November 24, 2017

B&N, Defendants Respond in Ebook Antitrust Cases

Yes, you read that right: Barnes & Noble filed a document with the court in the Department of Justice (DoJ)’s ebook pricing antitrust case, despite not being a party to it. In its filing, the bookseller said the DoJ’s proposed settlement would “injure innocent third parties, including Barnes & Noble, independent bookstores, authors, and non-defendant publishers; hurt competition in an emerging industry; and ultimately harm consumers.” Barnes & Noble also claimed that the agency model is responsible for lowering Amazon.com’s ebook market share from 90 percent to about 60 percent, as well as lowering ebook prices.

Despite being invoked in this and most other filings in this and the associated cases, Amazon.com itself has yet to weigh in.

Meanwhile, Apple filed a response in the class action suit alleging collusion in ebook pricing on May 29. Among the expected positions the company took were that neither the named plaintiffs nor the members of the class were harmed by its actions and that Apple could not have engaged in a conspiracy among “horizontal competitors” because Apple is not a publisher and therefore not in competition with the other defendants.

Apple also denied that the agency model was “newly minted” (though its reasoning is not explained in this document, Apple has elsewhere said this is because Apple had previously sold ebooks through its app store under an agency model), and denied that Amazon’s $9.99 price point was the industry standard for ebooks at the time that Apple inked its agency model pricing deals with Macmillan, Penguin, and the publishers who have already settled, despite the fact that it admits Amazon had an approximately 90 percent market share at that time.

Among the most interesting claims in the document, Apple “denies that eBooks represent a distinct antitrust market,” particularly since Apple in the same document repeatedly makes the distinction between the ebooks and print books markets.

The filing follows Apple’s May 22 response to the Department of Justice’s complaint. While making many of the same legal points, that filing is far more strident in tone, saying the government’s case is “fundamentally flawed as a matter of fact and law” and that the government “sides with monopoly” in bringing it. “Before 2010, there was no real competition, there was only Amazon,” Apple said. (The document doesn’t seem sure whether Apple itself was in the ebook business before 2010 or not; when the agency model is under discussion, ebooks sold through the App store are counted, but at other times Apple considers itself to be a new entrant.)

Apple also denied that it provided individual or specific information about any publisher to any other publisher, but admitted that it provided “a general sense of progress toward the conclusion of negotiations with a sufficient number of publishers in total to warrant Apple’s entry.”

Macmillan also filed a response to the Department of Justice complaint on May 29, as did Penguin. (The other publishers originally named in the suit have settled.) Both deny any anti-competitive behavior. Penguin in particular cited its lack of “windowing” ebooks as evidence that it was not in lockstep with the other publisher defendants.

Penguin also refers to Amazon as a monopoly on the one hand, yet on the other, claims the publishers’ own direct ebooks sales to consumers were significant enough to cast doubt on the wholesale model’s dominance prior to Apple’s entrance.

Penguin admitted that Apple had told the company it wanted to have substantively the same terms with all its ebook suppliers, so that the general information Apple admitted to providing – that other publishers were close to signing on – also conveyed the essence of what terms they were signing up for: those each publisher knew because it was what they themselves had been offered. Whether the combination counts as Apple providing a conduit for inappropriate information in the court’s view remains to be seen.

Penguin also admitted saying at one point that its agreement was contingent on Apple signing a fourth major publisher, but denied that was evidence of conspiracy, especially since Penguin opted out after that and only signed on with Apple after separate negotiations which it believes are unique to its business model. Among the defenses Penguin offered is the unclean hands doctrine, essentially claiming that the Department of Justice acted unethically or in bad faith with respect to the subject of the complaint.

Macmillan also denied any wrongdoing in a filing which, like Penguin’s, points out that the government case neglects to mention Bookish, a joint venture between publishers which, they say, was the context for many conversations which the DoJ alleged were conspiratorial. The company stopped short of calling Amazon a monopoly but played on the same themes of Apple’s entrance into the ebooks market producing a revitalized competitive landscape. Macmillan also said that the relief sought is broader than what would be necessary to repair the alleged harm, and not in the public interest.

Meredith Schwartz About Meredith Schwartz

Meredith Schwartz (mschwartz@mediasourceinc.com) is Executive Editor of Library Journal.

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