Apple calls DoJ e-book settlement proposal unlawful, says trial is needed

Posted:
in General Discussion edited January 2014
In a strongly-worded legal memo filed on Wednesday, Apple opposed the U.S. Department of Justice's settlement proposal which would have the company dismantle its current e-book business structure with three major publishing houses.

Apple's filing, first reported by paidContent is in response to a recent DoJ memorandum in support of a proposed settlement, which asked the New York district court handling the case to hand down a decision without any further hearings. The government argues that a quick final judgment would be in the best interest of consumers as well as the settling parties, which would no longer have to pay fees for ongoing litigation.

Apple counsel disagrees, writing that the proposed judgment would "terminate and rewrite Apple's bargained-for contracts" before evidence, witness testimony and disputed facts are resolved at trial. The Court's decision would be final and irreversible, Apple says, noting that the company can't simply reinstate terminated contracts if it were to win a court trial in the future.

From Apple's memo:
Apple has not settled with the Government; it denies the allegations against it and is actively defending this case. Apple has never participated in, encouraged, or sought to benefit from collusion. It has no objection to the Proposed Judgment?s bar on collusion. But the Government proposes to go much further.[?]Nullifying a non-settling defendant?s negotiated contract rights by another?s settlement is fundamentally unfair, unlawful, and unprecedented. The Government does not cite a single case in which such relief was granted without a trial or merits determination.
At issue is Apple's so-called agency model, in which a publisher is free to set e-book pricing in a "most favored nations" agreement that forbids them from offering the same content to another reseller at a lower price. According to the DoJ, Apple and its publishing partners used the business plan to falsely inflate the price of e-books, thereby hurting consumers.

Apple claims a settlement would unlawfully penalize the company, and grants more relief than a negative post-trial decision would yield.

At the heart of the matter, says Apple, is the alleged conspiracy to force Amazon to adopt the agency model. To that end, "a settlement enjoining collusion or precluding publishers from forcing agency on Amazon would be appropriate." However, the government seeks to reach a favorable judgment without a fair trial, and "justifies the termination of Apple?s contracts before trial on the grounds that they are causing ongoing harm." There has yet to be any finding of antitrust violation, and Apple claims the agency model hasn't been proven to have forced publishers to adopt it with other resellers.



In a footnote to one of Apple's claims, the company takes aim at Amazon and the internet sales giant's role in the proceedings:
For example, many expressed concerns about the possibility that the Government has unwittingly placed a thumb on the scales in favor of Amazon, the industry monopolist. Amazon was the driving force behind the Government?s investigation, and it told a story to the Government that has yet to be scrutinized. Amazon talked with the Government repeatedly throughout the investigation, even hosting a two-day meeting at its Seattle headquarters. In all, the Government met with at least fourteen Amazon employees—yet not once under oath. The Government required that Amazon turn over a mere 4,500 documents, a fraction of what was required of others.
Two of the book publishers named in the settlement also filed opposition memos on Wednesday, with Penguin citing sales figures in support of the agency model. The company states the DoJ "argues that, as the Government, it has access to 'secret' sales data from other retailers—access that, for example, B&N lacks. But DOJ never says what its secret data shows."

Most recently, the DoJ dismissed 868 public comments in favor of Apple's e-book sales model, refusing to modify the proposed settlement's terms and alleging that Amazon's dominant market position has been overstated.

Apple suggests the Court defer judgment until after the case goes to trial in June 2013.
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Comments

  • Reply 1 of 115
    daharderdaharder Posts: 1,580member
    Then Prove It.
  • Reply 2 of 115

    Quote:

    Originally Posted by DaHarder View Post



    Then Prove It.




    Exactly!


    The government must prove collusion.

  • Reply 3 of 115
    freerangefreerange Posts: 1,589member
    I believe the following statement in the article to be false - "At issue is Apple's so-called agency model, in which a publisher is free to set e-book pricing in a "most favored nations" agreement that forbids them from offering the same content to another reseller at a lower price."

    In fact, I believe the agreement said that if they offered a lower price to another company, they needed to offer the same price to Apple. That is much different than "forbid" from offering lowere prices.
  • Reply 4 of 115
    Sounds like a good old fashion request for railroading.
  • Reply 5 of 115
    freerange wrote: »
    In fact, I believe the agreement said that if they offered a lower price to another company, they needed to offer the same price to Apple. That is much different than "forbid" from offering lowere prices.

