Apple denies e-book price fixing allegations in response filing

Posted:
in General Discussion edited January 2014
A class-action lawsuit against Apple involving e-book price fixing moved a step forward on Tuesday as the Cupertino-based company filed an official response to accusations that it colluded with book publishers to artificially inflate the cost of products sold through the iBookstore.

Apple's latest filing is standard procedure in the suit being leveled against the iPad maker and two major publishing houses and is the latest significant development since presiding Judge Denis Cote denied the defendants' motion to dismiss earlier in May.

Tuesday's filing saw Apple categorically dismiss accusations from the class, which now includes 31 states, stating several times that the evidence will "speak for itself." The response breaks down the complaint paragraph by paragraph, challenging the charges by either citing a lack of "sufficient evidence and belief" or denying them outright.

Apple pointedly admits that, while it conducted bilateral negotiations with certain publishers, the company denies any collusion or attempt at price-fixing.

Speaking to the so-called "agency model," Apple "denies that the adoption of an agency model worked a ?radical? or ?fundamental? change in pricing ?that had existed for more than a hundred years.? The response went further and posited that the agreements held with publishers did not prevent competing retailers to set their own e-book prices. Under the agency model, however, a "most favored nations" clause disallowed publishing partners to offer their wares to other resellers at lower prices.

Amazon was mentioned numerous times in the filing as the wholesale pricing model used by the internet sales giant is being leveraged by the plaintiffs as an example of how Apple's strategy affected the e-book market. In the complaint, the class alleges that e-books sold through the iBookstore face "no pricing competition from Amazon or other e-distributors."

The plaintiffs also argue that Apple used the dissatisfaction felt by publishers that were negatively impacted by the wholesale model as leverage to join the iBookstore. To this, Apple responds by admitting that "publicly and privately in their individual discussions with Apple, representatives of each of the publishers separately expressed varying degrees of unhappiness with Amazon?s tactics, including its prices," but denies using the knowledge as a means of incentive to use the agency model. The company also denies that it was an intermediary between the publishers as indicated by the complaint.



The class-action suit is progressing alongside a parallel Department of Justice antitrust case, which Apple has warned could be harmful for consumers, calling it "fundamentally flawed."

Most recently, documents from the class-action case revealed a previously redacted email from Apple co-founder Steve Jobs pushing for the agency model. Though not hard evidence of collusion, the plaintiffs are attempting to illustrate a willingness on the part of Apple to persuade the publishers into the iBookstore model.

The next deadline for the case is a status conference set to take place in late June.
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Comments

  • Reply 1 of 59
    hill60hill60 Posts: 6,992member


    Here we go again, whine, whine, whine the price went up for SOME titles, get over it, buy something else, go to a library.


     


    Books are a luxury not a necessity.


     


    Apple has done nothing wrong, they will be exonerated.

  • Reply 2 of 59
    smallwheelssmallwheels Posts: 584member


    When e-books cost more than printed books that are shipped across the country there is definitely something wrong. Many new titles are available on Amazon in paperback for under three dollars yet their e-book equivalents cost no less than $9.99. I could buy ten paperback books on Amazon for $2.50 and get free shipping. That is what two and a half e-books would cost there or perhaps two books from iBooks bookstore.


     


    Until e-books cost less than paperback books I won't be buying them.

     

  • Reply 3 of 59
    hill60hill60 Posts: 6,992member

    Quote:

    Originally Posted by Smallwheels View Post


    When e-books cost more than printed books that are shipped across the country there is definitely something wrong. Many new titles are available on Amazon in paperback for under three dollars yet their e-book equivalents cost no less than $9.99. I could buy ten paperback books on Amazon for $2.50 and get free shipping. That is what two and a half e-books would cost there or perhaps two books from iBooks bookstore.


     


    Until e-books cost less than paperback books I won't be buying them.

