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US Justice Dept rejects criticisms of ebook settlements

Apple and hundreds of other complainants are wrong

The US Department of Justice has hit back at criticisms of its ebook case against Apple and five major publishers, saying its critics either don't understand or are just looking out for themselves.

The DoJ filed a case in April accusing Apple and five publishing houses of colluding on ebook prices in their attempt to counteract the growing dominance of Amazon in the market.

Three of the publishers have already settled the case, agreeing to rip up the contracts that contained agency agreements between themselves and Apple, thus once again allowing retailers to discount books as much as they want and ditch most-favoured nation clauses.

The agency model, not in itself illegal, was at the heart of the DoJ's concerns. Under those contracts, publishers set the price for ebooks and retailers take a percentage. Before Apple came on the scene, publishers sold their ebooks at a wholesale price and the retailers were the ones who priced them, allowing Amazon to sell ebooks at cost or below cost in order to shift its Kindle readers.

The DoJ claimed that Apple and the five publishers not only moved to the agency model but also discussed pricing, which is the part that's illegal under antitrust laws.

However, many of the critics of the settlement argued that going back to the old way of selling ebooks would return things to the way they were before Apple, when Amazon was dominating the market, which could also stop healthy competition.

The DoJ said it had received 868 comments in the case – from individuals, publishers, retailers and even Apple. While some supported the DoJ, others criticised the case, but the DoJ maintained that the critics either misunderstood the department's judgment or were trying to keep prices higher for their own purposes.

"Many critics of the settlements view the consequences of the conspiracy – higher prices – as serving their own self-interests, and they prefer that unfettered competition be replaced by industry collusion that places the welfare of certain firms over that of the public," the department said in its published response. "That position is wholly at odds with the purposes of the federal antitrust laws – which were enacted to protect competition, not competitors."

The DoJ claimed that it wasn't Apple's entry into the market that stopped Amazon from hoovering up even more than its massive 90 per cent share of the market, but rather the arrival of Barnes & Noble before Apple that "took significant share" from the etailer.

The department also denied it was dictating how the industry should do business.

"The United States does not object to the agency method of distribution in the ebook industry, only to the collusive use of agency to eliminate competition and thrust higher prices onto consumers," the DoJ insisted.

"Publishers that did not collude are not required to surrender agency agreements and even the settling publishers here can resume agency, if they act unilaterally, after only two years."

The DoJ said that none of the arguments put forth had changed its mind about the settlements and they would be going ahead.

HarperCollins, Hachette and Simon & Schuster are the three settling publishers. Apple, along with Penguin and Macmillan, are all planning to fight the case in court, in a trial that is currently set to start in June next year. ®

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