Apple fires back at Justice

Apple is pushing back against the Justice Department’s antitrust lawsuit, saying the accusation that the company colluded with publishers to fix the price of electronic books is “simply not true.”

“The launch of the iBookstore in 2010 fostered innovation and competition, breaking Amazon’s monopolistic grip on the publishing industry,” Apple spokesman Tom Neumayr said in an email Friday. “Since then customers have benefited from eBooks that are more interactive and engaging. Just as we’ve allowed developers to set prices on the App Store, publishers set prices on the iBookstore.”

{mosads}According to the Justice Department’s complaint, which was filed in federal district court in New York on Wednesday, five publishing companies were unhappy that competition from Amazon was driving down the price of e-books. Amazon had set the price of all of its e-books at $9.99.

Executives from the publishers began meeting in the summer of 2009 in “private dining rooms of upscale Manhattan restaurants” to discuss confidential business information, according to the government’s case.

As a result of those discussions, the publishers agreed to adopt a new business model, the Justice Department alleges. Under the new model, the publishers, not bookstores, would set the retail price of e-books. 

When Apple launched its iBookstore along with the release of its first iPad in 2010, the publishers agreed to give Apple 30 percent of the revenue from the e-books it sold. Additionally, they gave Apple the “most-favored nation” status, which guaranteed that no other retailer could sell an e-book for less than Apple.

The agreements drove up the price of e-books by about $2 to $3 per book, costing consumers millions of dollars, according to the Justice Department. 

The Justice Department’s case quotes the late Apple CEO Steve Jobs as saying, “The customer pays a little more, but that’s what you [the publishers] want anyway.”

Three publishers, Hachette, HarperCollins and Simon & Schuster, agreed to a settlement with the Justice Department and will avoid litigation. But Apple, Macmillan and Penguin Group are expected to fight the charges in court.