DOJ Points to Draft Email as Proof of Apple Ebook Price Fixing

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The U.S. Department of Justice showed an email from Steve Jobs as evidence that Apple pushed publishers into forcing Amazon to move to an agency pricing model as part of its plan to artificially raise book prices. The message in question, however, was a draft that turned out to be very different from the final version he sent to Senior Vice President of Software and Services Eddy Cue.

DOJ: Email shows intent to control ebook prices. Apple: Nope.DOJ: Email shows intent to control ebook prices. Apple: Nope.

In reference to the move to an agency model where publishers set book prices instead of retailers, the draft version of the email from Mr. Jobs stated, "I can live with this as long as they move Amazon to the agent model too for new releases for the first year. If not, I'm not sure we can be competitive."

That line, according to the DOJ, backs up its argument that Apple was actively working to help manipulate the ebook price market with publishers, according to AllThingsD. The problem with that argument is that the message was never sent, and Apple went so far as to submit evidence showing as much.

The email that Mr. Jobs actually sent to Mr. Cue told a different story:

I can live with this as long as they also agree to the other thing you told me you can get: The retail price they will set for any book will be the LOWER of the applicable 'iTunes' price below OR the lowest wholesale price they offer the book at to anyone else, with our wholesale price being 70% of such price. For example, normally our retail price for a $26 book will be $12.99 and we will pay 70% of that, or $9.10. However, if they offer the same book to Amazon for a wholesale price of, say $12.50, then our retail price for the same book shall be set at $12.50 and we will pay 70% of that price for the book.

Apple, along with Penguin, MacMillan Simon & Schuster, HarperCollins, and Hachette Book Group were all accused of working together to push ebook prices higher by forcing retailers into using what's called an agency pricing model where publishers set book prices instead of stores. All of the publishers eventually settled out of court instead of taking their chances at trial, while Apple has held strong that it did nothing wrong and is the only company from the original case that's fighting the DOJ in court.

The DOJ had hoped to bolster its case against Apple with the apparently damning email, and could still say it shows the company's intent even though it wasn't ever sent. With the actual message in evidence now, too, the agency may have a more difficult time using it to help make their case, especially since Penguin CEO David Shanks backed up Apple's claims when he testified last week.

Mr. Cue is scheduled to take the stand on Thursday where the DOJ will likely focus on establishing him as the point man for Apple's grand plan to control ebook prices. Apple will continue to assert that it wasn't interested in the types of deals publishers had with other retailers and instead only wanted to ensure that it was able to offer competitive prices through its iBookstore.

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Without Steve Jobs here to say what his intent was in the draft email the DOJ is speculating as to whether or not he actually wanted publishers to force Amazon into selling books at higher prices. Since the final version of the message was entered as evidence as well -- and Eddy Cue will be testifying today -- Apple is in a good position back up its claims that it didn't care about the deals publishers made with other retailers.

Since the DOJ is focusing on Mr. Cue as the man behind the conspiracy with publishers to artificially raise book prices, today should be a pretty interesting day in the courtroom. His testimony will likely be critical to Apple's case and the DOJ will do what it can to get him to say what they need to support their collusion claims.

Bring your popcorn, because this could be a fun day in court.

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Comments

skipaq

This DOJ is proving itself to be incompetent. The judge should throw out if that is their smoking gun.

jameskatt

The DOJ Lawyers are purely evil.  They are so obviously fabricating a lie.  They are so obviously distorting the truth.  They are delusional.

daemon

Skipaq, Jameskatt:

It’s pretty clear from his emails that Steve Jobs intended to fix prices for ebooks.

I honestly don’t see how you two can say such things.

skipaq

The draft email proves nothing beyond a thought. I have written many drafts that were never sent after reading them back to myself or someone else. Mostly they were revised because they didn’t accurately say what I intended.

If you read the email that was actually sent, what is emphasized is getting an equal “wholesale” price at the least. That would in no way set the retail price for everyone at a fixed level. Amazon could still continue to sell at a loss. Would you be happy to have your wholesaler sell the same product to your competition for less? Or would your negotiate the price down to what others are paying?

The DOJ is in way over its’ head if this is the best they have.

daemon

Skipaq, let’s imagine Steve Jobs kept a diary. And in that diary this version of the email that he sent out appears. Do you think that doesn’t show intent? Cause there’s more than one US Judge who would disagree with you.

skipaq

daemon, no. Intent implies doing so when opportunity is presented. The fact is he sent a different message when the opportunity arose. Remember Eddie Cue did the negotiating. The draft was not sent; so the DOJ has not even established a connection between the draft and those negotiations. They have failed with this line of evidence to prove collusion to fix prices. A piece of non-communication is not collusion.

Besides intent is not the same as action. Imagine this: You notice a security weakness at a bank. You make a note of how you use this opening to rob the bank in your online dairy. The NSA turns the info over to the DOJ. But you never actually rob the bank. Should you be found guilty of bank robbery?

Maybe the DOJ has more evidence; but thus far all they have is a draft email of someone they cannot question. Jobs did not send that draft. He did not negotiate. He wasn’t even CEO at the time. The publishers denied collusion. Amazon’s testimony didn’t help the DOJ. This imaginary case should be thrown out if the DOJ doesn’t present something better.

daemon

@skipaq: Hey would you look at that, Apple found guilty. I wonder how much those emails impacted the credibility of Eddie Cue on the witness stand. I think Sam Gustin at Time wrote about it.

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