John Paczkowski

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DOJ Filing Calls Apple “Ringmaster” of E-Book Pricing Rise

Steve_iBooks_croppedApple’s creation of the iBooks electronic book store and its agency pricing model was not an altruistic attempt to break Amazon’s grip on the nascent e-book market, but a conspiracy to eliminate price competition and raise e-book prices.

That’s the gist of a new U.S. Department of Justice filing against Apple in the agency’s upcoming lawsuit against the company. According to the DOJ, Apple was the “ringmaster” of a plan that raised mainstream e-book pricing well above the $9.99 price point Amazon had established by shifting the industry from a wholesale model, where retailers set prices, to an agency model where publishers set prices. Among the agency’s evidence supporting that allegation:

  • An e-mail from Apple co-founder Steve Jobs to James Murdoch of News Corp. — parent company of HarperCollins — that reads in part, “Throw in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99.”
  • A comment Jobs made to biographer Walter Isaacson, explaining that Apple “told the publishers, ‘We’ll go to the agency model, where you set the price, and we get our 30 percent, and yes, the customer pays a little more, but that’s what you want anyway.'”

According to the DOJ, those statements are clear evidence of collusion. “Apple knew that the plan it was proposing involved a ‘dramatic business change’ for publisher defendants,” the agency argued in its filing. “Accordingly, Apple kept each publisher defendant aware that it was orchestrating and coordinating a common approach for all of them.”

Apple is now the lone holdout in the DOJ’s lawsuit, originally brought against the company and five major publishing houses last April. HarperCollins, Hachette, Macmillan, Penguin and Simon & Schuster have all since settled. But Apple, the alleged “ringmaster,” continues to dig its heels in.

“Apple did not conspire to fix eBook pricing,” Apple spokesman Tom Neumayr said in a statement. “We helped transform the eBook market with the introduction of the iBookstore in 2010 bringing consumers an expanded selection of eBooks and delivering innovative new features. The market has been thriving and innovating since Apple’s entry and we look forward to going to trial to defend ourselves.”

Below, the DOJ’s latest filing:



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— Om Malik on Bloomberg TV, talking about Yahoo, the September issue of Vogue Magazine, and our overdependence on Google