:
– this says it fairly well — from Apple and hey – it is not all about price and what prices did go up? What is the government saying, really? Maybe prices should go down – I am all for lower prices, yet price is not everything.

— start quote — The Government starts from the false premise that an eBooks “market” was characterized by “robust price competition” prior to Apple’s entry. This ignores a simple and incontrovertible fact: before 2010, there was no real competition, there was only Amazon. At the time Apple entered the market, Amazon sold nearly nine out of every ten eBooks, and its power over price and product selection was nearly absolute. Apple’s entry spurred tremendous growth in eBook titles, range and variety of offerings, sales, and improved quality of the eBook reading experience. This is evidence of a dynamic, competitive market. These inconvenient facts are ignored in the Complaint. Instead, the Government focuses on increased prices for a handful of titles. The Complaint does not allege that all eBook prices, or even most eBook prices, increased after Apple entered the market.” — end quote —

May 24, 2012 3:11am EDT  --  Report as abuse
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