Apple has requested a trial in the antitrust case being pursued by the DOJ against it and two publishers. Three other publishers already settled with the DOJ, which believes that Apple and those publishers colluded to raise prices for ebooks.
“Our basic view is that we would like the case to be decided on the merits,” Apple lawyer, Daniel Floyd, told U.S. District Judge Denise Cote, according to Reuters. “We believe that this is not an appropriate case against us and we would like to validate that.”
The suit was announced in April after Apple and two of the five publishers being investigated refused to settle with the U.S. Department of Justice (DOJ). The DOJ accused the companies involved of forming a “cabal” to raise prices on ebooks after they entered into agreements with Apple that shifted pricing control away from retailers, notably Amazon) to publishers using the agency model.
In the agency model, publishers set prices and pay the seller, such Amazon, Barnes & Noble or Apple’s iBooks Store, a 30 percent cut for making the sale. That agreement was reached in the face of Amazon dumping books, including best sellers, below cost in order to gain share for its ereader Kindle platform.
Publishers were concerned that Amazon was eroding the value perception of their products with its retailing practices and accumulating too much power in the process. When Apple introduced its iPad, it got publishers to agree to the agency model with contracts that included a clause stipulating that the publishers not sell their wares through other retailers for less, a clause that has been nicknamed the “most favored nation” clause, or MFN.
Virtually overnight, prices on ebooks rose by $2-$3 on average, setting off alarm bells at the DOJ. Those alarm bells led to an investigation into the deal between the six companies, which led to the settlement with some and the lawsuit against Apple, MacMillan, and Penguin, the two publishers who didn’t settle.
For its part, Apple said that its deal with publishers fostered competition and was an effort to break what it called Amazon’s monopoly. In a statement, the company said:
The DOJ’s accusation of collusion against Apple is simply not true. The launch of the iBookstore in 2010 fostered innovation and competition, breaking Amazon’s monopolistic grip on the publishing industry. Since then customers have benefited from eBooks that are more interactive and engaging. Just as we’ve allowed developers to set prices on the App Store, publishers set prices on the iBookstore.
The settlement with three of the publishers eliminates the MFN clause for Apple and returns to Amazon the power to dump books. Apple and the holdout publishers have said they will fight it out.