Apple Seeks To Block Ebook Settlement Between DOJ And Publishers
In April, the Department of Justice sued Apple and five book publishers for allegedly conspiring to increase the price of bestselling ebooks from Amazon's $9.99-per-download rate.
Apple and two publishers -- Macmillan and Penguin -- are fighting the charges, while three other publishers -- Hachette, HarperCollins, and Simon & Schuster -- have agreed to a settlement. The proposed deal requires those three to immediately end their contracts with Apple.
This week, Apple filed papers asking U.S. District Court Judge Denise Cote to block the agreement between DOJ and the three publishers, arguing that it "penalizes Apple in a manner that is inconsistent with the public interest and the law."
"Without Apple’s consent and without a trial, the proposed judgment automatically terminates Apple’s agreements," the company says in papers filed in federal court in New York. The company adds that such a result is "not justified by proven facts, and has been overwhelmingly opposed by the public."
The messy case dates to April, when the DOJ filed a civil antitrust lawsuit alleging that Apple and the publishers masterminded a plan to end Amazon's pricing by forcing the retailer to accept a "wholesale" model rather than the "agency" model it previously used. The agency model involves publishers setting prices and giving commissions to retailers.
By contrast, the wholesale model allows retailers to set whatever prices they wish -- which in Amazon's case resulted in deep discounts. (Some observers have speculated that Amazon sold ebooks at a loss in order to monopolize the nascent market for digital books.) An industry-wide shift to the agency model obviously benefited Apple, because otherwise the company would have had to price bestsellers at the below-cost rate of $9.99 per download in order to compete with Amazon. Apple said in an earlier round of court papers that it negotiated deals one-on-one with publishers.
In its papers filed this week, Apple reiterates its stance that it did nothing wrong and shouldn't see its contracts canceled by a court before trial. "There have been no findings here that could warrant pre-trial termination of contracts that Apple contends are perfectly legal," the company argues.
Apple also notes that other players and industry observers -- including Barnes & Noble and the Authors Guild -- are siding against DOJ in this battle. "The proposed settlement has generated a firestorm of criticism. Everyone from a United States Senator to authors to publishers to retailers big and small to readers have delivered the same message to the Antitrust Division: this decree does not serve the public interest and poses a significant threat to future competition."