US Justice Department details Apple's e-book 'conspiracy' in opening arguments

Posted:
in General Discussion edited January 2014
The U.S. Department of Justice's opening statements in its antitrust lawsuit against Apple have been published online, laying the groundwork for what the government hopes will prove illegal collusion between Apple and book publishers that led to higher prices.

iBooks


At the forefront of the government's case is Eddy Cue, Apple's senior vice president of Internet Software and Services, who is responsible for securing content-related deals for his company. As evidence of an alleged "conspiracy," the DOJ has shown phone calls and emails between Cue and representatives from major book publishers.

Opening statements for United States of America v. Apple, Inc. took place in court Monday morning, with DOJ co-counsel Larence Butterman arguing that Apple and book publishers violated the 1980 Sherman Antitrust Act. The DOJ highlighted its case with a series of 81 slides that were provided to CNet.

In one example, representatives from Simon & Schuster, Random House and Macmillan were all called on the same day within hours of each other. Cue also used identical verbiage in emails sent to those same representatives.

iBooks


Other evidence claims to show that Apple provided information to publishers about what other publishers were willing to agree to. In one example, it was noted that Macmillan was only willing to offer enhanced content to tablets with color displays, which Amazon's Kindle lineup did not offer as of the debut of the first iPad in 2010.

Apple, meanwhile, saw its opening statement delivered by lead attorney Orin Snyder, in which Judge Denise Cote was asked to "hit the delete button" on earlier comments she had made at a pre-trial hearing, suggesting that Apple would likely lose the trial. Cue's dealmaking was just part of Apple's efforts to break into an e-book market that has been historically dominated by Amazon, Snyder argued on Monday, according to Apple 2.0.

Cue himself will testify in the trial, but he is not scheduled to take the stand until June 13.



In pre-trial court filings the DOJ accused Apple of being a facilitator in alleged collusion with major publishers to fix e-book prices. Apple, however, has denied the allegations, saying it drafted separate consumer-friendly agreements with each publisher.

The five largest publishers all came under federal scrutiny after they agreed to a so-called "agency model" pricing agreement with Apple. Under that deal, the publishers were allowed to set fixed prices for content ??a change from the "wholesale model" preferred by online retailer Amazon, which allows booksellers to set their own prices and offer discounts.

Apple remains the lone holdout in the e-book antitrust case, making the trial a rare occurrence in which the defendant did not settle out of court with the government. But Apple's executives are adamant that the company did nothing wrong, which has prompted them to stand their ground and go to trial.

Speaking at the D11 conference last week, Apple Chief Executive Tim Cook dismissed the DOJ case as "bizarre," and said that Apple has taken a "principled position" on e-book pricing.
«134

Comments

  • Reply 1 of 71
    icoco3icoco3 Posts: 1,456member

    Quote:

    Originally Posted by AppleInsider View Post



    The U.S. Department of Justice's...


     


    Now THAT is a contradiction.

  • Reply 2 of 71
    solipsismxsolipsismx Posts: 19,566member
    How can they prove collusion via phone calls? Clearly Apple had to contact the publishers to make the deals. Can they prove there was a massive conference call between Apple and the publishers to collude?
  • Reply 3 of 71
    icoco3icoco3 Posts: 1,456member

    Quote:

    Originally Posted by AppleInsider View Post





    In one example, representatives from Simon & Schuster, Random House and Macmillan were all called on the same day within hours of each other. Cue also used identical verbiage in emails sent to those same representatives.




    iBooks



     


    Let me see, I cut and paste information to send to different people especially if I have the same thing to say to each.  Nothing odd there in the corporate world.


     


    So what if he calls 3 publishers back to back !!!!  His goal for the day was talking to different companies to try and get a contract for their products.  If they were all on a conference call one could conclude collusion but one after the other??

  • Reply 4 of 71
    nagrommenagromme Posts: 2,834member
    This sounds like an easy win for Apple. If THIS "evidence" is part the big opening splash, that doesn't bode well for the DoJ's case.
  • Reply 5 of 71
    tallest skiltallest skil Posts: 43,399member


    Originally Posted by nagromme View Post

    This sounds like an easy win for Apple. If THIS "evidence" is part the big opening splash, that doesn't bode well for the DoJ's case.


     


    Of course, when the people who make the laws are one of the sides of the argument, they can just change the laws to be whatever they want.

  • Reply 6 of 71
    mstonemstone Posts: 11,510member

    Quote:

    Originally Posted by nagromme View Post



    This sounds like an easy win for Apple. If THIS "evidence" is part the big opening splash, that doesn't bode well for the DoJ's case.


