APPLE SLAPS BACK: Government's E-Books Case Is 'Fundamentally Flawed'

face slap, slap, hitBook ’em.

Photo: Flickr / TheRogue

The government’s antitrust complaint against Apple and six book publishers over e-book pricing is “fundamentally flawed as a matter of fact and law,” according to a response it’s filed with the court overseeing the case.Ars Technica says that Apple “pulls no punches” in its response, which accuses the government of siding with Amazon, which Apple says is the real monopolist in the market for electronic books. Amazon, Apple points out, sold 9 out of every 10 e-books before Apple introduce its iBookstore.

The company also states repeatedly that Apple “lacks sufficient information and belief” to respond to most of the government’s allegations.

Translated from the legalese, that’s a fancy lawyer way of saying “We have absolutely no idea what you’re talking about.”

That’s a feisty response, which means this is going to be a fun case to watch.

Historically, books have been sold like most physical goods—purchased at a wholesale price and sold at a retail price. That’s how Amazon sold print books, and that’s how it started out selling e-books. It took a loss on some e-books in order to keep prices low and spur sales of its Kindle e-reader.

Publishers worried that Amazon’s low prices would set consumers’ expectations for e-books prices at a permanently lower level than what physical books sold for. (Never mind that those expectations are probably pretty reasonable and something consumers would arrive at on their own.)

Apple, meanwhile, always sold media and apps, including some e-book apps, through an agency model—taking a cut of the transaction rather than profiting from the difference between the wholesale and retail price. Under the agency model, book publishers, just like app makers in the app store, picked a price for the e-books they published.

Apple makes a big deal out of its prior use of the agency model in its response.

Meanwhile, Amazon has argued that publishers have a monopoly on the titles they publish. Which, in a sense, they do: Copyright law doesn’t let one publisher go around and sell another publisher’s books. If you want a particular title, you have to go to that publisher.

That’s the argument Amazon offered when it had a spat with Macmillan and briefly pulled all of the publisher’s titles—both print and electronic—from its website, then acceded to Macmillan’s demands that it adopt agency pricing.

Call this case Jeff Bezos’s revenge.

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