Apple's Closing Arguments Concludes E-Book Price Fixing Trial

After slightly more than two weeks of litigation, USA v. Apple, Inc. concluded with closing arguments from Apple and the Department of Justice.

AllThingsD reports that Orin Snyder, Apple's lead counsel, closed out the trial with a slick Keynote presentation, as the company's lawyers have been doing throughout the trial.

At one point, the PowerPoint presentation the Government's lawyers were using failed to play audio, with the Judge noting that they weren't using a Mac.
"Apple did not conspire with a single publisher to fix prices in the e-book industry," Snyder said, arguing that the negotiations under scrutiny in this case were nothing more than "standard, lawful business activity." And the DOJ’s claim that they were more than that, a nefarious plot over which Apple served as ringmaster, is entirely unsupported. "All of the government’s evidence is ambiguous at best," Snyder argued, lambasting the DOJ’s case as one built on "word games and inferences."

Snyder's final slide shows an iPad with the text "It's time to close the book on this case".

The Department of Justice has argued that Apple was the "ringmaster" of a scheme to raise e-book pricing across the industry. The government says Apple convinced publishing companies to work together to set pricing above the $9.99 price point that Amazon was selling books at before the iPad came out. The DOJ's slide deck is available from AllThingsD as well.

U.S. District Judge Denise Cote is expected to have a final judgement within a few weeks. Both sides agreed to have a judge hear and decide on the case rather than present it to a jury.

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86 months ago
I love how our DOJ has time to waste suing Apple over something it never did, yet apparently does nothing when voters have to wait in line for 8 hours in Florida to cast a ballot, when states try to change voter registration rules two months before a national election and then try to eliminate early voting or limit the voting hours, when some states are trying to change how the electoral college votes are awarded from those states, when legislatures across the country are gerrymandering districts in a way to ensure that the popular vote won't decide the winner of an election.

Where is the DOJ when it comes to enforcing the ADA and FCC rules against companies like Apple, Netflix, Amazon, Vudu and others who resist making closed captions or subtitles available for those who are deaf or hearing impaired? There are so many things that the DOJ should be focusing on, and Apple is not one of them. This is the most ridiculous waste of taxpayer dollars I've witnessed since the $400 Pentagon toilet seat.
Rating: 12 Votes
86 months ago
It's mind-boggling how this case was ever brought. DOJ seems completely inept and clearly didn't do their research on this, didn't even understand what they were suing over.
Rating: 9 Votes
86 months ago
Love how it's embedded in flash

Rating: 9 Votes
86 months ago

I've read every piece of legal document available to the public and it is crystal clear that Apple (as much as I enjoy their products) conspired with the big publishers to increase e-book prices in a strategy to make amazon "play nice".
Nobody in their right mind can deny those facts exist.

I'm quite certainly in my right mind, and my friend, those facts don't exist.

It appears to me that Apple, understanding a dissatisfaction with the status quo on the part of the publishers, made a move to jump into the ebooks market in a powerful way.

That is not illegal, nor is it even immoral by any reasonable person's measure.

The publishers were dissatisfied with Amazon's $9.99 model to begin with. They were pursuing a strategy that would essentially have killed Amazon by refusing to offer top quality new releases in the ebook format at all. Barnes & Noble was pursuing an agency model with the publishers before Apple even entered the conversation.

The fact is that content creators (the publishers) were no longer interested in Amazon's model. Ebooks did not have the market power in 2009 that they do today. They would have killed the $9.99 price point no matter what.

Apple stepping in to support the (already in development) agency model simply gave the publishers a better alternative. Now instead of windowing their high profile titles, they could release them at a price point they were comfortable with in all formats.

Apple did not require that the publishers stop doing business with Amazon. They didn't require that Amazon stop selling ebooks for $9.99, or dictate the price that publishers could sell to other retailers. They simply said they wanted equal pricing so they could remain competitive.

In the end, the publishers told Amazon they were no longer interested in their model--which they were going to do anyway, in one form or another. Amazon chose to remain in the ebooks market and agreed to pay the prices the content creators were asking. This is not collusion, it is not conspiracy and it is not illegal.
Rating: 8 Votes
86 months ago
Only a hardcore "fanboy" would think apple did absolutely nothing wrong here.
They obviously conspired with the big publishers at driving up the e-book prices in such a manner that Amazon would either have to sign a new contract or be blacklisted by the major publishers.

That is illegal.
Rating: 6 Votes
86 months ago
Love how the Calendar shots have the stitched leather .. this wasn't done in Mavericks :D.
Rating: 6 Votes
86 months ago
If Apple used Amazon strategy of selling ebook, there would be no anti trust lawsuit. Buy books at wholesale and sell it at whatever price Apple desire.

Amazon strategy: LOSS LEADERS on the new releases and best sellers. Once in the door, a lot of customers will purchase the profitable books. Net result: Overall profits.

