Penguin Backs Apple in Ebook Price Fixing Trial

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Penguin may have settled out of court in the Department of Justice ebook price fixing trial Apple is dealing with, but that hasn't stopped the publisher from backing the iPhone and iPad maker on the stand. Penguin CEO David Shanks took the stand on Tuesday to say that Apple was fine if negotiations didn't pan out and was willing to stay out of the ebook selling space, contradicting the DOJ's claim that Apple was aggressively pushing to control pricing in the market.

Penguin CEO: Apple didn't care if ebook negotiations fell apartPenguin CEO: Apple didn't care if ebook negotiations fell apart

According to Bloomberg, Mr. Shanks testified,

It was fairly clear that they could take or leave being in the book business. If they couldn't get it on their terms, they weren't going to take the jump into being in books.

An Apple attorney that participated in the ebook contract talks backed up Mr. Shanks when he took the stand and testified that Apple was "indifferent" to the pricing model publishers chose to use.

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. Apple, however, held strong that it did nothing wrong and is now the only company left squaring off against the DOJ.

Mr. Shanks also called the negotiations with Apple "typical," and that Penguin considered using the agency model with Apple while maintaining its existing deal with Amazon where the online retailer set its own book prices. Sticking with that agreement, however, would've let Amazon continue to sell books at a loss and undercut the competition.

The DOJ contended that Apple spearheaded an effort to force the agency model on retailers, allowing publishers to take control of book prices and artificially drive costs up. Apple's legal team argued that the company was negotiating with each book publisher independently and was unaware of any plans on the part of the companies to manipulate ebook prices.

Another point the DOJ targeted was the "most favored nation" clause in Apple's contracts that prohibited retailers from selling ebooks at prices that undercut the iBookstore. While the DOJ said that was a move to force ebook prices up, Apple argued it was actually a way to ensure that it could match the lower prices competitors were charging for the same titles.

Apple's Senior Vice President of Internet Software and Services Eddy Cue is scheduled to take the stand next week on June 13. The DOJ will likely try to use his testimony to back up its claims that he was instrumental in a plot with publishers to raise book prices, while Apple will try to show its iBookstore negotiations were no different than its efforts to get record labels on board when the iTunes Store launched.

Odds are that the other publishers will offer testimonies in line with Mr. Shanks since saying otherwise would contradict their own position that they didn't collude to raise book prices.

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The DOJ is saying Apple orchestrated a scheme to raise book prices, but Apple and Penguin are saying otherwise. This trial will likely play out like a soap opera with plenty of dama, and if Apple should lose, the drama will continue because it's a safe bet an appeal will happen.

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I appreciate the blow-by-blow nature of your coverage. It is a drama and I am enjoying it playing out everyday with a brief wrap-up of the testimony.

Who will win? What are the appeal angles? How will it affect other media that Apple provides and other media providers? The 21st century is taking shape here.


Apple is being treated as if they had a monopoly and they abused their position to force everyone into higher prices. It’s a rather ridiculous argument, since at the time Apple hadn’t even sold ONE ebook and had zero leverage.

This sort of reminds how (anti-Apple) people were accusing Apple of abusing their position in digital music to force music producers into the 99 cent pricing model - the fact of the matter was, that agreement was set in place before Apple sold a single song.

What happened there? The music industry allowed Amazon and others to sell music DRM free while forcing Apple to continue to lock iTunes down in an attempt to force Apple into a tiered pricing model. The music industry got what they wanted and the price of popular songs went up 30%. Explain to me how that is not the same that the DoJ is accusing the book publishers of doing?

It seems to me that Apple is merely a target for attention mongering. There are so many examples of this over the past couple of years it’s become a joke.


Interesting perspective/history, mj.

Jeff, I agree with ctopher, your work is written well and is a pleasure to read. Neither wasted words nor subjective opinion seems your style.

Lee Dronick

When I first saw the headline my mind flashed on the actor Burgess Merideth as the Penguin in the Batman TV series.

So what happens if Apple wins?


I just don’t get the DOJ. All Apple seems to have done is say “Hey book sellers, set a price we can agree to…”

Does the DOJ expect the sellers of digital things to lose money just so buyers can pay the least price possible ?

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