    I don't know. Did you take a look at the full slideshow?


     


    U.S. v. Apple Et Al Opening Slides


     


    There are some unfortunate dialogues in many of those communications including a reference "to be sure to double delete this from your email mailbox."

  • Reply 7 of 71
    kozchriskozchris Posts: 209member


    Here we go with another waste of tax payer money. Government lawyers just trying to get their name out there by getting associated with an Apple trial.

  • Reply 8 of 71
    gatorguygatorguy Posts: 19,805member
    solipsismx wrote: »
    How can they prove collusion via phone calls? Clearly Apple had to contact the publishers to make the deals. Can they prove there was a massive conference call between Apple and the publishers to collude?

    If you look at all the slides it does look like Cue was doing coordination on what the others would agree to, including reporting conversations he had with one to the others. See PX-0159 and PX-0359 and PX-0718.
    http://www.scribd.com/doc/145486131/U-S-v-Apple-Et-Al-Opening-Slides

    I assumed you'd already looked at them before making your comments so perhaps you're understanding them differently than I am. guess that's why they have trials huh?
  • Reply 9 of 71
    solipsismxsolipsismx Posts: 19,566member
    gatorguy wrote: »
    If you look at all the slides it does look like Cue was doing coordination on what the others would agree to, reporting conversations he had with one to the others. See PX-0159 and PX-0359 and PX-0718.
    http://www.scribd.com/doc/145486131/U-S-v-Apple-Et-Al-Opening-Slides

    I assumed you'd already looked at them before making your comments so perhaps you're understanding them differently than I am. guess that's why they have trials huh?

    I hadn't looked at the slides since I was on my iPhone. I just read the base article.


    edit: I see what you mean by PX-159 and PX-359 (slide 27 of 81). Do we have access to the full two pages of the document and a translation of that chicken scratch? I can't even tell who that paper was addressed to in that slide. Who would write this up to give for business if wasn't to used internally for brainstorming? That slide is titled "Apple Provides Information to PublishersAbout Other Publishers" seems to imply collusion by scribd but without more context it's not a smoking gun.

    For PX-0178 (slide 71 of 81) that seems fine to me. All it shows is he didn't want to be first. It's perfectly legal to ask if others have also signed up without divulging the other deals. In fact, it actually leans in favour of no collusion.


    1000
  • Reply 10 of 71
    anonymouseanonymouse Posts: 6,563member

    Quote:

    Originally Posted by mstone View Post


    I don't know. Did you take a look at the full slideshow?


     


    U.S. v. Apple Et Al Opening Slides


     


    There are some unfortunate dialogues in many of those communications including a reference "to be sure to double delete this from your email mailbox."



     


    If that quote is their strongest "evidence", and it appears to be, from a quick perusal, the DoJ doesn't have even half a case. The judge, however, seems to have already reached conclusions before the trial, so, no doubt it's going to be a long drawn out process with appeals, etc.


     


    Apple's "crime" here, was to bust the Amazon eBook monopoly, something that DoJ should have done themselves.

  • Reply 11 of 71
    hawkbladehawkblade Posts: 76member


    So, now corps can't charge what they want for their own goods?  It's not like there was a monopoly on e-books.  So they did "wholesale" price on one place and did "retail" price on another.  If you did not like the price, don't buy it.  Simple.  Not like all the big banks, or big insurance people got together and "price fixed" things... oh wait, yes they did and do.  Where is their trial???  


     


    So these little hedgefund managers did not make a killing off Apple stock because Apple did not run their company into the ground giving "big payoff".  So they cried to their friends in the DOJ and poof... trial... how convenient... 

  • Reply 12 of 71
    kozchriskozchris Posts: 209member


    If Apple wins does that mean that the publishers can choose not to honor their settlements if they want?

  • Reply 13 of 71
    jragostajragosta Posts: 10,473member
    gatorguy wrote: »
    If you look at all the slides it does look like Cue was doing coordination on what the others would agree to, including reporting conversations he had with one to the others. See PX-0159 and PX-0359 and PX-0718.
    http://www.scribd.com/doc/145486131/U-S-v-Apple-Et-Al-Opening-Slides

    So?

    There's nothing prima facie illegal about telling a company what another company had agreed to. You'd need much more than that to prove collusion.

