In their lawsuit against Apple and five agency publishers, the Department of Justice claims “the evidence showing conspiracy is substantial.” In the broadest terms, Justice charges that the defendants “shared their business information, plans, and strategies in order to formulate ways to raise retail e-book prices.”
It appears that Justice is actually charging two separate conspiracies. The earlier one they say began “no later than September 2008” and involves a number of meetings regarding a possible “joint venture” to sell ebooks together as well as “telephone conversations and other communications in which they jointly acknowledged to each other the threat posed by Amazon’s pricing strategy and the need to work collectively to end that strategy.” (Many of these gatherings of “senior executives” are said to have been held in “private dining rooms of upscale Manhattan restaurants.”) The bigger charge is that after all of this preamble, “ultimately, in late 2009, Apple and the Publisher Defendants settled on the strategy that worked—replacing the wholesale model with an agency model that gave the Publisher Defendants the power to raise retail e-book prices themselves.”
Justice claims that publishers “directly discussed, agreed to, and encouraged each other to collective action to force Amazon to raise its e-book prices” and they say the defendants also “took steps to conceal their communications with one another, including instructions to ‘double delete’ e-mail and taking other measures to avoid leaving a paper trail.”
By their account, it was “Hachette and HarperCollins [that] took the lead” in December 2009 “in working with Apple to capitalize on this golden opportunity for the Publisher Defendants to achieve their goal of raising and stabilizing retail e-book prices.” They allege based on calendar records that at that time “it appears that Hachette and HarperCollins communicated with each other about moving to an agency model.”
As for Apple’s role, Justice says “as it negotiated with the Publisher Defendants in December 2009 and January 2010, Apple kept each Publisher Defendant informed of the status of its negotiations with the other Publisher Defendants. Apple also assured the Publisher Defendants that its proposals were the same to each and that no deal Apple agreed to with one publisher would be materially different from any deal it agreed to with another publisher. Apple thus knowingly served as a critical conspiracy participant.”
Justice also says publishers required assurances from Apple that multiple companies were agreeing to their contract requirements at the same time: “Penguin explicitly communicated to Apple that it would sign an e- book distribution agreement with Apple only if at least three of the other “major[]” publishers did as well. Apple supplied the needed assurances.” At least one CEO is said to have “admitted under oath” to calling two other CEOs in late January 2010 “specifically to learn if the other two Publisher Defendants would sign with Apple prior to Apple’s iPad launch.”
Though less germane to the charges, there are colorful details of industry executives lobbying against Random House when the declined to move the agency model at first. And Justice charges that “throughout the summer of 2010, Apple also cajoled the holdout publisher to adopt agency terms … including on a phone call between Apple CEO Steve Jobs and the holdout publisher’s CEO.”
In Justice’s broad view of an alleged conspiracy, they also cite earlier plans from 2008 and 2009 to create some kind of alternative ebookselling platform, which is separate from the introduction of agency pricing alongside the launch of the iPad. Here Justice claims that “by the end of the summer of 2009, the Publisher Defendants had agreed to act collectively to force up Amazon’s retail prices and thereafter considered and implemented various means to accomplish that goal, including moving under the guise of a joint venture.”
There is a letter translated from French, thus presumably from Lagardere Publishing head Arnaud Nourry, saying in 2009 that “[i]n the USA and the UK, but also in Spain and France to a lesser degree, the ‘top publishers’ are in discussions to create an alternative platform to Amazon for e-books. The goal is less to compete with Amazon as to force it to accept a price level higher than 9.99 . . . . I am in NY this week to promote these ideas and the movement is positive with [the other four Publisher Defendants].” Penguin ceo John Makinson is said to have referred to “the development of the Project Z initiatives [joint ventures] in London and New York.”
Finally, the suit also claims that “various persons, who are known and unknown to Plaintiff, and not named as defendants in this action, including senior executives of the Publisher Defendants and Apple, have participated as co-conspirators with Defendants in the offense alleged and have performed acts and made statements in furtherance of the conspiracy.”
Also, DOJ has requested that the case by assigned by Judge Denise Cote, who is already presiding over the consolidated lawsuits seeking class-action status from consumers who purchased agency ebooks. They argue it will “promote judicial efficiency” but indicate the government “has no plans to move to join these cases for trial.”
Full complaint