Apple fires back at DOJ, calls them draconian, punitive

Apple fires back at DOJ, calls them draconian, punitive

Apple has filed a response to the DOJ's ludicrously restrictive demands following their first-round knock-out in the ebooks anti-trust case. Matthew Panzarino of The Next Web quotes:

Plaintiffs’ proposed injunction is a draconian and punitive intrusion into Apple’s business, wildly out of proportion to any adjudicated wrongdoing or potential harm. Plaintiffs propose a sweeping and unprecedented injunction as a tool to empower the Government to regulate Apple’s businesses and potentially affect Apple’s business relationships with thousands of partners across several markets. Plaintiffs’ overreaching proposal would establish a vague new compliance regime—applicable only to Apple—with intrusive oversight lasting for ten years, going far beyond the legal issues in this case, injuring competition and consumers, and violating basic principles of fairness and due process. The resulting cost of this relief—not only in dollars but also lost opportunities for American businesses and consumers—would be vast.

Apple did the right thing in the wrong way and the U.S. government wants to punch them in the throat. Amazon did the wrong thing in the right away and U.S. government wants to hand them de facto monopoly of the ebook market. Since Amazon is currently intent on dumping ebooks at below cost to prop up other aspects of their business, this can be seen as a "win" for "cheaper prices". But markets aren't only about price.

Leave Apple's business alone and strike out the most-favored pricing conventions. Let Amazon dump books if they want, and force Apple to compete regardless. Maybe Apple would have to subsidize prices with hardware profits, the inverse of Amazon's model. Maybe they'd innovate a way to justify higher prices. Either way, creators (publishers in the old model, authors in the new) would be better compensated for their work. Absent fair compensation, writers stop writing, and then there's no ebook market to worry about.

The judge is yet to rule on damages, though given past behavior, future behavior would seem to lean decidedly against Apple. Which is probably why Apple continues to appeal, and may well take that appeal all the way to the highest court in U.S.

Stay tuned. Er... page turned.

Source: The Next Web

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Rene Ritchie

EiC of iMore, EP of Mobile Nations, Apple analyst, co-host of Debug, Iterate, Vector, Review, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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Reader comments

Apple fires back at DOJ, calls them draconian, punitive

56 Comments what was coming to em'.

Doesn't matter if Amazon was wrong. Amazon wasn't on trial for this, Apple was. And the government has to make an example out of them.

Let's leave amazon out if this. The DOJ is going far beyond anything that one should consider reasonable. The DOJ would be wise to control itself here.

Sent from the iMore App

What damages would you impose an unscrupulous company that cheats the consumer and competitors just to get an edge?

Typical fanboy article, can we get atleast one objective article on this topic by anyone from team imore?

Blatantly Supporting price-fixers is the most pathetic thing you can do Rene!!

Count me in the fanboy camp then. You don't think this is an extreme request? I'd love to know why. Apple was found to be in the wrong and should be subject to reasonable fines, of they don't win on appeal.

This, along with the original "Pre trial judgement" have me concerned as a citizen. Our government is proving they do not deserve our trust. They almost appear to be going further and further, like a child with a babysitter or substitute teacher. Seeing how far they can go before there is pushback.

It also fits in with the current "success is bad" and "at some point you've made enough money" themes in DC. Apple is successful, in spite of the government, and the government is looking for a way, any way, to make them pay.

Sent from the iMore App

You don't think this is an extreme request?

No, its a fair ruling(not a request!!), infact this should have received some big financial fine along with this ruling to make sure that nobody else thinks about price-fixing any ecosystem.

How can you not see this as an external request. Their dipping their hands in a private business.

If you have reconsidered your statements then post so. Other wise you are a complete fool.

you are a moron for supporting this anti-competition behavior, it is DOJ's job to make sure that no private company indulges in this kind of behavior.

First, it was Microsoft who was monitored for ten years, now it will be Apple but only for 5 years.

Please quote we're I said I support I support anything Apple is doing. Please. I would really like to see it.

You are so blind to what is actually happening here. The DOJ is over stepping. Plain and simple. They want to have a say in what Apple can and can not do.

You are blinded by your apple fanboyism, nothing else. It is DOJ's job to take care of price-fixers and monopolistic companies. Apple got lucky here with just some changes and 5 years monitoring and no big financial fine.

Yeah! Because that's what the DOJ did to the gas cartels, and the cell phone oligopolies, and the cable monopolies, and... no, wait.. WTF?!

That is completely irrelevant to the topic, DOJ did fine Microsoft and they were monitored for 10 years whereas Apple is not fined and will be monitored only for 5 years.

Rene, those cases of unfair competition and price fixing do not make Apple right. I think Apple should be fined and their ebook pricing deals monitored for the next 5-10 years.

I also think cable, cell, and gasoline price fixing should be looked into. However, you face the issue of over-regulating as well.

Maybe you should research "Standard Gas & Oil", which spawned modern antitrust law as we know it, and "AT&T breakup" which created a cell phone industry that despite being dominated by AT&T and Verizon is very competitive both with pre-paid carriers and MVNOs that are keeping prices competitive.