Amazon makes profits from selling ebook since the very beginning. Read this quote:

"When Amazon launched its Kindle device, it offered newly released and bestselling e-books to consumers for $9.99. At that time, Publisher Defendants routinely wholesaled those e-books for about that same price, which typically was less than the wholesale price of the hardcover versions of the same titles, reflecting publisher cost savings associated with the electronic format. From the time of its launch, Amazon's e-book distribution business has been consistently profitable, even when substantially discounting some newly released and bestselling titles."

Why Apple didn't want to use this wholesale/discount/loss leader strategy: The margin is very low because the market is very competitive. Some retailers will use discount to gain market share etc...If Apple prices the ebook too high, customers might price shop.

Apple strategy: how do I get my 30% margin? and at the same time stop Amazon from offering discount. How to make Amazon price be the same as Apple price and eliminate pricing competition?

And guess what? Apple did made that happen. Customers were screwed from the higher prices for new releases / best sellers.
Rating: 5 Votes
86 months ago

Only a hardcore "fanboy" would think apple did absolutely nothing wrong here.
They obviously conspired with the big publishers at driving up the e-book prices in such a manner that Amazon would either have to sign a new contract or be blacklisted by the major publishers.

That is illegal.

If you call people who dare to disagree with you "hardcore 'fanboy'", what does that make you?

And when you see "they obviously conspired", what you really mean is "there is absolutely no evidence of any conspiracy, or any cooperation".
Rating: 4 Votes
86 months ago
Love that the PowerPoint didn't work :lol:
Rating: 4 Votes
86 months ago

what if that company with 0% market share want

1) to eliminate retail price competition ("the prices will be the same") so it can effectively compete on price
2) guarantee 30% margin

and to get there, it needs at least 4 Major Publishers on board. And these 4 Major Publishers will only get on board if Apple could guarantee that they are not alone. In other word, 1 Publisher with 12% market share won't get Amazon to move away from $9.99 but 5 Publishers with 60% market share will be large enough that Amazon will have to raise the price of best sellers to $12.99 / $14.99.

DOJ evidence:

"You are absolutely correct: we've always known that unless other publishers follow us, there's no chance of success in getting Amazon to change its pricing practices."


Penguin David Shanks: "My orders from London. You must have the fourth major or we can't be in the announcement."

Apple Eddy Cue: "Hopefully this is not an issue but if it is I will call you at 4pm. It would be a huge mistake to miss this if we have 3."

"No change here, he is waiting for the others to sign. We have executables ready to sign but he wants an assurance that he is 1 of 4 before signing."

"Once previous two are signed, I will head to their offices to get this one signed."

1) Apple doesn't care about the retail price (as long as it's not excessive to the point where no one would want to buy ebooks). They don't mind if publishers want to sell at 9.99 or even less. Apple just wants to pay 70% of whatever the retail price is. In fact, Apple was clear that publishers cannot set the price of ebooks as high as paper books because there wouldn't be a market for it. Why don't you quote Eddy Cue's slide where he makes this point? Publishers could easily have just told Apple "no".

Some people seem to forget that Apple is primarily in the business of selling high margin hardware (iPhones, iPads, Macs, etc.). Their iTunes business is simply there to create more demand for Apple hardware products. That's why they kept trying to push music publishers to maintain LOWER prices, not higher prices. That's also why they warned publishers they can't price books more than $12.99 or $14.99 or there wouldn't be a viable ebook market.

After taking a 30% cut and paying overhead, Apple's profit margin is in the low single digits (this was again in one of the slides). In short, Apple has no incentive to drive UP the price of ebooks. They want to sell as many ebooks as possible so people would buy more iPads/iPhones/iPods.

2) MFN clause is used in many retail businesses by those with enough marketshare that wholesalers are willing to go along with the MFN clause. Considering the fact that Apple had 0% marketshare of the ebook business, and had not even released the iPad or any other normal sized ereader yet, and Amazon controlled 90% of the ebook market, Apple really had no leverage over the publishers and the publishers could have easily refused the MFN clause and froze Apple out of the ebook market completely.

Instead, the PUBLISHERS wanted to wrestle power away from Amazon and saw Apple as a means to do it. So, the PUBLISHERS agreed to the MFN clause in order to facilitate Apple's entry into the ebook market.

The publisher's tactic is similar to Amazon's $9.99 loss leader price strategy. Amazon is willing to sell certain books below their cost to build marketshare and bring customers in to buy other products from Amazon. An unstated motive is it also allows Amazon to bury their competition, i.e. Barnes and Noble and other ebook retailers who can't compete b/c they don't have the same cross-selling opportunities or scale as Amazon.

Similarly, the publishers knew Apple's MFN clause was a potential money losing proposition but the PUBLISHERS still decided it was good business strategy for THEM to give Apple the MFN clause because it would bring Apple into the ebook market and screw Amazon.

Did Apple want a MFN clause? Of course. Was Apple in position to force the publishers to give it to them? No. The publishers CHOSE to give it to them for their own business reasons. Apple was going to release the iPad with or without an iBook store. In fact, with the Kindle and Barnes and Noble and other ereader apps, iBooks and the iBook store is redundant.
Rating: 3 Votes

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