Penguin and Macmillan, the two publishers fighting the Department of Justice’s e-book price fixing lawsuit in court, have both filed responses to the DOJ suit.
Both publishers flatly deny that they engaged in a price-fixing conspiracy with other publishers. Macmillan’s response is shorter and more fiery; Penguin’s response is longer, with more colorful details and explainers.
Penguin “began to consider the agency model seriously when, and only when, Apple proposed it to Penguin as a method of doing business for Apple’s proposed iBookstore,” the complaint says, noting that it “proposed a wholesale/retail distribution agreement with Apple on January 4, 2010” and Apple responded the next day with the agency model “as a take-it-or-leave-it deal term.”
Penguin “admits that it believed that Apple could not have a successful iBookstore without the participation of and supply of books from other publishers, because if the iBookstore’s inventory was limited to only a small percentage of available eBooks, the iBookstore would almost certainly fail.” And “Penguin sought assurances from Apple that Apple could deliver the breadth of participation Penguin felt was necessary for a successful eBook store.”
The company says that many of the publisher conversations cited in the DOJ suit had nothing to do with agency pricing but were actually related to Penguin’s participation in the U.S. and UK e-book joint ventures aNobii and Bookish. (aNobii has launched in the UK; Bookish is delayed.) “The legality and propriety of these joint ventures, which Penguin was recruited to join before it made the decision to enter into an agency model with Apple, is not and has never been actually challenged,” Penguin notes.
The agency model hasn’t ended price competition, Penguin says, but rather moved it “from the retail level to the publisher level.” Among the types of competition that Penguin says have increased since the agency model:
There is more dynamic pricing of eBooks, which has resulted in lower consumer prices on many, many eBook titles, more robust competition at the device level in terms of both the cost and variety of eReading devices, handsome and imaginative enhanced, full-color eBooks, which did not even exist as a category before Apple introduced the iPad, and more vibrant and differentiated marketing of eBooks by Penguin’s agents, all to the benefit of consumers.
Throughout the filing, Penguin cites enhanced e-books as one of the reasons it wanted to enter into a relationship with Apple. Books like “Penguin’s enhanced version of A.A. Milne’s classic Winnie the Pooh, which is pre-loaded as a complementary eBook on every iPad,” weren’t possible before iPad because “the Amazon Kindle was not then capable of accommodating color or other enhancements.”
The much-cited publishing executive dinner at Picholine was actually intended to welcome Markus Dohle as the new CEO of Random House, Penguin says in its complaint; Macmillan says the same and notes in italics for emphasis that Random House was “a house not even alleged to be part of the alleged conspiracy.”
Penguin’s response as a PDF here
“Macmillan did not participate in any illegal conspiracy,” Macmillan’s filing says, and “the lack of direct evidence of conspiracy cited in the Government’s Complaint is telling…[it is] necessarily based entirely on the little circumstantial evidence it was able to locate during its extensive investigation, on which it piles innuendo on top of innuendo, stretches facts and implies actions that did not occur and which Macmillan denies unequivocally.”
Like Penguin, Macmillan says the publisher conversations cited in the DOJ suit weren’t about agency pricing, but actually had to do with joint ventures Bookish and aNobii. Macmillan adds that “the government’s deafening silence about Bookish indicates its acceptance of the legitimacy of the joint venture itself and of its formative process.”
Macmillan says Apple (s AAPL) proposed agency terms “to Macmillan on a ‘take it or leave it’ basis. Macmillan’s unilateral decision to accept Apple’s take it or leave it’ offer to adopt the agency model was made by [CEO John] Sargent alone.”
Macmillan’s response as a PDF here