In any case, those are commodity industries (spectrum is a commodity) which is vastly different than ebooks in terms of competitiveness and pricing and still do not allow conspiring among competitors to fix pricing to the detriment of consumers. If AT&T, Sprint, Verizon and T-Mobile had actively met and agreed to fix prices, the DOJ would come down on them just as hard.

Apple broke the law. There are consequences to doing so. There is nothing draconian about ensuring that they don't wantonly disregard the law in the future as they did here.

Sorry. The judge said, "I think the DOJ will prove its case"

Sorry. Fact is, the DOJ won. Not sure they proved Apple the mastermind, and not that the publishers just used their deals with Apple as a way to get out of bad deals with amazon, but that is neither here nor there. Apple has the right to appeal and they will.

If appeals don't change the outcome, yes, a punishment is warranted. Just think the proposed is excessive. And perhaps that is by design. Something over the top so when the DOJ comes back with a 'compromise' it will be what they want.

In the end, out of my hands. The DOJ is trying to fix something that isn't broken. Fines and removal of the terms they feel are in violation. Aside from that, get out of the way.

Sent from the iMore App

There was overwhelming evidence that Apple, including Steve Jobs and Eddie Cue, acted as the ringleader in convincing all of the publishers that they could all go to an agency model without worrying that any of their competitors weren't going to undercut them and stay with wholesale. There is also nothing to indicate that a fine to a company with $150 billion in cash would prevent them from doing so in any other industry. They don't get a pass just because they are apple. This is the consequences of breaking the law and deliberately and knowingly doing so with the intent to raise prices on consumers.

"Amazon did the wrong thing" - why wrong, because it upset Apple? They are fulfilling their fiduciary responsibilities, providing cheaper books to customers, and doing what every discount department store does, so why are they doing the wrong thing? Is Apple doing "the right thing" to benefit other online bookstores? Do we have any indication that, after Apple took its usual 30%, authors and customers would benefit?

"...dumping ebooks at below cost..." - Objectively, what is the cost of an ebook? Can't we acuse Apple, for instance, of selling apps at below cost at the AppStore to prop up other aspects of their business, since the vast majority of developers are not making money there?

There is one problem with your argument. Apple does not set the price of books or apps. Not even sure they set music or movie prices anymore. The provide guidelines. The content providers set the price.

Sent from the iMore App

Except that here, they met with publishers and conspired to ensure they set prices that favored Apple and hurt Amazon and by extension consumers since it created higher prices. This is price fixing, is illegal and why Apple lost.

I'm not sure about the authors (creators) being better compensated with the agency model either. Do people realize what publishers actually do? What amazon prices their books for isn't what they pay publishers. These authors already get paid by the publishers.

Authors need publishers to do their thing (there's no such thing as cutting out the middleman). Editing, proofreading, artwork, marketing, etc. It needs printing if an author wants any credibility. An author's time is better spent writing, not doing these things.

I've worked with publishers and I've self-published. There was no difference in end-product quality (typos in both!) and I made far more self-publishing. Most publishers cut editors and other "frills" years ago. Speaking as an author who's done both, Agency model is way better for me.

"Below cost" is really that hard a concept to understand? It means selling for less than you pay, i.e. below wholesale.

It's a common business practice. Loss leaders are common things.

I'm saying Apple could do that as well, or figure out a way to charge more by increasing value.

What about that statement is controversial?

What is wrong with loss leaders?

By the way, they weren't dumping ebooks, the ebook division was profitable.

Nothing is wrong with loss leaders. Well, at least not for consumers.

It can devalue product and ultimately kill manufacturers/creators, but that's probably beyond the scope of this discussion.

Selling below cost is never profitable, unless accounting.

You know that Amazon didn't sold ALL the ebooks at a loss, do you?

So yes, the division was profitable.

Do you have any proof that Amazon is selling ebooks at below-cost? you wont because they just make less profits on ebooks but no losses, the only loss leader for Amazon is the Kindle tablets range.

We're the good guy. All of us. I don't want a world where Amazon has monopoly control of ebooks any more than I want one where Apple artificially increases prices.

Both really can be bad.

But In this world itself, Apple was caught price-fixing and must face the consequence.

Rene, why are you even supporting this pathetic actions of Apple? Apple makes greats products like iphone and ipad which you are free to give rave reviews BUT supporting price-fixing behavior is really low even for a fanboy site.

Of course we don't want one company controlling everything but that's another story.. Point is right now apple have been found guilty, and as far as the law goes amazon are not breaking any and even if amazon were found guilty it still wouldn't be right to defend apple.. As the saying goes 2 wrongs do not make a right but even then the facts say apple broke the law, Amazon have not and if they did then they will get there punishment soon.

I guess the DOJ should go after Ford of GM, they add price to anyone buying a registered OEM part.

Just a few other points that I didn't cover in some of my replies.

By all means, have the most favored nation clause voided from existing contracts (since let's face it, that is the only thing the DOJ thinks is wrong with it - their entire case was that this forced prices up).