     



    May I suggest these fine titles, many of them available below $9.99


     


    http://www.amazon.com/s/ref=nb_sb_noss_1?url=search-alias=digital-text&field-keywords=cheapskate

  • Reply 4 of 59
    genovellegenovelle Posts: 978member


    There are some advantages to digital books.  How many family members can read your paper book at once.  If you loose the book or spill something on it or if it burst in to flames on a hot day, will Amazon send you a new one free of charge.  If there are updates to it like in a text book.  Will they send you the updated version.  Do any of you books include video or audio like some iBooks.  No!

  • Reply 5 of 59
    jragostajragosta Posts: 10,473member
    When e-books cost more than printed books that are shipped across the country there is definitely something wrong. Many new titles are available on Amazon in paperback for under three dollars yet their e-book equivalents cost no less than $9.99. I could buy ten paperback books on Amazon for $2.50 and get free shipping. That is what two and a half e-books would cost there or perhaps two books from iBooks bookstore.

    Until e-books cost less than paperback books I won't be buying them.

     

    Then don't buy them. No one is making you.

    Under Apple's model, the publisher is free to set whatever price they want. If the price is too high, no one buys them and they might consider dropping it. OTOH, if they sell lots of them, there's less incentive to drop the price.

    It's something called the free market.
  • Reply 6 of 59
    drdoppiodrdoppio Posts: 1,132member

    Quote:

    Originally Posted by AppleInsider View Post



    ... The company also denies that it was an intermediary between the publishers as indicated by the complaint.




     



     


     


    According to the class-action suit (cf. pdf below), Apple provided insurance to publishers that others are going to join in the agency pricing model. If that is proven to be true, then Apple could be found guilty of acting as the hub in a hub and spoke collusion. Many indicators of collusion are in place: uniform prices, a penalty for price discounts, information exchange. I think Apple will have a hard time defending its innocence, especially when using arguments essentially stating the applying the law can harm consumers.


     


     


    http://www.hbsslaw.com/file.php?id=861&key=a579e3b8530e573aaffdb1e3eb64f994

  • Reply 7 of 59
    jragostajragosta Posts: 10,473member
    drdoppio wrote: »

    According to the class-action suit (cf. pdf below), Apple provided insurance to publishers that others are going to join in the agency pricing model. If that is proven to be true, then Apple could be found guilty of acting as the hub in a hub and spoke collusion. Many indicators of collusion are in place: uniform prices, a penalty for price discounts, information exchange. I think Apple will have a hard time defending its innocence, especially when using arguments essentially stating the applying the law can harm consumers.


    http://www.hbsslaw.com/file.php?id=861&key=a579e3b8530e573aaffdb1e3eb64f994

    Let's take your issues:

    - Uniform prices. Doesn't apply. Sorry, that was Amazon. Apple lets the publishers set prices wherever they want. Some eBooks are a couple of bucks and some are $20 or more.

    - Penalty for price discounts. Apple doesn't care what price you set. They take 30%.

    - Information exchange. There's absolutely no evidence that Apple exchanges information between publishers and Apple denies it. Where's your evidence that it occurs?

    So there's absolutely nothing that suggest that Apple is guilty of what you're claiming.
  • Reply 8 of 59
    drdoppiodrdoppio Posts: 1,132member

    Quote:

    Originally Posted by jragosta View Post





    Let's take your issues:

    - Uniform prices. Doesn't apply. Sorry, that was Amazon. Apple lets the publishers set prices wherever they want. Some eBooks are a couple of bucks and some are $20 or more.

    - Penalty for price discounts. Apple doesn't care what price you set. They take 30%.

    - Information exchange. There's absolutely no evidence that Apple exchanges information between publishers and Apple denies it. Where's your evidence that it occurs?

    So there's absolutely nothing that suggest that Apple is guilty of what you're claiming.


    I listed a few indicators, not to be confused with the proof that the DoJ is expected to provide. Let me clarify a bit:


    - Uniform prices were set between the five publishers accused of collusion. I did not mean "uniform prices for different books at one publisher" (that would be meaningless), but rather uniform prices for the same category of books between several publishers.


