DOJ defends its Apple lawsuit

After public complaints by Sen. Charles Schumer and others, the DOJ says it's not wavering in its lawsuit against Apple and five major US publishers.

The Justice Department’s 66-page response to the 868 (overwhelmingly negative) comments it received about its e-book price fixing case can be summed up in three words: take a hike.

In response to these and other public complaints about the lawsuit (see Sen. Charles Schumer), the Department of Justice, perhaps not surprisingly, staunchly defended its case against Apple and five major publishers, insisting they conspired to raise the prices of e-books.

The DOJ’s investigation into sharp upticks in e-book prices upon the launch of Apple’s iBookstore in 2010 “uncovered significant evidence that the seismic shift in e-book prices was not the result of market forces, but rather came about through the collusive efforts of Apple and five of the six largest publishers in the country,” according to a US federal court filing in New York.

(The Wall Street Journal reported that the DOJ’s suit claims “executives of the major book publishers met regularly in private dining rooms of upscale Manhattan restaurants to discuss how to respond to steep discounting by Amazon.com Inc.”)

“The Department stuck to its view that what matters most is that consumers be able to buy e-books at the lowest prices possible in free market competition and that Apple and five publishers colluded illegally in instituting the agency model,” writes industry newsletter Shelf Awareness. “The Department defended all of its proposed remedies, right down to its requirements of ‘logs of communications among publishers,’ federal review of any joint ventures and ‘antitrust counseling’ for publishing executives.”

In other words, the DOJ said it’s not wavering.

As reported in previous posts on the suit, three publishers – HarperCollins, Hachette, and Simon & Schuster – have agreed to settle the DOJ suit while Apple, Penguin, and Macmillan continue to fight the charges. The settlement with the first three publishers was opened to public comment, bringing a deluge of responses from individuals and groups including the Authors Guild, independent publishers, Barnes & Noble, literary agents, and Apple itself, which has long argued that the DOJ’s suit will endanger e-book retailers and distributors alike and result in Amazon’s market domination.

The DOJ called fears of an Amazon monopoly “speculative at best” and pointed out that Barnes & Noble had already captured part of Amazon’s e-book market share long before the agency model was introduced.

“In the pre-conspiracy competitive market, innovation, discounting, and marketing were robust,” the DOJ said in its response. “In contrast, the conspiracy eliminated any number of potential procompetitive innovations, such as 'all-you-can-read' subscription services, book club pricing specials, and rewards programs.'”

Not only is its suit legitimate, the DOJ asserted in its response, it’s also already reaped positive changes in the industry. Since the settlement was announced, “more companies are investing to enter or expand in the market and compete against Amazon, Apple, and other e-book retailers,” the DOJ claimed in its response, citing Microsoft’s investment in Barnes & Noble and forthcoming tablets from Microsoft and Google.

Adding insult to injury, the DOJ said much of the criticism it received on its proposed settlement “expressed a general frustration ...  from the evolving nature of the publishing industry – in which the growing popularity of e-books is placing pressure on the prevailing model that is built on physical supply chains and brick-and-mortar stores.”

The DOJ is resolute in its suit and proposed settlement, but we’re pretty sure this isn’t the last we’ll hear from Apple, either.

Husna Haq is a Monitor correspondent.