Apple, E-Books, Price Fixing, the Department of Justice, and the DOJ (Dimwit Ole Judge)

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Apple, E-Books, Price Fixing, the Department of Justice, and the DOJ (Dimwit Ole Judge)

The Department of Justice has been declared the winner in the lawsuit against Apple and those big megalithic publishers who tried to prop up an ebook industry Amazon is keen to take over. (One must admire Amazon in that greedy American take over the world way. I will someday write a post entitled, Amazon! O Great Behemoth! Adoration and all my money are yours! Soon will be the day we are all in your thrall.) The DoJ fought this brave battle in the name of ebook readers everywhere, with the same logic behind the Met Life tv commercials wherein Lucy tells her insurance agent everything should cost a nickel. “Five cents. Everything should be five cents.” DoJ would argue this simplifies the case, and isn’t it easier to understand simple things?

Now, until Amazon puts the rest of the bookstores out of business – remember the Amazon/Mommy and Me diaper wars? – you can enjoy Amazon’s discounted ebooks, especially on their proprietary Kindle platform.

This will all turn to tears when Amazon is the only game in town. Watch how quickly the benign monopoly turns Scrooge, and you pay dearly for the lack of competition. Once the industry is in tatters, the DoJ can sue the monopoly, but there will be no alternatives left to turn to. Frankly, it is a little surprising Apple didn’t just shutter the iBookstore. Not iTunes, just the iBookstore wing. Apple revenue from ebook sales must be a relatively inconsequential bit of their $billion$ bottom line. I suppose it’s still worth the trouble as the supplier of ebooks to the iPad and other iOS devices. (NB: Apple today @ $492.89 I considered buying Apple at $45. Wife bought it at $90, which I told her was way too high. I then shrewdly bought at $125.)

But really it’s not all doom and gloom. Aside from the shortsightedness of the DoJ this is just growing pains. Technology smashing headlong into reading lamps, comfortable chairs, carpet slippers, and pipes. Read up on US vs Apple. One day it will be in your children’s digital reader core curriculumn texts.

The legal beagle Bob Kohn and I happen to be on the same page in the Apple case. Kohn attempted to file many briefs in the case as a friend of the court and was routinely shut down by Judge Cote. She might listen to his latest shot. This news appeared in the publishing news by industry newsletter Publisher’s Lunch:

Bob Kohn filed with the US District Court indicating his intention to appear in opposition to final entry of the Federal ebook pricing settlements with Macmillan and Penguin. The new wrinkle to avoid being dismissed as not having standing in the matter is that Kohn objects as one of the many eligible consumers affected by the settlement.
His primary intention is to reassert the simple but sensational argument that Judge Cote ignored the most important element of the entire ebook pricing saga: “Amazon’s below marginal cost pricing” of ebooks prior to the launch of the agency model. That argument is the sole focus of Kohn’s 27-page brief. It opens: This Court made a fundamental error of law when it ruled that an examination into Amazon’s e-book pricing practices prior to April, 2010 was not relevant to the Court’s inquiry in this case and its related actions.” Ultimately, “unless this Court engages in an inquiry into the economic consequence of Defendants’ conduct in relation to Amazon’s below marginal cost selling of e-books—perhaps through an evidentiary hearing on the matter–this Court cannot intelligently approve the Settlement.”
Kohn’s legal reasoning is that, “if Amazon was engaged in predatory pricing, Defendants’ conduct could not have contravened the Sherman Act.” Kohn notes to us, “The Supreme Court has repeatedly ruled that conduct that is procompetitive or which promotes efficiency in the operation of a market is a perfect defense to even literal price fixing.” With the latest filing, he says his “objective is to get Judge Cote to explain herself and appeal if necessary.”

Nutshell: Despite the fact the “Agency Model” for selling manufactured goods in not illegal and is used in other industries quite effectively, it’s employment by Apple in order to level the playing field with Amazon was construed as collusion with those publishers to raise ebook prices.

Apple and Simon & Schuster have appealed. (S&S is only appealing that the ruling handed down to Apple penalizes S&S beyond the penalties S&S and the DoJ already agreed in S&S’s negotiated settlement. Hey – isn’t that double jeapordy? Or dirty pool?)

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