    - Price discounts outside of Apple's store become impossible with the favorite nations clause.


    - Information exchange is very well documented in the link that I provided. I advise you to read it before making blanket statements.

  • Reply 9 of 59


    The most fundamental problem with this lawsuit is that it charges the wrong company of manipulating the market.  Amazon was the company dumping (selling below wholesale cost) ebooks on the market.  Amazon was trying to corner the market in ebooks, and they were succeeding.  They had 90% of the market.  When Apple entered the market some prices went up, but most of these were books Amazon was selling below cost.  The idea that there was no competition between Amazon and Apple is laughable.  Both had Apps that sold their wares on the iPad and the iPhone.  Amazon quit selling directly through the iPad and iPhone Apps because Apple was charging 30% and they already had the distribution the needed. You can still order Amazon ebooks over the web through your browser on an iPhone or iPad, but it is less convenient because you had to email the book to your account.  This is like Coke complaining that Pepsi charged more for coke products in Pepsi stores.  It is some thing the market can certainly handle.  Amazon can still produce their own books, and sell them at a discount.  What they could not do under this system is dump ebooks below their cost to draw customers to their ecosystem.  That is not an unfair restriction, it is just plain competition.  If you don't like it then don't buy any books that way.  No one can make money with out selling their product.  Limiting the distribution system to drive up prices for your product is not considered anti competitive, especially if there are substitutes available to consumers.  In this case, paperbacks and hardbacks certainly qualify as a substitute that competes with ebooks for market share.

  • Reply 10 of 59
    drdoppiodrdoppio Posts: 1,132member

    Quote:

    Originally Posted by Macnewsjunkie View Post


    The most fundamental problem with this lawsuit is that it charges the wrong company of manipulating the market.  Amazon was the company dumping (selling below wholesale cost) ebooks on the market.  Amazon was trying to corner the market in ebooks, and they were succeeding.  They had 90% of the market.  When Apple entered the market some prices went up, but most of these were books Amazon was selling below cost.  The idea that there was no competition between Amazon and Apple is laughable.  Both had Apps that sold their wares on the iPad and the iPhone.  Amazon quit selling directly through the iPad and iPhone Apps because Apple was charging 30% and they already had the distribution the needed. You can still order Amazon ebooks over the web through your browser on an iPhone or iPad, but it is less convenient because you had to email the book to your account.  This is like Coke complaining that Pepsi charged more for coke products in Pepsi stores.  It is some thing the market can certainly handle.  Amazon can still produce their own books, and sell them at a discount.  What they could not do under this system is dump ebooks below their cost to draw customers to their ecosystem.  That is not an unfair restriction, it is just plain competition.  If you don't like it then don't buy any books that way.  No one can make money with out selling their product.  Limiting the distribution system to drive up prices for your product is not considered anti competitive, especially if there are substitutes available to consumers.  In this case, paperbacks and hardbacks certainly qualify as a substitute that competes with ebooks for market share.



     


    Paperbacks a substitute for ebooks? LOL. Try downloading a paperback in your 6 ounce e-reader.


     


    The reasons Apple is being accused of collusion (along with 5 publishers, three of who have settled) are well documented and described in detail in attached documents and previous threads. Nobody needs new inane statements that there was competition between Apple and Amazon. Comparing this to Pepsi and Coke is ludicrous. Books are not sugar water.

  • Reply 11 of 59
    hill60hill60 Posts: 6,992member

    Quote:

    Originally Posted by DrDoppio View Post


     


     


    According to the class-action suit (cf. pdf below), Apple provided insurance to publishers that others are going to join in the agency pricing model. If that is proven to be true, then Apple could be found guilty of acting as the hub in a hub and spoke collusion. Many indicators of collusion are in place: uniform prices, a penalty for price discounts, information exchange. I think Apple will have a hard time defending its innocence, especially when using arguments essentially stating the applying the law can harm consumers.


