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Posted at 08:25 AM ET, 06/25/2012

DOJ vs. Apple, e-book publishers: Dispute heats up


Apple chief executive Tim Cook walks off stage at the Apple Developers Conference in San Francisco on June 11. (Paul Sakuma - AP)
NEW YORK — The Justice Department’s price-fixing lawsuit against e-book publishers and Apple will go to trial in June 2013, setting up a long legal struggle sure to reverberate across the nascent digital publishing market.

Apple has maintained that it did no wrong and argued to a federal judge last Friday that it wants a speedy trial to defend itself. The Silicon Valley giant is joined by McMillan and Penguin Group in fighting Justice’s suit. HarperCollins, Simon & Schuster and Hachette Book Group settled with Justice last April.

Some consumer groups have defended Justice, saying Apple and publishers wrongly colluded to fix prices — which is illegal and sure to hurt consumers in the end, even if it created an alternative option to Amazon’s Kindle e-reader store.

But Apple and the remaining two publishers have argued that Justice’s antitrust charges will have the unintended effect of deterring new competition to a market dominated by what they described as a bully in the marketplace. Amazon has 60 percent of the e-books market and sets prices for mainstream titles as low as $9.99.

Justice quoted the late Apple founder Steve Jobs as saying he wanted to create a “real mainstream e-books market at $12.99 and $14.99.”

“We want an early trial and we strongly feel that we did not do anything wrong,” Apple attorney Daniel Floyd said during a preliminary trial at the U.S. District Court of the Southern District of New York. “The entire process creates a cloud, or negative impact on the business.”

U.S. Judge Denise Cote set the beginning of trial at June 3, 2013 — which she was a compromise. Justice had requested for the trial to begin near the end of 2013.

The one-year stretch could advance Amazon’s lead, rivals and authors groups have complained.

Amazon rival Barnes and Noble argued this month that the Justice Department’s actions could lead to “higher overall average e-book and hardback prices and less choice, both in how to obtain books and in what books are available.”

Publishers and Apple, according to the Justice suit, colluded to create a new agency model of selling books at higher prices on the iTunes store.

Some consumer advocates have come to Justice’s defense. They say that Apple and publishers, with their arguments for so-called “agency pricing,” are wrong-headed to fight the suit. Amazon might be the dominant player, but the way to create more competition isn’t through what appears to be price-fixing, according to Mark Cooper, a director at the Consumer Federation of America.

“The competitive structure built on a cartel agency pricing model increased the price to consumers and the profits of colluding publishers and selected brick and mortar retailers,” Cooper said. “There are no indications that the book market performed better in the aggregate under the cartel agency model than it would have if the offending practices had not been present.”

Related:

DOJ probes cable firms for allegedly quashing Netflix, Internet competition

Google search draws antitrust scrutiny of European regulators

By  |  08:25 AM ET, 06/25/2012

 
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