    Heck, if that was sufficient to prove collusion, then every single purchasing agent in the country would be charged. "But company Y agreed to give me xxxxx" is a very common (and completely legal) negotiating tactic.
  • Reply 14 of 71
    gatorguygatorguy Posts: 19,805member
    jragosta wrote: »
    So?

    There's nothing prima facie illegal about telling a company what another company had agreed to. You'd need much more than that to prove collusion.

    Well of course you do. Hey look, we agree. :D

    With you being somewhat of a legal expert you no doubt recognize that the opening statements for both sides only serve as an outline of how they intend to present their arguments and not include everything they think they have to prove their case. The actual evidence is yet to be presented. Within a few weeks it will be clearer as to the facts and whether any of it rises to the level of illegality.

    EDIT: The hotel industry uses a similar pricing strategy. While there's significant product differences, primarily that one offers a time-sensitive (perishable) product while the other does not, the outcome of this case could influence a possible look at hotel room pricing too.
  • Reply 15 of 71
    lord amhranlord amhran Posts: 902member
    The Sherman Anti-Trust Act was put into law in 1890 not 1980:

    http://en.m.wikipedia.org/wiki/Sherman_Antitrust_Act
  • Reply 16 of 71
    solipsismxsolipsismx Posts: 19,566member
    The Sherman Anti-Trust Act was put into law in 1890 not 1980:

    http://en.m.wikipedia.org/wiki/Sherman_Antitrust_Act

    Sherman could have placed he law into effect anywhere in the timeline…

    400
  • Reply 17 of 71
    boeyc15boeyc15 Posts: 986member

    Quote:

    Originally Posted by kozchris View Post


    Here we go with another waste of tax payer money. Government lawyers just trying to get their name out there by getting associated with an Apple trial.



    Wow thats terrible... if true, please provide some evidence to back this serious allegation, Im interested. Or is this just a wisecracker remark?

  • Reply 18 of 71
    65c81665c816 Posts: 133member
    One of the final slides show apple selling ebooks at $14.99 and amazon at $9.99.

    Where is the problem?!?!
  • Reply 19 of 71
    mstonemstone Posts: 11,510member

    Quote:

    Originally Posted by anonymouse View Post


    If that quote is their strongest "evidence", and it appears to be, from a quick perusal, the DoJ doesn't have even half a case. The judge, however, seems to have already reached conclusions before the trial, so, no doubt it's going to be a long drawn out process with appeals, etc.


     


    Apple's "crime" here, was to bust the Amazon eBook monopoly, something that DoJ should have done themselves.



    Well you could put it that way or one could characterize it as Apple being late to the ebook market and wanted a foot in the door. And, they still wanted to make their 30% too. Had they just said to the publishers that you set the price at whatever you want and we'll take 30% and left it at that, then there would be no trial. But Apple knew they would not sell very many ebooks if the price was higher than Amazon. With a higher price than Amazon, Apple's bookstore would be perceived as a failure so they worked out a plan to try to make Amazon raise their prices, which I don't understand why Amazon wouldn't want to actually make some profit on those books anyway. Perhaps they didn't want to be brought into a potential collusion with Apple.

  • Reply 20 of 71
    maestro64maestro64 Posts: 4,415member


    What I find funny about this is the fact this happens every day right in front of everyone in companies public communications. It is illegal for companies to collude, however it seem like it is only illegal if it is done behind close doors or via email or phone calls. 


     


    Everyday companies broadcast public statement about what they plan to do as a business, such as hey we loosing money so we going to stop loosing money by cutting production and holding or raising pricing, the next thing you know is the competitors are doing the exact same things. Companies have been doing this for a long time, they make statements and wait to see what their competitors do. If they follow or make similar public statement then they know they can follow their plan which is to raise pricing. Never once did they have to call one another. Our government is so stupid since they believe the only way to collude is to meeting in person and put it all in writing. Public statement is the best agreement you can have as a competitor since if the company makes those statement and them not do it then the share holder will be all over your ass.


     


    As a person who negotiate deals all the time, I see nothing wrong in the apples conversation, it is part of the negotiation tactics, you tell all your suppliers that the other guys is winning to do something are you willing to do the same, sometimes it is true and some time is a bluff just to see if you can get one guy to roll over. I said this before, companies are free to sell product at what ever price they want, since when is it illegal to raise your pricing, consumer will vote with their pocket books if the price is too high they will go elsewhere. The Recording industry learn this lesson the hard way, they gave the public garbage at a high price so the public stole only the pieces they like since they could not but it at any price.


     


    I personally think this is a dog and pony show by the DOJ. 

Sign In or Register to comment.