Allowing links in other ebook apps to their stores (this could cause problems with other subscription apps) - sure. Though I don't think there is anything preventing those apps from linking. They just have to pay he apple 30%.

Or, pull your app, build a competing device that people want, and host your own apps. Then you don't have to worry about Apple practices. Should work out.

Or better yet, include links to the iBookstore in your competing app.

Sent from the iMore App

Why Apple (or Google in the Play Store) deserves a 30% cut when they are not storing the content, they are not publicizing the content? And why Apple (or Google) deserves a 30% for linking to a web page?

Because they provide a service most creators agree is worth 30%? Including: storage, transaction processing, order fulfillment, marketing, and more.

No, they don't provide storage, order fulfillment or marketing.

Amazon/B&N has to make the marketing for the ebooks, the ebooks are stored on Amazon/B&N servers and they are fulfilled through Amazon/B&N infrastructure.

And Apple do the transaction processing because they force to do that through them

Wrong info Rene, Apple is not storing Amazon's books, Amazon app will handle all the transactions and order fulfillment too.

I don't know that most creators agree that 30% is fair. Quite a few have groaned about the large cut Apple takes.

Pretty ridiculous article. Why is that to sites like iMore or The Loop, Apple can do zero wrong? They were wrong, broke the law (maybe unknowingly), got caught and about to get the consequences. Deal with it.

Actually Rene, I am a former Apple employee but working at another software start-up. My house is full of Apple products so I have zero reasons to be biased against, but iMore has been going downhill for me lately. Not the quality of you guys' work because I have respect for most of the writers here, but the objectiveness is nowhere to be found. Apple obviously does no wrong. I am sure I am not the only commenter who mentioned this.

C'mon Rene, Keller called the DOJ actions ludicrous. Let's face that there is a pro-Apple bias at iMore, which is only natural given your relationship with the products.

I going to have to disagree with this article. Apple helped the publishers fix the prices of ebooks. That is blatantly illegal. I think the fact that the publishers all settled before trial speaks volumes. Maybe what Amazon is doing is bad for the long term industry, or maybe the industry needs to evolve with the times. That's another argument but somehow I think the written (or typed) word will be just fine. There are a lot of parallels to the music industry here. Music is still around and plenty of people are still making a lot of money. They may not be making money the same way they used to, they had to evolve with the digital age.

What, specifically, was "the right thing in the wrong way" that Apple did? Was it inducing competitors to collaborate in direct violation of 102 years of law? Or was it leveraging one market (App Store entry) to pressure a player and gain presence in another market (ebooks) in direct violation of 90 years of law?

Similarly, what specifically was "the wrong thing in the right way" Amazon did? Was it purchasing from a producer at the producer's agreed-upon price, and then reselling at its own price, as retailers have done, well, forever?

I might agree the punishment might be too severe for the crime, but to twist the actual rights and wrongs here - that takes an incredibly blinkered view.

Ohhhhhhhhhhhhhh poor Apple......I agree with you Rene...poor Apple.....i will give all my money to support this big company with a big heart. Love you apple.

I have read in full both PROPOSED judgments and yes they are proposals NOT A JUDGMENT. Before making off hand remarks try reading the legal documents. I don't have a problem of Apple losing the case I do have a problem with the DOJ over stepping and going beyond the scope of the original case and reaching into other parts of Apples business that have NO and I repeat NO relevance to the case filed against Apple for the iBook store and e-books. No part of this trial had anything to do with the app store, music, movies, tv only e-books. The judge stated "that she does not seek to paint with a broader brush.” or if you don't understand that, it means the judge does not want to go beyond the iBook store and e-books in this case.

"The opinion explicitly “does not seek to paint with a broader brush.” Id. But that is precisely what plaintiffs’ proposed injunction seeks: to leverage the Court’s findings to obtain an unwarranted and dangerous oversight of Apple’s content businesses."

The government has no business interfering in any of this. Period.

The market will sort it out. That's what markets do.

If the market is based on competition and free-market principals, absolutely yes.

When competitors conspire to fix prices in order to benefit themselves and harm consumers, you no longer have a free market and since the market isn't competitive then a regulating authority has every right, and indeed the obligation to intervene to protect consumers since consumers cannot do so themselves as there is no alternative or competition that could force the market to take action themselves.

Soon, how much are all you posers being paid by Samsung to write these heinous diatribes on Apple sites?
Either admit your full-time Sammy fanboys or we will just assume you're being paid to write such drivel.
Apple did nothing wrong

I think a harsh punishment is appropriate for Apple, though I'd rather see a harsher punishment levied on the publishers, who are more in the wrong and seem to have just gotten off with fines.

The lack of competition in the ebook market as a result of Apple's deals has lead to overly high prices - there's no good cost reason why ebooks should cost as much as, or more than, hardcovers. Unlike physical books, there is almost zero per-unit cost of production. We were being taken for a ride by the publishers (with Apple's help), and the DOJ stepped in, and that's frankly appropriate.

I'm looking forward to ebook prices actually coming down due to actual competition - then I'll start buying them. I haven't yet because they were pretty clearly a price-fixed scam. This whole case has just confirmed that for me.