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Apple to DoJ: I Know You Are, but What Am I?

By Richard Adhikari MacNewsWorld ECT News Network
May 24, 2012 3:32 PM PT

Apple on Thursday struck back against the United States Department of Justice's charges that it joined several major publishers in an effort to fix the prices of e-books.

Apple to DoJ: I Know You Are, but What Am I?

In a filing with the U.S. District Court for the Southern District of New York, Apple contended that the government's complaint against Apple is fundamentally flawed as a matter of fact and law.

"That's just a tactic," Yasha Heidari, managing partner of the Heidari Power Law Group, told MacNewsWorld. "It's just a way of trying to get away from the underlying merit of the case."

The Gist of Apple's Counterclaim

Apple insists that it did not conspire with anyone, was not aware of any alleged conspiracy by others, and never fixed prices. Instead, it individually negotiated bilateral agreements with book publishers that let it enter a new market segment, e-books, and compete there.

The company set a maximum price for e-books and required publishers with books in its iBookstore to match lower prices set on new releases elsewhere, but it did not reduce competition or fix prices because it acted as an agent, it said. Further, the price-matching requirement allowed exceptions for promotions, was not rigidly self-executing, and encouraged competition because publishers' titles could compete directly against each other at the retail level.

"The whole thing about antitrust law is, it's very complex, and once you get very big and powerful, you'll try to get around it," Heidari said. "The question is whether or not Apple is trying to get around it."

Room for One More

Apple further charged that the government is siding with monopoly rather than competition in bringing this case because it began with the false premise that an e-books market was characterized by robust price competition prior to its entry. Before 2010, there was no real competition, Cupertino insisted. Amazon dominated the market, Apple said, selling nearly nine out of every 10 ebooks and having nearly absolute power over price and product selection.

The entry of Apple spurred a growth in the number, range and variety of e-book titles and improved the quality of the e-book reading experience, according to the company. All these are evidence of a dynamic, competitive market, it claimed, stating that the U.S. government is only focusing on the increase in prices for a handful of titles.

Apple dismissed as absurd DoJ allegations that it conspired to eliminate retail price competition.

Three out of the five publishers -- Hachette Book Group, HarperCollins Publishers, and Simon & Schuster -- settled with the DoJ on April 11, the day the department filed suit.

Apple, Penguin and Macmillan continue to fight on.

Does Cupertino Have a Chance?

It's not clear whether Apple's argument will prevail.

"Once you get into the nitty-gritty, there will be some very interesting nuances," Heidari said. "It's a very nebulous area, so it's going to be very complex."

Further, the case has ventured into uncharted territory, attorney Craig Delsack told MacNewsWorld.

"We're talking now about licensing, not about products," Delsack explained. "It's one thing if you have a physical book and say you can't sell it for, oh, less than $20. But here we're talking about an agency model with respect to licensing fees."

Separately, Sharis A. Pozen, the acting assistant attorney general of the DoJ's antitrust division, who spearheaded the laying of charges against Apple, among other things, left her post the week of April 23. In a speech at the Brookings Institute April 23, she referred repeatedly to the case against Apple and the other defendants.

DoJ spokesperson Gina Talamona would not say if Pozen's departure was linked to the e-book price fixing case, nor would she comment on Apple's countercharges. "Please use anything from the press release, complaint or competitive impact statement in response to your questions," she told MacNewsWorld.

Apple did not respond to our request for further details.

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