In a flurry of pretrial filings made public yesterday ahead of the scheduled June 3 trial in the Apple e-book price-fixing case, the documents largely reiterate the case laid out by the government when charges were first filed, and the defendant's initial responses to those charges. The latest filings, however, point to the wealth of sworn testimony and documents entered as evidence and suggest that, win or lose, the trial will be a costly, bruising affair that will shine an uncomfortable light on the private business practices of the major publishers—most notably on Penguin, which, as the only publisher that has not settled claims with the states and the consumer class, is set to participate as defendant at trial, along with Apple.
“The case against Penguin is straightforward,” argues the States Attorney’s supplemental brief against Penguin. “Penguin agreed with four of its five principal competitors–Hachette, HarperCollins, Macmillan, and Simon & Schuster (collectively with Penguin, the “Conspiring Publishers”) to raise the price consumers paid for trade e-books.”
As it has from the outset, the government alleges that the conspiracy revolves around publishers’ negotiations for the launch of the Apple iBookstore, and the near simultaneous switch to the agency model in 2010, which attorneys argue was coordinated by publishers and Apple in an effort to counter Amazon’s dominant position in the e-book business. “The conspiracy eliminated trade e-book retail price competition and the Conspiring Publishers and Apple shared the conspiracy’s spoils,” the States assert. “The Publishers received the higher retail prices they had been trying unsuccessfully to introduce to the market before Apple’s arrival and Apple was able to enter the market without having to compete with Amazon on e-book prices.”
In its joint filing with the states, the DoJ called the long-running e-book price-fixing battle “an unremarkable and obvious price-fixing case,” and alleges that under the law Apple’s conduct made it the “ringmaster” of the conspiracy. “Apple wanted to sell e-books to the public but did not want to compete against the low prices Amazon was setting,” the DoJ argues. “Apple knew that the major publishers also disliked Amazon’s low prices and saw Apple’s potential entry as a pathway to higher retail prices industry-wide.”
In its filings both Apple and Penguin, however, continue to strongly dispute the charges, asserting that despite the mountain of documents and sworn testimony, there is no “direct evidence” of any conspiracy. “The evidentiary record the parties submitted proves that Apple did not conspire with any publisher to raise prices in the e-book industry,” Apple attorneys state. “Plaintiffs cherry-pick quotes taken out of context and repackage them to tell a false narrative.”
Penguin, meanwhile, similarly accuses the plaintiffs of “misconstruing” events. “The plaintiffs cannot extrapolate direct evidence of a conspiracy from the fact that Penguin received vertical assurances from Apple,” Penguin attorneys argue. “Penguin did not care what business model anybody else used with Apple.” The “assurances” Penguin sought and received regarding other publishers’ participation in the iBookstore, Penguin argues, were related solely to the commercial success of the venture. “Penguin’s desire for a cross-selection of publisher titles to be available in the iBookstore was hardly anti-competitive,” the brief argues, “and certainly does not provide direct evidence that Penguin conspired with other publishers to drive up e-book prices.”
If the plaintiffs are “cherry-picking” quotes, however, the filings show that they are cherry-picking on an industrial scale. The evidence includes testimony and e-mail from executives throughout each big six publishers as well as Apple, including Eddy Cue, who orchestrated the launch of the iBookstore, Apple CEO Tim Cook, and even the late Steve Jobs, via Jobs’ “official biographer,” Walter Isaascon. The record also includes a number of expert witnesses, and a large portion of the filings seek to exclude or limit some of this evidence at trial. As PW reported in March, Apple alone had produced over 3.6 million pages of documents for the case, and the publisher defendants nearly five million more pages.
And, if the government’s narrative is false as it pertains to a conspiracy to raise e-book prices, the narrative is nevertheless revealing as to the publishers’ business and pricing practices, especially its transition to an e-book market.
As of this week, the long anticipated e-book price-fixing case is still a go for June 3. Late last week, Judge Denise Cote agreed to move the case's final pretrial conference back to May 23, but barring an unexpected development, the trial remains set to begin in a New York City court room on June 3, just two days after BookExpo America ends its 2013 run.
There is still a possibility, however, that Penguin could settle with the states and the consumer class, although time is running out. Penguin was clearly not eager to join the upcoming bench trial. Although the publisher settled claims with the DoJ last December, it asked the court in late March to grant them a separate jury trial to hear the remaining unsettled claims from the states and the consumer class. Judge Cote, however, denied that request. Recently, Macmillan, which like Penguin had originally vowed to fight the charges at trial, finalized a final deal with the states and consumer class that will cost them around $26 million.
Regardless, Apple is certain to press ahead with its case—there is no hint of any settlement in the works, and there has not been. And whether defendants or not, this week’s filing show that all of the major publishers will have starring roles in that case.