The DOJ’s half-baked explanation of Apple’s role in the e-book case

The Justice Department is pouncing on statements by Apple like “aikido move” and “trounce Amazon” to prove its case that Apple was the hub of a illegal conspiracy to fix the price of e-books.
While the statements sounds serious, the government’s overall explanation of Apple’s role in the conspiracy is far from convincing.
The “aikido” comments appear in a court filing that coincided with a long-expected announcement that the government is suing Apple and book publishers for antitrust violations.
The filing instead relies on circumstantial evidence like frequent phone calls and lunches between executives, as well as the publishers’ common concern over Amazon’s $9.99 e-book pricing.
While this might or not be evidence of a conspiracy among the publishers, the government’s explanation for why Apple participated is far-fetched at best.
According to Justice:

  • “Apple was motivated to ensure that it would not face competition from Amazon’ s low-price retail strategy.”
  • “Apple soon concluded, though, that competition from other retailers – especially Amazon – would prevent Apple from earning its desired 30 percent margins on e-book sales.”
  • “[The contract] was designed to protect Apple from having to compete on price at all, while still maintaining Apple’ s 30 percent margin.”

In other words, Apple orchestrated the entire conspiracy to make sure Amazon didn’t undercut its e-book profits.
Really? Keep in mind that Apple had $108 billion in sales last year and that the vast amount of those came from devices like the iPhone. Meanwhile, the entire e-book market was reportedly worth $878 million in 2010 according to BookStats (Apple’s marketshare is reportedly 10 percent.)
e-Books are a big deal to publishers but to a company like Apple they are insignificant. Saying that Apple created a conspiracy to protect its e-book margins is like suggesting that it would be worth Ferrari’s time to corner the market for tricycles.
The government’s explanation is half-baked but that doesn’t mean that Apple had no reason to enter a conspiracy. It’s possible, for instance, that Steve Jobs wanted to blunt Amazon’s rise into the tablet market — this is precisely what lawyers in a related class action suit are arguing.
But given the government’s strange argument, it’s not surprising that Apple is digging in for a court fight.
Three publishers have settled the suit while Penguin and Macmillan will push on. State governments are also suing on the grounds that alleged price-fixing cost readers $100 million.

DoJ warning means one thing: E-book prices are coming down

The ultimate outcome of the Department of Justice’s case against Apple and five major book publishers over alleged price fixing and collusion in e-books is unknown, but it seems obvious that prices are likely to go down — and that could be a good thing for publishers.

Did Apple conspire with publishers to keep e-book prices high?

A class-action lawsuit alleges that Apple conspired with the book industry to implement the “agency model” of pricing, which has kept e-book prices high. But was this an actual conspiracy, or just an attempt by Apple and publishers to compete with Amazon’s dominance in the market?

Where to watch the Murdoch testimony live online

Members of the U.K. parliament will be grilling Rupert Murdoch and his son James Murdoch about the phone hacking scandal today, and they will surely also have some tough questions for Murdoch’s former News International executive Rebekah Brooks. The full-length testimony will be streamed online.

Suit Alleges Apple in Bed With the Mafia


In a bizarre story over at Ars Technica that seems like the plot of a terrible mafioso movie, a man named Gregory McKenna is claiming that Apple (s aapl) knowingly colluded with the Mafia (and various governmental agencies) to help them threaten him with death via his iPod mini. According to McKenna, it is apparently fairly standard practice for Apple to add receivers and transmitters to its portable media players as a special service for organized crime.

Apple attracts its own fair share of wacko legal action, but this one is so intricate in its level of detail that it deserves a closer look, if only to admire the craftsmanship. McKenna believes that not one, but two separate iPods contained Mafia bugs. One, a Shuffle he picked up on eBay (s ebay), makes a little sense, since it would be easy to tamper with the hardware after the fact, if the Mafia was really committed to doing so. Read More about Suit Alleges Apple in Bed With the Mafia