    Under the "agency model", the publisher sets the selling price that the reselling is obligated to charge the customer.

    Under a contract with a "most favored nations" clause, the publisher cannot sell to any other reseller at a lower price.

    The combination of the two means that no reseller can sell an ebook from one of these publishers to the customer for less than it's sold in Apple's store. Apple's 30% take means that for publishers to continue receiving the same amount per book that they were getting prior to the shift, the publisher must raise the selling price above what it was.
  • Reply 6 of 115
    irnchrizirnchriz Posts: 1,590member
    At least in a full trial Apple can drag Amazon fully into this and demonstrate how this benefits the monopolist in the market.
  • Reply 7 of 115
    As long as the best outcome for consumers is met, I could care less about whoever may be a monopolist or who colluded.

    Consumer first.
  • Reply 8 of 115

    Quote:

    Originally Posted by GalaxyTab View Post



    As long as the best outcome for consumers is met, I could care less about whoever may be a monopolist or who colluded.

    Consumer first.


    I would amend your last two-word sentence to: Consumer first AND last.


     


    In the case of Amazon, with monopolistic power, under the old model had the ability to sell e-books below cost (while making profits on other items) UNTIL they have run out of business all the other outlet competitors. THEN as the only source for the e-books Amazon can raise prices to whatever they wish to the consumer. 


     


    So, the consumer, AT FIRST, can see lower prices, but in the END will pay higher prices.


     


    There is also a good argument for a balance of power between the various publishers and outlets. One large and overly powerful outlet (Amazon) can then dictate to the publishers how to do business. Ultimately this can destroy the whole market, in addition to making e-books more costly.

  • Reply 9 of 115
    solipsismxsolipsismx Posts: 19,566member
    I doubt the DoJ will want to take this to court. I'm predicting they will settle.
  • Reply 10 of 115
    felix01felix01 Posts: 253member

    Quote:

    Originally Posted by SolipsismX View Post



    I doubt the DoJ will want to take this to court. I'm predicting they will settle.


     


    What is there to settle? Apple denies all allegations DoJ has claimed.


     


    You've got to admit, DoJ's track record on these shaky cases hasn't been great...they've consistently come up short and lost...John Edwards, Roger Clemens, etc.


     


    They are just looking for a way to save face on this one before another embarrassing lawsuit loss.


     


    Good on Apple for defending vigorously and demanding Justice prove their allegations in court. Should be fun watching a bunch of GS 12/13/14 lawyers making $125k/year going up against Apple's $750-$1000/hour corporate lawyers.

  • Reply 11 of 115
    anonymouseanonymouse Posts: 6,581member

    Quote:

    Originally Posted by Felix01 View Post


     


    What is there to settle? Apple denies all allegations DoJ has claimed.


     


    You've got to admit, DoJ's track record on these shaky cases hasn't been great...they've consistently come up short and lost...John Edwards, Roger Clemens, etc.


     


    They are just looking for a way to save face on this one before another embarrassing lawsuit loss.


     


    Good on Apple for defending vigorously and demanding Justice prove their allegations in court. Should be fun watching a bunch of GS 12/13/14 lawyers making $125k/year going up against Apple's $750-$1000/hour corporate lawyers.



     


    Plus, it seems clear now that the DoJ was played by Amazon in this instance. The only acceptable settlement would be for the DoJ to drop the whole thing, including the settlements with the publishers who were cowed into giving up. But, clearly there are some enormous egos at play at DoJ who aren't voluntarily going to admit that the totally blew it.

  • Reply 12 of 115
    dasanman69dasanman69 Posts: 12,985member
    freerange wrote: »
    I believe the following statement in the article to be false - "At issue is Apple's so-called agency model, in which a publisher is free to set e-book pricing in a "most favored nations" agreement that forbids them from offering the same content to another reseller at a lower price."
    In fact, I believe the agreement said that if they offered a lower price to another company, they needed to offer the same price to Apple. That is much different than "forbid" from offering lowere prices.

