Apple Sued by DOJ

from WashingtonPost.com

Apple and five of the publishing industry’s top firms were accused of working together to fix prices on e-books in a Justice Department suit Wednesday. Three publishers — Hachette, Simon and Schuster and HarperCollins — agreed to settle. Apple, Penguin Group and Macmillan did not agree to settle. Macmillan’s chief executive said Wednesday that the firm would fight the charges in court.

In its complaint, the Justice Department lays out a narrative of collusion at the highest levels of the tech giant and some of the nation’s biggest publishing houses. The filing is filled with accounts of high-priced lunches, phone calls between chief executives and barbs thrown at the “holdout major publisher,” likely Random House, which took longer to switch to Apple’s agency model.

Here are some highlights from the filing:
- The complaint paints Apple’s late co-founder Steve Jobs as dismissive toward concerns that the companies might be in unethical territory. In her remarks, acting antitrust chief Sharis Pozen pointed to a Jobs quote to illustrate that attitude. According to the complaint, Jobs told the publishers, “the customer pays a little more, but that’s what you want anyway.”
- Amazon looms large in the filing. At several points, the lawsuit quotes executives complaining about the e-reader giant’s $9.99 price point. Publishers reportedly told Apple that the “price for new releases is eroding the value perception of of their products in customer’s minds, and they do not what this practice to continue for new releases.”
- The complaints turned to fury when Amazon announced that it would let copyright holders publish their books directly through the online retailer.
Penguin USA chief executive David Shanks reportedly responded, “[on] Apple I am now more convinced that we need a viable alternative to Amazon or this nonsense will continue and get much worse.” He is quoted as saying he was “‘p****d’ at Amazon,” and the filing said Shanks “expressed his desire to screw Amazon.”
- The suit also alleges that the publishing firm chiefs coordinated an effort to stand strong against the Web retailer and maker of the enormously successful Kindle e-reader, encouraging members to “hold back your books from Amazon.” At one point, Macmillan asked Amazon to convert to Apple’s agency model. When Amazon refused, the publishing firm essentially stopped selling its books on the Web site. The suit quotes the chief executive of another publishing firm telling Macmillan’s CEO: “I can ensure you that you are not going to find your company alone in the battle.”
- The suit accuses Penguin and Shanks of taking lead in criticizing a “holdout major publisher,” telling that publisher that it was “not helping” the group.
According to the complaint, Jobs refused to sell books from the holdout publisher unless it “agreed to an agency relationship substantially similar” to Apple’s arrangements with the other companies.
- Justice has also presented evidence that the publishers agreed to sign on to the agency model only if all did so together, and that two CEOs admitted under oath that they had called other publishers “specifically to learn” whether they would sign with Apple before the iPad launch.