Apple Ebook Price Fixing Trial: Amazon had the Same Deal

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Apple's trail over conspiring to artificially raise ebook prices has focused on the deals the iPhone and iPad maker struck with publishers, and the Department of Justice has made a point of focusing on wording that ensured other retailers couldn't sell books at a lower price. That contract clause doesn't seem to be a big deal for Amazon as far as the DOJ is concerned, however, because it turns out the online retailer struck very similar deals with publishers -- including the "most favored nation" clause that's getting Apple in hot water.

Amazon landing the same terms as Apple with publishers doesn't help the DOJ caseAmazon landing the same terms as Apple with publishers doesn't help the DOJ case

Apple, along with Penguin, MacMillan Simon & Schuster, HarperCollins, and Hachette Book Group were all accused of conspiring to push ebook prices higher by forcing retailers into using an agency pricing model. The agency model lets publishers set book prices instead of stores, which the DOJ said ultimately forced retailers into charging more.

All of the publishers eventually settled out of court instead of taking their chances at trial leaving Apple to stand alone insisting it did nothing wrong. Penguin CEO David Shanks did, however, back up Apple in court on Tuesday saying that the company seemed indifferent to the ebook market and was willing to walk away if it couldn't strike deals with publishers.

The DOJ, however, characterized Apple as the ringleader in a conspiracy to force book prices higher and take control of the market from Amazon.

Amazon was using the traditional wholesale model to buy and sell books, which gave the online retailer the ability to sell books at a loss and undercut its competition. When publishers moved to an agency model where they set the retail price for books, Apple was on board and Amazon eventually renegotiated its contracts, too.

Amazon's Vice President of Kindle content, Russ Grandinetti, testified on Wednesday that the company negotiated the same terms as Apple to ensure it could stay competitive, according to AllThingsD.

"We were not prepared to sign a contract for whatever length of time this was going to be, where we weren't confident we could not be further discriminated against by these publishers," he said.

Amazon had hoped to keep its contracts with publishers out of the trial, but now that they're included, it brings into question why the MFN clause is bad for Apple but fine for Amazon, especially since both companies said they included it to ensure they had an equal chance to compete in the book market.

Apple's legal team will no doubt focus on Amazon's contracts to help bolster its argument that there never was a price fixing conspiracy and that it wasn't using its contracts to force other retailers to raise their prices. If they do their job well and convince the court that the MFN clause isn't a big deal, the DOJ will have to reassess its tactics and focus on other parts of its case.

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Comments

jfbiii

The “big deal” IMO is that Apple spends far too little of its cash cache in Washington.

webjprgm

Isn’t the main deal that switching to an Agency model meant publishers could raise the prices? Specifically, that they DID raise the prices. Had the prices not changed I don’t think there would be a DOJ case right now, regardless of what the contracts say.

The “most favored nation” clause just means that the publishers can’t give a better price to a competitor, right? It doesn’t mean that the competitors can’t charge more or less. It doesn’t do any price fixing.

The price fixing is that the publishers set the price rather than the retailer.

Theoretically various publishers could try to set their price lower than competing publishers to compete. I don’t know how that applies to books since you can’t get the same book from a different publisher but you could choose a different book.

Lee Dronick

I wonder how non-agency model is effecting the bottom line of publishers and writers.

Harvey Lubin

I put an old computer up for sale on Craig’s List, but the DOJ came after me because I set my own price, and it was too high. It’s a good thing that Craig’s List wasn’t charging a commission (agency fee) for me to sell my items, because they would have been charged with being co-conspirators. wink

FlipFriddle

Amazon’s pricing benefits no one but Amazon. I publish a small RPG and we use to sell through Amazon. To do so they require that you sell them books at the wholesale price like any other retailer. However, they do not agree to sell your book at MSRP, ever. When we saw our books for sale at pennies above wholesale price we pulled our products. All it was doing was screwing over all of our brick-and-mortar retailers (those that were left, anyway).

skipaq

You got that issue nailed, Flip.

geoduck

FlipFriddle
That’s the part of it that the DOJ doesn’t seem to get. Amazon was using tactics to drive brick and mortar bookstores out of the market. THEY were the one being anti-competitive.

Imagestealer

Pretty obvious to me that someone in your Department of Justice (SIC) has a hard on for Apple.

Being canadian, I am constantly amused at the goings on of your supposed Justice and Legal System, not that our is a whole lot better.

Imagestealer

Damn… Wish this comment system would let me edit.

James 1

What is wonderful is that amazon sells the same item at different prices in different countries here is a site comparing amazon sites across Europe http://www.huge-river.com I have been using for years that even graphs the differences!

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