     


     


    http://www.hbsslaw.com/file.php?id=861&key=a579e3b8530e573aaffdb1e3eb64f994



     


    From Apple's response:-


     


     


    133. Apple admits that it engaged in individual, but simultaneous, negotiations with


    each of the Publisher Defendants and further admits that it entered into agreements with each of 


    the Publisher Defendants “within days of each other.” Apple denies the remaining allegations in


     paragraph 133, except that Apple admits that the final agreements provide that Apple’s commis-


    sion is 30% of the eBook retail price and admits that the agreements include an MFN provision


     


     


    149. Apple lacks sufficient information and belief as to the allegations in paragraph


    149, and on that basis denies them, except that Apple specifically admits its distribution agree-


    ment with Macmillan contained an MFN, and Apple specifically denies that Apple and Macmil-


    lan “agreed to a pricing formulae and MFN Clauses, assuring themselves that Amazon would be


    closed out of the market… unless Amazon agreed to allow the Publisher Defendants to raise prices.


    ”Apple lacks sufficient information and belief as to the allegations in paragraph149, and on that basis


    denies them, except that Apple specifically admits its distribution agree-ment with Macmillan contained


    an MFN, and Apple specifically denies that Apple and Macmil-lan “agreed to a pricing formulae and MFN


    Clauses, assuring themselves that Amazon would beclosed out of the market… unless Amazon agreed to


    allow the Publisher Defendants to raise prices.”


     


     


    206. Apple admits that it was an eBook retailer prior to entering into the agency


    agreements with the Publisher Defendants but denies that it set the prices of eBooks. Apple has


    always sold eBooks under the agency model. Apple lacks sufficient information and belief to


    respond to the remaining allegations in paragraph 206, and on that basis denies them.


     


    207. Apple admits that, under its bilateral contracts with book publishers, each Pub-


    lisher Defendant decides the price of its product in the retail marketplace, and Apple’s commis-


    sion is 30% of the retail price. Those contracts are the best evidence of their contents. Apple


    lacks sufficient information and belief to respond to the remaining allegations in paragraph 207,


    and on that basis denies them.


     


    208. Apple admits that its bilateral contract with each Publisher Defendant was the re-


    sult of individual negotiations during January 2010, and that the resulting agreements have some


    similar terms, but they are not identical. Those contracts are the best evidence of their contents.


    Apple denies the remaining allegations in paragraph 208.


     


    209. Apple admits that its individual agreement with each Publisher Defendant identi-


    fies Apple as an agent of the contracting Publisher Defendant and that each agreement provides


    Apple will sell, market, and distribute eBooks on behalf of the publisher. Those contracts are the


     best evidence of their contents. Apple lacks sufficient information and belief to respond to the


    allegations in paragraph 209 regarding any other eBook retailer’s contractual agreements with


    the Publisher Defendants, and on that basis denies them.


     


     


    210. Apple admits that it does not have the authority to set eBook prices under its


    agency agreements with each Publisher Defendant. Apple alleges that it separately negotiated


    certain limitations on the prices charged by the Publisher Defendants. Those agreements are the


     best evidence of their contents. Apple lacks sufficient information and belief to respond to the 


    allegations in paragraph 210 regarding any other eBook retailer’s contractual agreements with


    the Publisher Defendants, and on that basis denies them.


     


    211. Apple admits that each of its agency agreements with the Publisher Defendants


     provides that a 30% commission will be paid to Apple for the sale of a Publisher Defendant’s


    eBook. Apple lacks sufficient information and belief to respond to the allegations in paragraph


    211 regarding any other eBook retailer’s contractual agreements with the Publisher Defendants,


    and on that basis denies them.


