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Amazon Execs Testifying Against Apple in Price Fixing Case

By - Source: PaidContent | B 24 comments

Apple wanted more access to two Amazon execs testifying against the iPad maker, but was denied.

As the Department of Justice's ebook anti-trust trial against Apple inches closer, the fruity company recently tried to gain more access to two top Amazon ebook executives who agreed to testify on behalf of the government. But Apple was denied by U.S. District Judge Denise Cote who said that their information was "privileged."

According to court documents, Amazon began to seek legal advice back in 2010 when it suspected "the existence of an illegal (possibly criminal) price-fixing conspiracy by the five publishers and one or more retailers." Shortly thereafter two meetings were conducted between senior Amazon executives in early 2011, one of which took place in a "boathouse" at the Seattle residence of Amazon CEO Jeff Bezos.

The Amazon executives claim that these meetings were held to get legal advice on how to "avoid the very liability that the publisher Defendants and Apple are facing now." It's these two meetings that Apple wants access to, claiming that Amazon was plotting a business strategy. The iPad company is also saying that Amazon is hiding the two executives behind the attorney-client "privileged information" shield to hold back information.

"Although the Amazon depositions to date have exposed a glaring hole in the government's case, Apple has been denied meaningful discovery into Amazon's critically important business decision to adopt agency," Apple stated. "Without this evidence, Apple will be gravely prejudiced in its ability to challenge – and disprove – the core allegation that Apple forced Amazon into agency."

At the heart of the entire ebook dispute is the agency model. Before the launch of Apple's iPad tablet, retailers were allowed to sell ebooks at wholesale prices, meaning they could assign any pricetag to the virtual books. To sell Kindle tablets, Amazon offered extremely competitive pricing thus making its ebook reader more attractive. Book publishers felt that their ebooks were worth more, and feared Amazon's overall ebook market dominance.

While developing the iPad (which would also offer ebooks), Apple and five book publishers reportedly agreed to use the agency model which allows the publisher to set the price, not the retailer. With each agency-based purchase, retailers such as Apple and Amazon get a steady 30-percent cut. But Apple wouldn't agree to the agency model unless all other retailers did the same. Once the iPad hit the market, ebook prices began to inflate.

Meanwhile, Amazon had a choice: either use the enforced agency model, or not sell ebooks at all. Given that virtual books are the Kindle ereader's life blood, the online retailer had no choice but to comply. Due to complaints that ebooks prices were abnormally on the rise, the Department of Justice conducted an investigation and uncovered enough evidence to file a lawsuit against Apple and five book publishers in early 2012.

Unable to face the eventual cost, all five book publishers have since settled out of court. Apple is the only accused left standing, and it's not surprising. The two Amazon executives testifying against the company on behalf of the government's lawsuit were placed behind the attorney-client privilege shield last week after Apple insisted it had a right to extract more testimony and documents from them.

Access denied, according to Judge Cote.

In addition to denying Apple's challenge to Amazon's attorney-client privilege, Judge Cote also ordered executives from book publisher Penguin to participate in the proceedings.

