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Apple: Ruling against us in ebook case would create “chilling” effect on content markets

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Thursday marked the last day in the three week U.S. vs. Apple case, in which the government accuses Apple (s AAPL) of conspiring with book publishers to set ebook prices for the launch of the iBookstore. Apple’s lead attorney, Orin Snyder, spent the morning providing Apple’s closing statement, with the DOJ set to follow after lunch. [See Apple’s closing slides, below.]

Snyder summarized Apple’s argument that it did not conspire with publishers to set ebook prices; rather, he said, the negotiations that took place before the launch of the iBookstore were “standard, normal, lawful business activity.” He described this as “an extraordinary antitrust case,” but “[this was a] standard, ordinary business negotiation,” and the retailer’s contracts with publishers for ebooks were the same type of contracts that Apple has for other kinds of content like apps. If US District Judge Denise Cote rules against Apple, Snyder said, it would create “a chilling and confounding effect not only on commerce” but on “content markets throughout this country.”

Throughout the case, Apple has taken the position that Amazon moved to agency agreements with publishers not because Apple’s publisher contracts required them to adopt agency with other retailers, but because it was in Amazon’s business interest to do so: If Amazon hadn’t agreed to agency, publishers would have allowed it to operate on wholesale terms but would also have continued to insist on “windowing” their titles, or making ebooks available three to six months after the hardcover was released (at the same time as paperbacks) as they had already begun to do at the end of 2009. Because Barnes & Noble was moving to an agency model with publishers as well, “the competitive threat of Apple’s entry lit a fire under Amazon,” Snyder said, and “Amazon changed its business model for prudent and intelligent business reasons.”

Judge Cote asked Snyder several times whether Apple believed that publishers were conspiring together before the launch of the iBookstore. Apple has no opinion on this, Snyder said, because it is not Apple’s burden “to prove or disprove that” — though he referred to SVP Eddy Cue’s testimony in which Cue said he thought it was unlikely that the publishers had conspired because they were so disorganized when it came time to negotiate with Apple. At any rate, Snyder said, there was “no evidence, none, zero” that Apple was aware of any phone calls that did take place between publishers.

Judge Cote then indicated that she would have found that publishers did conspire with each other in December 2009 and January 2010 to raise ebook prices (seemingly a moot point since all of those publishers have now settled, though it may come up again in her final decision).

Snyder concluded his summation with a brief slide presentation laying out Apple’s arguments on the pages of an ebook on the iPad. “It’s time to close the book on this case,” he said. Judge Cote said wryly, “And I notice that beautiful page curls.”

The Department of Justice will provide its own summation this afternoon. Judge Cote is likely to take weeks to rule on the case.

Here are Apple’s slides (via AllThingsD):

[protected-iframe id=”eb723d551953bf4edfbf754958ccd14a-33319749-34305775″ info=”” width=”630″ height=”550″]

4 Responses to “Apple: Ruling against us in ebook case would create “chilling” effect on content markets”

  1. I’d call that ‘chilling effect’ a ‘stupid effect.’ It’s quite clear that creative digital content such as movies, music, and books, is moving to either or both of two models:

    * Agency (iTunes, the iBookstore and even Amazon)

    * Subscription, particularly for heavy users (Netflix, perhaps soon iRadio)

    The wholesale/retail business model doesn’t fit a marketplace where the cost of production and storage is virtually zero and where most costs are incurred in creation or distribution. That’s why the fixed 70/30 split between those two makes sense and an 80/20 split would make even more sense, given the declining costs of running massive server farms.

    No court decision is likely to alter that. All it can do is confuse and delay what’s a natural for this sort of marketplace. Let’s hope this judge sees that.

    –Michael W. Perry, Inkling Books

    • Tetracycloide

      On the other hand collusion has always made good business sense and been natural in a marketplace with a small number of powerful players and the market for e-books is no exception. The issue remains and always has been that it doesn’t matter if it’s good for business if it’s illegal anti-consumer activity.

      • David Thomas

        Still on that other hand, Amazon was and remains in fact a powerful monopsony buyer at the center of far weaker sellers, and when given options by those sellers instead of dictating to the sellers, they cried foul play. The only thing anti-consumer about the unfolding of the e-book agency plan is that Amazon adopted it instead of the wholesale plans they were already on.

        • Tetracycloide

          So your logic is the onus is on Amazon to curtail anti-consumer behavior on part of the publishers by dictating to them other terms, risking their business in the process? I don’t think that’s how anti-trust law in the US works…