     


    212.Apple admits that its agency agreements with each Publisher Defendant specify


    Apple’s and the Publisher Defendants’ responsibilities under the individual agreements. Those


    agreements are the best evidence of their contents. Apple lacks sufficient information and belief 


    to respond to the allegations in paragraph 212 regarding any other eBook retailer’s contractual


    agreements with the Publisher Defendants, and on that basis denies them. Apple denies any


    remaining allegations in paragraph 212.


     


    213. Apple responds that the allegations in paragraph 213 generally appear to provide


    an accurate high-level description of Apple’s agency agreements with the Publisher Defendants.


    Those agreements are the best evidence of their contents. Apple lacks sufficient information and


     belief to respond to the allegations in paragraph 213 regarding any other eBook retailer’s con-


    tractual agreements with the Publisher Defendants, and on that basis denies them.


     


    214. Apple admits in general under its agency agreements that the Publisher Defend-


    ants bear the credit risk from eBook sales to customers if the stated conditions are met, but the


    specific terms relating to accounts receivable and credit risk are not uniform. Apple further 


    admits that there are return policies provided in each of its agency agreements, but alleges that


    they are not uniform. Apple’s agency agreements themselves are the best evidence of their contents.


     Apple lacks sufficient information and belief to respond to the allegations in paragraph


    215 regarding any other eBook retailer’s contractual agreements with the Publisher Defendants,


    and on that basis denies them.

  • Reply 12 of 59
    caliminiuscaliminius Posts: 944member

    Quote:

    Originally Posted by jragosta View Post





    Then don't buy them. No one is making you.

    Under Apple's model, the publisher is free to set whatever price they want. If the price is too high, no one buys them and they might consider dropping it. OTOH, if they sell lots of them, there's less incentive to drop the price.

    It's something called the free market.


     


    Except for that little clause that the publishers can't set the prices any lower for other sellers than they do for Apple. Which kind of kills that "free market" BS you're trying to sell.


     


    And people seem to miss the irony of the publisher's anger with Amazon. Forcing a change to the agency model was a pretty big slap in the face to Amazon. Amazon has made selling eBooks a part of its core business but to Apple it's just a value add to help sell more hardware. If the publisher's stopped selling eBooks tomorrow, Amazon would be forced into scramble mode adjusting to a dramatic change in balance plans while Apple would simply shrug and move on. Amazon is the one that has invested hard core on pushing the eBook market into the mainstream with tons of advertising and prime product placement of their website. For Apple, iBooks is another feature bullet point for iOS devices. The publisher's weren't losing money with Amazon. If Amazon sells a book for $3 that the publishers sold to Amazon for $5, it was Amazon that ate the $2 discount.

  • Reply 13 of 59
    caliminiuscaliminius Posts: 944member

    Quote:

    Originally Posted by hill60 View Post


     


    From Apple's response:-


     


    blah, blah, blah...



     


    Wow, imagine that, Apple's defense team denies there was any wrong doing. Gods, who would have guessed that?


     


    Since Google's defense attorneys deny any wrong doing in the suit with Oracle over Java, I guess that means Google must be innocent too.


     


    Never mind that letter that was posted here from Jobs to the publishers that CLEARLY showed Apple was selling the iBooks deal as a club the publishers could use to force Amazon to raise prices. Which sort of defeats a lot of the nonsense you quoted.

  • Reply 14 of 59
    hill60hill60 Posts: 6,992member

    Quote:

    Originally Posted by caliminius View Post


     


    Except for that little clause that the publishers can't set the prices any lower for other sellers than they do for Apple. Which kind of kills that "free market" BS you're trying to sell.


     


    And people seem to miss the irony of the publisher's anger with Amazon. Forcing a change to the agency model was a pretty big slap in the face to Amazon. Amazon has made selling eBooks a part of its core business but to Apple it's just a value add to help sell more hardware. If the publisher's stopped selling eBooks tomorrow, Amazon would be forced into scramble mode adjusting to a dramatic change in balance plans while Apple would simply shrug and move on. Amazon is the one that has invested hard core on pushing the eBook market into the mainstream with tons of advertising and prime product placement of their website. For Apple, iBooks is another feature bullet point for iOS devices. The publisher's weren't losing money with Amazon. If Amazon sells a book for $3 that the publishers sold to Amazon for $5, it was Amazon that ate the $2 discount.



