The USA Justice Department was looking into allegations that Apple colluded with major publishers to establish agency pricing. This created an environment where the publishers dictated the pricing for digital books and created an outcry in Europe and the USA against price fixing. All of the publishers have settled their cases by abandoning the agency model for two years and allocating funds for refunds and discounts. Court documents made available today have Apple firing back at the Justice Department.
A court document filed April 26th and was made public today. It gives us an indication on Apple’s intentions. At the time, Apple said that the major publishers were locked in a battle with online retailer Amazon over selling books for too cheap. Apple has claimed that the publishers developed the agency model independently and were partly influenced by the 30% royalty that Apple demands from all digital content sales.
The essence of the 81 page document Apple submitted to the courts had the company exchanging proposals and counter-proposals with each other to get ebooks in the iBooks store with the launch of the original iPad. The trick was to offer ebooks where Amazon did not, and severely undercut them in price. Convincing publishers to offer ebooks with Apple for the same price as Amazon was not a very popular idea. In order for the publishers to not lose money selling through Apple, they had to establish unified pricing to even the playing field.
Who colluded with who? Did Apple parlay the deal directly with publishers? Did the publishers act in concert with each other to form a cartel? Did Apple mandate the price fixing measures? These are the main questions that Apple has to answer for the Justice Department, and it is likely this case will drag on for another year or two.