Late on Tuesday, the Justice Department filed its response to Apple’s(s aapl) appeal of a 2013 price-fixing verdict that found the iPhone maker had brokered a conspiracy among book publishers to fix the price of ebooks.
The government brief is 117 pages long and recounts familiar allegations: that Apple helped big publishers create a new pricing scheme in 2012 in order to get books on its new iPad device, and to wrest the ebook market from Amazon.
The new brief contains rhetorical flourishes such as “publishers fear and loathe $9.99 Ebook pricing,” and also makes the unlikely assertion that Apple organized the conspiracy because it “cared about iBookstore profits” and about earning a 30 percent commission (unlikely since ebook revenues are chickenfeed to a company that sells hundreds of millions of iPhones).
The most interesting part of the brief, however, may be the Justice Department’s descriptions of Amazon(s amzn). Even though Amazon is cast as one of the victims of the conspiracy, the brief reveals the immense power the retail giant held over the publishing world in 2011:
Amazon (the market leader in ebook retail sales) … The publishers were concerned that any single publisher who issued that ultimatum would face “retribution” – “the actual extreme of [Amazon] not putting our books up for sale.” If the publishers presented a unified front, however, it was less likely that any one publisher would be singled out.
Ironically, more than three years later, the publishers’ fear of “retaliation” and being “singled out” appears more well-founded than ever. As my colleague Laura Owen explained last week, Amazon is currently taking remarkable measures in its contract negotiations with the publisher Hachette — measures that are likely intended to scare the daylights out of other publishers who want to challenge Amazon.
All of this begs the question of why the Justice Department continues to train all of its antitrust fire on Apple, which continues to be an also-ran in the ebook market with a market share reportedly around 10 percent for most publishers. Why not investigate Amazon instead?
Section 2 of the Sherman Act holds that a company violates antirust law if it has monopoly power and uses that power in improper ways. I don’t pretend to be an antitrust expert but, from a distance, it sure looks as if Amazon’s roughing up of Hachette is worth the DOJ asking a question or two. In Europe, meanwhile, there are signs that regulators are already taking an interest.
Amazon, for its part, is framing the Hachette controversy as an ordinary dispute between a retailer and supplier. The company may also feel it is on strong legal ground since U.S. antitrust law protects consumers not competitors, which means that Amazon’s practices may be fine so long as they result in cheaper books.
The Justice Department did not respond to an email request for comment.
As for Apple, the DOJ lawyers are in many ways just doing their job — it was Apple that appealed, and the government has an obligation to respond. Nonetheless, the Department has at times appeared overzealous in handling the case, even as its action may have helped Amazon grow ever more powerful.
Here’s the new DOJ filing (note the many references to Hachette) :
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