    See I don't get that. Does Apple buy the ebook or does it just handle the transaction then collect 30%?
  • Reply 13 of 115
    jragostajragosta Posts: 10,473member
    ewtheckman wrote: »
    Under the "agency model", the publisher sets the selling price that the reselling is obligated to charge the customer.
    Under a contract with a "most favored nations" clause, the publisher cannot sell to any other reseller at a lower price.
    The combination of the two means that no reseller can sell an ebook from one of these publishers to the customer for less than it's sold in Apple's store. Apple's 30% take means that for publishers to continue receiving the same amount per book that they were getting prior to the shift, the publisher must raise the selling price above what it was.

    That's essentially what FreeRange was saying.

    He was arguing against the wording. The article stated that no one could sell below list price. That is not correct. If a publisher chooses to do so, they could offer anyone a discount off of list price - as long as they include the company with the MFN clause. The difference is subtle, but important.

    galaxytab wrote: »
    As long as the best outcome for consumers is met, I could care less about whoever may be a monopolist or who colluded.
    Consumer first.

    And what's the best outcome? Oh, yeah - it's what Apple has done. Break up the Amazon monopoly so that there's real competition in the market rather than one company controlling everything - with the potential to greatly raise prices in the future and/or control what content gets distributed.
  • Reply 14 of 115
    dasanman69dasanman69 Posts: 12,985member
    I would amend your last two-word sentence to: Consumer first AND last.

    In the case of Amazon, with monopolistic power, under the old model had the ability to sell e-books below cost (while making profits on other items) UNTIL they have run out of business all the other outlet competitors. THEN as the only source for the e-books Amazon can raise prices to whatever they wish to the consumer. 

    So, the consumer, AT FIRST, can see lower prices, but in the END will pay higher prices.

    There is also a good argument for a balance of power between the various publishers and outlets. One large and overly powerful outlet (Amazon) can then dictate to the publishers how to do business. Ultimately this can destroy the whole market, in addition to making e-books more costly.

    Says who? You have zero proof that Amazon would raise prices. They didn't raise them while they were almost a monopoly so what would it let you believe that they would? That's an outright lie used to bolster your argument for Apple.
  • Reply 15 of 115
    anonymouseanonymouse Posts: 6,581member

    Quote:

    Originally Posted by dasanman69 View Post





    Says who? You have zero proof that Amazon would raise prices. They didn't raise them while they were almost a monopoly so what would it let you believe that they would? That's an outright lie used to bolster your argument for Apple.


     


    The history of monopolies contradicts your "argument". There's no reason to expect that once Amazon is able to consolidate its monopoly that it won't behave like monopolists almost always do; they aren't a charitable institution, after all. It's mere wishful thinking on your part to think they wouldn't.

  • Reply 16 of 115
    mi_satmi_sat Posts: 39member


    Welcome to ObamaNation, where the Great Dictator's regime decides what's lawful.

  • Reply 17 of 115
    anonymouseanonymouse Posts: 6,581member

    Quote:

    Originally Posted by mi_sat View Post


    Welcome to ObamaNation, where the Great Dictator's regime decides what's lawful.



     


    You're apparently overlooking the fact that the previous administration filled the DoJ with right-wing political hacks.

  • Reply 18 of 115
    mi_satmi_sat Posts: 39member


    As opposed to preeminent legal scholars like Eric Holder...

  • Reply 19 of 115
    rfhjrrfhjr Posts: 44member


    Thank you, Apple, for having the courage to stand-up for what is right.  

  • Reply 20 of 115
    dasanman69dasanman69 Posts: 12,985member
    anonymouse wrote: »
    The history of monopolies contradicts your "argument". There's no reason to expect that once Amazon is able to consolidate its monopoly that it won't behave like monopolists almost always do; they aren't a charitable institution, after all. It's mere wishful thinking on your part to think they wouldn't.

    Still only makes at best a could have scenario, because it has happened in the past does not guarantee it'll happen again. Had the poster written "if allowed to gain a monopoly Amazon can then raise prices unchecked" I would not argue against in fact I'd agree, but to say "Amazon will raise prices" as an unfounded scare tactic to get someone to see things Apple's way, that I'll challenge every single time.
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