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Apple will fight the DOJ

Apple wants the anti-trust case filed against it by the DOJ to be decided 'on the merits.'

By Husna Haq / April 19, 2012

The Department of Justice claims that Apple and five major publishers fixed e-book prices and that the price-fixing reduces industry competition.

Martin Oeser/dapd/AP

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We’re not entirely surprised that Apple is taking on the Department of Justice.

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Apple announced Wednesday it will go to trial to fight an antitrust lawsuit the DOJ filed against it and five major book publishers accusing the group of price-fixing electronic books.

"Our basic view is that we would like the case to be decided on the merits," Apple lawyer, Daniel Floyd, told U.S. District Judge Denise Cote, as reported by Reuters. "We believe that this is not an appropriate case against us and we would like to validate that."

The antitrust lawsuit alleges Apple and five publishers, including HarperCollins, Hachette Book Group, Macmillan, Penguin Group Inc., and Simon & Schuster Inc., colluded to fix e-book prices, as we reported earlier this spring. The DOJ’s concern is that this fixed pricing model, adopted by five of the big six publishers, has reduced competition in the e-books industry and raised e-book prices for consumers.

So far, HarperCollins, Hachette, and Simon & Schuster have signed settlements with the DOJ. But Apple and the remaining two publishers, Macmillan and Penguin Group, appear intent to defend their actions in court.

In a statement to The Los Angeles Times, Apple spokesman Tom Neumayr said, “The DOJ's accusation of collusion against Apple is simply not true. The launch of the iBookstore in 2010 fostered innovation and competition, breaking Amazon's monopolistic grip on the publishing industry.”

As we explained in an earlier post, there are two competing models for distributing books: the wholesale model and the agency model. Under the wholesale model, a publisher sells its goods to a distributor for a fixed price and the distributor is free to decide the actual price for the public. Under the agency model, publishers set the retail price and the distributor gets a fee.

But, as Wired’s Epicenter blog explains, “wholesale pricing causes two problems for publishers: it gives market leaders (read: Amazon) disproportionate negotiating power, and makes it possible to use heavily discounted e-books to boost sales figures, capture market share and sharply undercut sales of printed books.”

That, in short, is why Apple says it is fighting the suit. The DOJ, meanwhile, has promised it would pursue the case against Apple vigorously to keep the e-book market “open and competitive.”

Stay tuned; Judge Denise Cote scheduled the next hearing for June 22.

Husna Haq is a Monitor correspondent.

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