Apple has acknowledged that yes, part of its motivation to launch the iBookstore was to make money, but says its agreements with e-book publishers were a result of individual negotiations. Additionally, the company argues that publishers didn't seem happy with Amazon's pricing tactics and should be able to set their own prices in the iBookstore. Apple's statements come as part of the company's response to a class-action lawsuit brought by (now) 31 US states—largely mirroring the one brought by the US Department of Justice—accusing Apple of conspiring to raise e-book prices.
In its filing this week, Apple says that the iBookstore was partly launched was to generate revenue, but also to "avoid negative margins that it believed Amazon was incurring as it sold certain bestselling eBooks below cost." The company argues that its bilateral contracts with each publisher may have similar terms, but they are "not identical," and the agreements were made on an individual basis—not a joint conspiracy.
And although Apple repeatedly asserts that it has no knowledge of why Amazon originally chose to sell e-books via the wholesale model—as opposed to the iBookstore's agency model, which Amazon eventually switched to in mid-2010—the company does point out that publishers seemed to be unhappy with Amazon.
Agency model
When people refer to the "agency model," it's usually in reference to the sale of electronic content online—in particular, e-books. The "old" way to sell e-books was to use what is known as the wholesale model. Under the wholesale model, book publishers sell a certain number of books to a reseller (such as Amazon or Barnes & Noble) for a set price, then the reseller sets its own price on each book.
Read more…"Apple admits that publicly and privately in their individual discussions with Apple, representatives of each of the publishers separately expressed varying degrees of unhappiness with Amazon’s tactics, including its pricing," Apple wrote. "Apple further admits that Amazon is the dominant eBook retailer and wields 'market power' over eBooks."
Apple's response to the class-action suit is less aggressive than its response to the DoJ suit last week. There, Apple called the government's actions "absurd" and "fundamentally flawed," accusing the DoJ of siding "with monopoly, rather than competition." Cupertino appears to feel strongly about its position in these cases, reiterating that it doesn't believe it has done anything wrong and that the agency model is not only perfectly valid, but a time-tested sales strategy.
When it comes to the class-action suit, however, Apple has already suffered some minor setbacks. The company originally tried to get the lawsuit dismissed, only to be smacked down by US District Judge Denise Cote—she denied the request and said there was plenty of evidence that "Apple intentionally and knowingly joined that conspiracy [to raise e-book prices]." Cote also asserted that Apple might not have had the same motivations to join the alleged conspiracy as the publishers it signed agreements with, but Apple could have still been a participant.
In its response, Apple once again argued that the class-action suit should not proceed due to settlement agreements between some of the publishers and various state governments; the company says "it is inequitable to allow both sets of overlapping claims to proceed simultaneously." Something tells us the judge won't throw Apple any bones on that front, so we're likely going see this—and the DoJ suit—go forward.
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