Apple denies e-book price fixing to beat Amazon

FILE - In this Oct. 19, 2009 file photo, the Apple logo is seen on an Apple store in San Francisco. Investors seem to think you want an iPad more than oil, as Apple Inc. became the most valuable company in the United States, surpassing Exxon Mobil Corp. on Wednesday, Aug. 10, 2011. (AP Photo/Russel A. Daniels, File) Russel A. Daniels

Russel A. Daniels
(CNET) Apple is fighting back against allegations that it has been involved in e-book price fixing to counter Amazon's dominance in that space.

In a court filing obtained by PaidContent yesterday, Apple argues that any claim that it views Amazon and the Kindle e-book store as a threat is nonsense.

Here's what Apple had to say in the court filing:

"Nor does this 'Kindle theory' make sense on its own terms. For example, if Amazon was a 'threat' that needed to be squelched by means of an illegal conspiracy, why would Apple offer Amazon's Kindle app on the iPad?

"Why would Apple conclude that conspiring to force Amazon to no longer lose money on eBooks would cripple Amazon's competitive fortunes? And why would Apple perceive the need for an illegal solution to the 'Kindle threat' when it had an obvious and lawful one which it implemented--namely, introducing a multipurpose device (the iPad) whose marketing and sales success was not centered on eBook sales?"

It's a compelling argument. Apple has historically not played nice with competitors. And its willingness to allow its hardware customers to read e-books either from iBooks or through some other service might help the company in the event it's dragged into a Justice Department lawsuit.

But even if Apple clings to that defense, it's worth noting what Steve Jobs told his biographer Walter Isaacson before his death. According to Isaacson, Jobs acknowledged that he had a plan to take down Amazon in the e-book space, and he understood that it would mean higher e-book prices.

"We told the publishers, 'We'll go to the 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," Jobs told his biographer. "They went to Amazon and said, 'You're going to sign an agency contract or we're not going to give you the books.'"

That agency contract is widely viewed as the reason e-book prices have gone up. The agency model eliminated wholesale pricing, which gave Amazon the leeway it needed to reduce e-book prices. Now, the same titles are dramatically more expensive than they had been, prompting government regulators to take a deep look at the industry.

Still, the U.S. Justice Department has not yet filed a formal antitrust lawsuit in the e-book space. Earlier this week, The Wall Street Journal reported that a lawsuit was coming down soon, but it didn't know when.

If the Justice Department does, indeed, file the suit, it would follow another brought against Apple and a group of publishers in the U.S. District Court in Northern California last year. The plaintiffs argued that the agency model pushes e-book prices up, and requested restitution and damages from the defendants.

This article first appeared at CNET with the headline "Apple: Kindle is no 'threat' in b-book market."

  • Don Reisinger

    Don Reisinger is a technology columnist who has covered everything from HDTVs to computers to Flowbee Haircut Systems. Besides his work with CNET, Don's work has been featured in a variety of other publications including PC World and a host of Ziff-Davis publications.

    Don writes product reviews for InformationWeek and Computerworld, and is a regular contributor to Byte and Switch. You can visit his personal site at DonReisinger.com or email him at CNETDigitalHome@gmail.com.

Comments