     


    No-one "forced" a change on Amazon, except Amazon.


     


    They negotiated agreements with publishers which had nothing whatsoever to do with Apple.


     


    That's business.

  • Reply 15 of 59
    hill60hill60 Posts: 6,992member

    hmmm....
  • Reply 16 of 59
    hill60hill60 Posts: 6,992member

    Quote:

    Originally Posted by caliminius View Post


     


    Wow, imagine that, Apple's defense team denies there was any wrong doing. Gods, who would have guessed that?


     


    Since Google's defense attorneys deny any wrong doing in the suit with Oracle over Java, I guess that means Google must be innocent too.


     


    Never mind that letter that was posted here from Jobs to the publishers that CLEARLY showed Apple was selling the iBooks deal as a club the publishers could use to force Amazon to raise prices. Which sort of defeats a lot of the nonsense you quoted.



     


    Wow imagine posting a list of allegations as fact (I refer to the link in the post I was responding to), since when did the US adopt a judicial system based on the presumption of guilt.


     


    Apple is innocent, they did nothing wrong, they will be exonerated.


     


    Google is NOT innocent, they were found to have breached Oracle's copyrights.


     


    The letter from Jobs shows nothing except for negotiations with AN INDIVIDUAL PUBLISHER, which is a normal part of doing business.


     


    There is NO evidence that there was ANY collusion with OTHER publishers as regards Apple.


     


    Steve Jobs is unavailable to testify as to what the letter meant, it is basically worthless as evidence.

  • Reply 17 of 59
    drdoppiodrdoppio Posts: 1,132member

    Quote:

    Originally Posted by hill60 View Post


    ...


    Steve Jobs is unavailable to testify as to what the letter meant, it is basically worthless as evidence.



    Yeah, nice save...

  • Reply 18 of 59
    charlitunacharlituna Posts: 7,215member

    Quote:

    Originally Posted by DrDoppio View Post


    - Uniform prices were set between the five publishers accused of collusion. I did not mean "uniform prices for different books at one publisher" (that would be meaningless), but rather uniform prices for the same category of books between several publishers.


    - Price discounts outside of Apple's store become impossible with the favorite nations clause.



     


    And? Every publisher for eons has had the same price range for each group of books -- hardcover, mass-market and trade paper. They used the same range for the ebooks using age of the title and how it is published as a standard book as their guide. 


     


    As for the discounts, Amazon has the same clause and may have since they started in 2007. Where's the fuss about that. 

  • Reply 19 of 59
    charlitunacharlituna Posts: 7,215member

    Quote:

    Originally Posted by DrDoppio View Post


     


    Paperbacks a substitute for ebooks? LOL. Try downloading a paperback in your 6 ounce e-reader.


     


    The reasons Apple is being accused of collusion (along with 5 publishers, three of who have settled) are well documented and described in detail in attached documents and previous threads. Nobody needs new inane statements that there was competition between Apple and Amazon. Comparing this to Pepsi and Coke is ludicrous. Books are not sugar water.



     


    How about we wait for the DOJ to finish their case and find Apple guilty. you might discover that in fact you aren't the legal expert on this that your tone is implying. 

  • Reply 20 of 59
    charlitunacharlituna Posts: 7,215member

    Quote:

    Originally Posted by hill60 View Post


     


    No-one "forced" a change on Amazon, except Amazon.


     


    They negotiated agreements with publishers which had nothing whatsoever to do with Apple.


     


    That's business.



     


    Very true. The publishers said they wouldn't re-up their contracts without their new terms but Amazon wasn't held at gun point to agree. They could have said no to the terms and removed said titles from their catalog without blinking

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