Apple Paints Itself Into Corner in Answer to eBook Class Action

| Analysis

In the latest development in Apple’s and its publisher partners’ eBook litigation, the Cupertino company in a legal filing Tuesday reiterated its denials that it “coordinated” with the publishers to raise eBook prices and “force Amazon to abandon its pro-consumer pricing,” but may have painted itself into a corner over “industry standard” eBook pricing.

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Apple and its partner publishers are currently facing two major lawsuits related to the introduction and pricing of eBooks on the iBookstore: one filed in April by the US Department of Justice and a class action commenced late last year. Apple’s filing Tuesday was in response to the class action complaint, although every move the company makes is watched closely by those involved in both suits.

In US lawsuits, a plaintiff lays out, paragraph-by-paragraph, the facts, issues, and conclusions as the party sees them. The defendant then responds, paragraph-by-paragraph, by admitting, denying, or claiming lack of knowledge to each claim. A defendant may also declare, although this is frowned upon in many jurisdictions as it is not officially part of the Federal Rules of Civil Procedure, that the document at issue “speaks for itself,” meaning that the document itself is completely self-explanatory and/or an explanation of the meaning of the document by a third party is not permitted.

The point of these complaints and answers is to identify facts and issues that are agreed upon, ensuring that only legal issues and facts that are genuinely in dispute proceed to trial or judgment. Almost always, parties will accept basic facts and procedural issues and deny or claim lack of knowledge on all other issues of law or more complicated facts.

Apple’s filing Tuesday is its answer to the class action plaintiffs’ complaint, a paragraph-by-paragraph response to the claims against the company. As is standard practice, Apple admits only the most basic and undeniable information, such as the fact that it opened the iBookstore in April 2010, but denies or claims lack of knowledge in almost every other area.

However, Apple makes liberal use of the “speaks for itself” response in reference to emails, news articles, and excerpts from Mr. Jobs’s biography, most of which discuss comments made by the late CEO. It is an interesting response by the company, especially considering that many of Mr. Jobs’s comments, in and of themselves, appear to be quite relevant to the conspiracy issue.

This includes an email from January 2010 in which Mr. Jobs clearly defines a $12.99 to $14.99 price point that specifically targets Amazon and suggests the necessity for all publishers to raise prices in order to create a “real mainstream eBooks market.”

As for the remaining claims, Apple unsurprisingly denies that Amazon’s Kindle “revolutionized the book publishing industry” or that, at the heart of the issue, the company “coordinated” with publishers to attack Amazon and raise eBook prices.

In a less certain area, however, Apple appears to have worked itself into a bit of a corner by denying that the $9.99 eBook price point was the “industry standard” prior to the company’s entry into the eBook market. This assertion is made despite the fact that, by Apple’s own admission several paragraphs later, Amazon, Barnes & Noble, and Sony all sold at the $9.99 price point and that Amazon was the “dominant eBook retailer” and wielded significant “market power,” which suggests that prices set by Amazon (i.e., $9.99) would have a significant impact on what would be considered industry standards.

Further complicating Apple’s position is its admission that the company felt that Amazon’s $9.99 price point resulted in a “negative margin” and that Apple “entered the eBook retail business…and that part of its motivation was to generate revenue and profits for the corporation and its shareholders and to avoid negative margins…”

The company goes on to deny that it sought to do this by “driving prices above $9.99” but the claims that a $9.99 price point was too low for a positive margin and that the company sought to sell books at a positive margin don’t mesh with a serious assertion that the company and publishers did not want prices to go up and reinforce the plaintiff’s claim that Apple had “strong incentives to help the publishers restrain trade and increase the price of eBooks.”

Along these lines, Apple also denied that the $12.99 to $14.99 price point that many eBooks under the agency model now sell at represents a “soaring” increase in price and the company claims that any potential class members have experienced no “real economic consequences” as a result.

Due to the nearly identical nature of the issues between the class action and DOJ lawsuits, Apple also asked the court to recognize that it is inequitable to allow both suits to proceed simultaneously and that any victory in favor of Apple in the DOJ suit should extinguish the claims of the class action plaintiffs.

While Apple’s community of supporters have rushed to the defense of the company, and some have rightly pointed out that, pre-iBookstore, Amazon may have held a monopoly on the eBook market, many of Apple’s arguments appear to be lacking and what was initially dismissed as a ridiculous case is growing stronger as more information becomes available.

It’s one thing for book publishers to individually decide to sell their products via the agency model at a higher price. It’s another thing entirely for a company such as Apple to “help” them come to this conclusion in unison. Regardless of the impact that the agency model had on Amazon’s marketshare, the potential breakup of a supposed monopoly is not justification for market conspiracy. 

U.S. District Judge Denise Cote, in denying Apple’s motion to dismiss the class action suit earlier this month, stated: “In short, Apple did not try to earn money off of eBooks by competing with other retailers in an open market. Rather, Apple accomplished this goal by [helping] the suppliers to collude, rather than to compete independently.”

[Image made with help from Shutterstock]

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Comments

greatgazoo192

I hope our modern legal system gives plaintiffs more choices than “by admitting, DYING or…”.  In paragraph 3 I think the word you want is denying. grin

Jim Tanous

I hope our modern legal system gives plaintiffs more choices than ?by admitting, DYING or??.? In paragraph 3 I think the word you want is denying.

Indeed, that would be quite severe. Although it would greatly reduce the congestion of lawsuits pending in the federal court system!

Thanks for catching that; the article has been corrected smile

TexasEric

Great article.  It would actually be better if the picture showed ‘painted into a corner’ as opposed to a person standing in a painted corner.  It is a shame the clearly incorrect picture detracts from the clearly thought out article…

vpndev

It would actually be better if the picture showed ?painted into a corner? as opposed to a person standing in a painted corner.

Ahh - positive space or negative space? It’s painted-into-a-corner if the paint is grey, and standing-on-painted-corner if the paint is white.The wall is grey, which suggests grey, to me.  The can looks grey inside however that could just be shadow so it isn’t definitive. What would decide it is the paintbrush but, puzzlingly, that is clean. Tricky, this iPaint.

Bryan Chaffin

It’s a can of gray iPaint…

Lee Dronick

It?s a can of gray iPaint?

The brush looks to have white pain on ferrule, but that could have been from the primer. Anyway it is all just nit picking and I understood the concept when I saw the graphic.

PSMacintosh

TexasEric, I hope you were trying to be funny….and not just home-improvement ignorant.
In any case, don’t be coming over to my house to help with painting—I don’t want someone who would actually STAND in the new paint or put their pail down in the paint!

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