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Apple claims US government sides with monopoly in e-book case

John Ribeiro | May 24, 2012
The U.S. government has sided with monopoly rather than competition in bringing a case of e-book price-fixing against Apple, the company said in a filing on Tuesday before a federal court.

Apple in its reply has denied conspiring with the publishers or of having or sharing a goal of restraining price competition as alleged by the DOJ.

The DOJ's lawsuit alleged that the late Steve Jobs, then Apple's CEO, approved of a new pricing model that would raise the price of e-books. "We'll go to [an] agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that's what you want anyway," he is quoted in court papers as describing his company's strategy for negotiating with the publishers.

"Throw in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99," Jobs wrote to one publishing executive during pricing discussions, according to the DOJ lawsuit.

In early 2010, the defendant publishers agreed to shift to a new pricing model called the agency model, where they set the prices for e-books, instead of retailers, the DOJ alleged. In an agreement with Apple, all new books would be priced at $12.99 to $16.99, according to the DOJ. Retailers lost their ability to compete on price and millions of e-books that may have been sold at $9.99 or lower were now sold at higher prices, DOJ said.

In its reply, Apple said that without the agency agreements, it would not have entered e-book distribution, given the circumstances of the business as it existed prior to its entry. It had already used the agency model in its App Store, including in sales of books through the store before the iBookstore was set up. But it did not seek to limit e-book retail price competition, did not reach an agreement to cause retail price competition to "cease" and did not agree that "retail eBook prices would increase significantly," it said in the filing.

 

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