The U.S. government has sided with monopoly rather than competitionin bringing a case of e-book price-fixing against Apple, thecompany said in a filing on Tuesday before a federal court. The Department of Justice filed in April an antitrust lawsuit against Apple and five large publishers,accusing the companies of working together to raise prices ofe-books, in retaliation for competitor Amazon.com pricing moste-books at US$9.99 beginning in late 2007. Three publishers - Hachette Book Group, HarperCollins and Simon& Schuster - agreed to settle the lawsuit, the DOJ said.
Apple's reply to the court is in line with a statement issued by Apple in April after the DOJ filed its case, in which it said that "the launch ofthe iBookstore in 2010 fostered innovation and competition,breaking Amazon's monopolistic grip on the publishing industry."The company added: "Just as we've allowed developers to set priceson the App Store, publishers set prices on the iBookstore." The government's complaint does not allege that all e-book prices,or even most e-book prices, increased after Apple entered themarket, the company said in the filing before the U.S. DistrictCourt for the Southern District of New York. Apple had in fact nointerest in seeing price increases, it said. The government's complaint against Apple is fundamentally "flawedas a matter of fact and law," Apple said. The company said it hasnot conspired with anyone, was not aware of any alleged conspiracyby others, and never fixed prices.
At the time Apple entered the market, Amazon sold nearly nine outof every ten e-books, and its power over price and productselection was nearly absolute, Apple has stated. The company'sentry helped grow the number of e-book titles, the range andvariety of offerings, sales, and improved the quality of the e-bookreading experience. Instead the government focuses on increased prices for a handful ofbook titles, Apple said. Apple offered any publisher interested in the iPad platform and itsiBookstore the ability to sell its e-books directly to consumers,rather than dealing only with a single dominant buyer, Amazon, itsaid. One of Amazon's most successful marketing strategies was to lowersubstantially the prices of newly released and best-selling e-booksto $9.99, a price that the defendant publishers saw as a challengeto their traditional business model, according to the DOJ lawsuit.
The defendant publishers feared that lower retail prices fore-books would result in consequences such as lower wholesale pricesof e-books and lower prices for print books. The publishers wantedhigher retail e-book prices across the industry before the $9.99price became an "entrenched consumer expectation," the DOJ said.The publishers then allegedly teamed up with Apple to push upe-book prices. Apple in its reply has denied conspiring with the publishers or ofhaving or sharing a goal of restraining price competition asalleged by the DOJ. The DOJ's lawsuit alleged that the late Steve Jobs, then Apple'sCEO, approved of a new pricing model that would raise the price ofe-books. "We'll go to [an] agency model, where you set the price,and we get our 30%, and yes, the customer pays a little more, butthat's what you want anyway," he is quoted in court papers asdescribing his company's strategy for negotiating with thepublishers.
"Throw in with Apple and see if we can all make a go of this tocreate a real mainstream e-books market at $12.99 and $14.99," Jobswrote to one publishing executive during pricing discussions,according to the DOJ lawsuit. In early 2010, the defendant publishers agreed to shift to a newpricing model called the agency model, where they set the pricesfor e-books, instead of retailers, the DOJ alleged. In an agreementwith Apple, all new books would be priced at $12.99 to $16.99,according to the DOJ. Retailers lost their ability to compete onprice and millions of e-books that may have been sold at $9.99 orlower were now sold at higher prices, DOJ said. In its reply, Apple said that without the agency agreements, itwould not have entered e-book distribution, given the circumstancesof the business as it existed prior to its entry.
It had alreadyused the agency model in its App Store, including in sales of booksthrough the store before the iBookstore was set up. But it did notseek to limit e-book retail price competition, did not reach anagreement to cause retail price competition to "cease" and did notagree that "retail eBook prices would increase significantly," itsaid in the filing. I am an expert from Power Accessories, usually analyzes all kind of industries situation, such as indexable carbide insert , gas pump nozzles.
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