In a recent set of court filings made public, the United States Department of Justice ratted out Apple Inc. (NASDAQ:AAPL) for conspiring with five major publishing houses in the U.S. to raise eBook prices in the iBookstore.
The Department of Justice filed the first amended complaint earlier this year in January. In one of the more recent DOJ filings from April 26th (which was made available on Tuesday) claims were made that Apple Inc. (NASDAQ:AAPL) violated antitrust laws when they overpriced their eBooks to take away pricing authority from retailers. Their evidence includes correspondence from the late Steve Jobs and Senior Vice President Eddy Cue.
What does value investing really mean? Q1 2021 hedge fund letters, conferences and more Some investors might argue value investing means buying stocks trading at a discount to net asset value or book value. This is the sort of value investing Benjamin Graham pioneered in the early 1920s and 1930s. Other investors might argue value Read More
Jobs wrote the following in an email to James Murdoch, “Apple’s iTunes Store and App Store have over 120 million customers with credit cards on file and have downloaded over 12 billion products. This is the type of online asset that will be required to scale the e-book business into something that matters to the publishers.” At that time, Murdoch was the chief executive officer of News Corp. which owns publisher HarperCollins.
With the wholesale model, retailers can purchase content in bulk in which they would sell it at or under cost to boost sales. This is unlike Apple’s “agency model” which allows publishers and content owners to name the price. With this particular strategy, publishers cannot sell the same content via other retailers at a lower price.
Another piece of evidence came from Steve Jobs’ biography. He told the book’s author Walter Isaacson, “[Apple] told the publishers ‘We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway.”
Last March, it was reported that Isaacson would not be asked to come in for testimony.
One representative for Apple Inc. (NASDAQ:AAPL), Tom Neumayr, denied the claims. He explained, “Apple did not conspire to fix e-book pricing. We helped transform the eBook market with the introduction of the iBookstore in 2010 bringing consumers an expanded selection of eBooks and delivering innovative new features.”
All five of the publishing companies including Macmillan, Hachette, Penguin, HarperCollins, and Simon & Schuster, originally joined Apple as defendants but each one settled their case outside of court. Apple Inc. (NASDAQ:AAPL) will have to stand alone for this case.