The Wall Street Journal reported earlier this week that the Department of Justice is investigating Apple and major book publishers over claims that they fixed prices on electronic books prior to the 2010 release of the original iPad — attempting to counter Amazon’s effort to reduce e-book prices in long-term interest of its Kindle business.
So what does Apple say in response?
The same allegation surfaced previously in litigation against Apple and those publishers, and as it happens, Apple lays out its preliminary defense in a recent filing in that case. In short, Apple says there was no conspiracy, and it doesn’t see the Kindle as much of a threat. (Apple’s filing was first spotted by PaidContent.)
The original complaint alleged that Apple believed it was necessary to enter the enter the e-books market and change the industry pricing structure because Apple “viewed Amazon and its Kindle platform as a long-term threat to its dominant position in the sale and marketing of mobile devices.”
Apple responds in its March 3 filing that “a supposed belief that a market must be entered for competitive reasons hardly shows a ‘conscious commitment’ to ‘achieve an unlawful objective’ of raising prices to uncompetitive levels by conspiracy or otherwise.”
The Apple filing continues …
“Nor does this ‘Kindle theory’ make sense on its own terms. For example, if Amazon was a ‘threat’ that needed to be squelched by means of an illegal conspiracy, why would Apple offer Amazon’s Kindle app on the iPad? Why would Apple conclude that conspiring to force Amazon to no longer lose money on eBooks would cripple Amazon’s competitive fortunes? And why would Apple perceive the need for an illegal solution to the “Kindle threat” when it had an obvious and lawful one which it implemented – namely, introducing a multipurpose device (the iPad) whose marketing and sales success was not centered on eBook sales?
However, as noted by CNet News.com, comments by late Apple co-founder Steve Jobs to his biographer, Walter Isaacson, suggest that Apple’s talks with the publishers did have a broader impact on pricing.
The book quotes Jobs saying, “We told the publishers, ‘We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway. They went to Amazon and said, ‘You’re going to sign an agency contract or we’re not going to give you the books.’”
In addition, the release of the Kindle Fire tablet last fall showed the potential for Amazon to leverage its Kindle business to challenge Apple’s iPad with a multipurpose device of its own.
Here’s the text of Apple’s court filing, seeking to dismiss the consumer class-action case.