Apple Should Settle E-Book Antitrust Case, Expert Says
Former FTC policy director says the DOJ's evidence against Apple and several book publishers is the kind that prosecutors "fantasize about."
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The government's evidence in its price-fixing case against Apple and several book publishers is so strong that the companies would be foolish not to settle the case with the Department of Justice out of court, said a former policy director of the Federal Trade Commission, which regulates industry competition in the U.S.
"This is one of the most compelling complaints I've seen in my life," said David Balto, who was also an attorney in the DOJ's antitrust unit. "Government enforcers fantasize about this kind of evidence but this is beyond their fantasies," Balto said in an interview.
The DOJ filed its antitrust suit against Apple and five major book publishers, including Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster, on Wednesday, accusing them of conspiring to fix the prices of electronic books in order to force Amazon to raise its prices. They feared Amazon was destroying their profit margins by selling e-books for as little as $9.99.
Three of the defendants, Hachette, HarperCollins, and Simon & Schuster, have settled their cases.
South Dakota Attorney General Marty Jackley said in a statement Wednesday that his state and 14 others also filed an antitrust lawsuit against Apple and major book publishers to "restore the free market for e-book sales."
Among the government's evidence is records of emails and phone calls that allegedly show executives from the companies, including late Apple CEO Steve Jobs, openly conspiring to use their market clout to increase the price of e-books industry wide.
In one instance, an unidentified exec from the group sent an email to a superior that in part read, "The top publishers are in discussions to create an alternative platform to Amazon for e-books. The goal is less to compete with Amazon as to force it to accept a price level higher than $9.99."
And in an email to one of the publishing execs, Jobs, according to court records, wrote that "all major publishers" had told Apple that "Amazon's $9.99 price for new releases is eroding the value perception of their products in customers' minds, and they do not want this practice to continue for new releases."
Jobs also told one of the execs that he should, "Throw in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99." The DOJ also alleges that the execs met quarterly in private rooms at pricey Manhattan restaurants to discuss their plan.
"One must wonder about the degree to which these business people thought about asking their antitrust lawyers for advice," said Balto, who is now in private practice. "Clearly the government has a case, and it will survive any motion to dismiss."
Balto said Apple and its co-defendants face another problem if the case goes to trial. It's been assigned to Judge Denise Cote of the U.S. District Court in Manhattan. Cote is a former head of the U.S. Attorney's Office for New York's Criminal Division. "She's fair, but she's very tough," said Balto.
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