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Top Comments
  • 22 Hide
    bllue , March 5, 2013 7:12 PM
    Apple needs to be smacked down for once.
  • 19 Hide
    slabbo , March 5, 2013 7:17 PM
    Apple is so arrogant and seems to be so full of lawyers that they don't think they need to follow the law anymore. Hope they set them straight for all the shady stuff they've been doing.
  • 18 Hide
    ddpruitt , March 5, 2013 7:33 PM
    Apple "Look judge we know we fixed the price but we're Apple, just because we got caught shouldn't mean we have have to pay for it!"
Other Comments
    Display all 24 comments.
  • 22 Hide
    bllue , March 5, 2013 7:12 PM
    Apple needs to be smacked down for once.
  • 19 Hide
    slabbo , March 5, 2013 7:17 PM
    Apple is so arrogant and seems to be so full of lawyers that they don't think they need to follow the law anymore. Hope they set them straight for all the shady stuff they've been doing.
  • 17 Hide
    hero1 , March 5, 2013 7:21 PM
    Talk about tough times. You know Apple is delusional when they are going to court over matters that other players have agreed to settle. They will end up paying dearly and this will surely bring their stock price down even further and compromise their lead in industry with respect to making money. I do believe that it's they are taught a tough lesson.
  • 15 Hide
    bustapr , March 5, 2013 7:27 PM
    it was good to see a well written short, but full summary on what the hell went down. dont really know what a attorney-client privilege is, but it seems apple is screwed beyond belief in this case. Would be nice to see ebook prices go back down to wholesale prices. as far as I remember, the other publishers accused wont be able to adopt an agency model for some time.
  • 18 Hide
    ddpruitt , March 5, 2013 7:33 PM
    Apple "Look judge we know we fixed the price but we're Apple, just because we got caught shouldn't mean we have have to pay for it!"
  • 14 Hide
    brucen13 , March 5, 2013 7:47 PM
    Apple is so used to exclusively restricted products, the Apple Store agency model, and customers that will pay anything for Apple products, it's not surprising that Apple thought they could do the same with ebooks in the real "free marketplace". This is a great example of how the world according to Apple isn't how the real world works.
  • -1 Hide
    pacomac , March 5, 2013 8:20 PM
    Book publishers and writers should be able to set their own prices, not Amazon. Everyone is entitled to earn a living. I write tablet software fora living and charge what I think my software is worth to ensure I make a living out of it. The last thing I would want is someone telling me I can't do that.
  • 5 Hide
    silver565 , March 5, 2013 8:22 PM
    From what I gather from all of this. Amazon clicked onto the price fixing and basically made sure they didn't get sucked into the vortex. Now Apple is having a whinge because they didn't think of that too
  • -3 Hide
    brucen13 , March 5, 2013 8:28 PM
    pacomacBook publishers and writers should be able to set their own prices, not Amazon. Everyone is entitled to earn a living.


    It was Amazon that wants to be able to determine the price, not the other way around. Apple and the accused book publishers were setting the price via the agency model and no one else could acquire the ebooks unless they agreed to the pricing model. Basically Amazon and the US government agree with you.
  • 7 Hide
    mbreslin1954 , March 5, 2013 8:55 PM
    Quote:
    If you're being accused of something you have the right to face youraccuser. This is how it's always been. People can't just make statements about you without you being allowed to cross-examine them.

    And in the case of witnesses, you can't bring in "surprise witnesses" at the last minute without the other party knowing about it (contrary to all the TV shows)."


    What an idiot. Apple knows all about them, has already talked to them, and will get to cross examine the Amazon execs/witnesses to their heart's content -- ONCE THE FREAKING TRIAL COMMENCES!!!

    "the fruity company recently tried to gain MORE access to two top Amazon ebook executives"
  • 2 Hide
    knowom , March 5, 2013 9:21 PM
    silver565From what I gather from all of this. Amazon clicked onto the price fixing and basically made sure they didn't get sucked into the vortex. Now Apple is having a whinge because they didn't think of that too
    I don't like snitches, but in this case I'll make a exception considering I like Apple much less.
  • 3 Hide
    knowom , March 5, 2013 9:26 PM
    ericburnbySo you're OK with Amazon selling e books at a loss in order to get a monopoly in the market by eliminating competitors who can't afford to sell at a loss?Do you actually think Amazon will sell e books at less than wholesale forever? If so I've got a bridge to sell you.
    There is really no reason they couldn't if by whole sale you mean pricing of it's retail softcover counterpart the fact is ebooks are a bit cheaper because they should be you don't have to ship them which is a added cost and you don't have to print them either another added cost and you don't have to pay Apple a licensing fee another added cost.
  • 4 Hide
    bustapr , March 5, 2013 9:27 PM
    ericburnbySo you're OK with Amazon selling e books at a loss in order to get a monopoly in the market by eliminating competitors who can't afford to sell at a loss?Do you actually think Amazon will sell e books at less than wholesale forever? If so I've got a bridge to sell you.

    you must not be understanding how the whole price fixing thing went out. its not just amazon who was affected. it was every major retailer. they were all forced into the agency model. before the ipad, every retailer had big sales and low prices similar to amazon.

    before the ipad, amazon wasnt the monopoly some claimed they were. amazon created the kindle which was just the preffered device by miles and thats the sole reason they were the dominance in the ebook market. right now, B&N is the only other giant ebook seller left competing in the ereader market and they have a solid, competitive product that doesnt crumble in the kindles shadow like in the past. and Ive enjoyed the sales both these retailers have always had(along with now defunct borders). Id say competition will be stronger after this whole trial.
  • 1 Hide
    markheber , March 5, 2013 10:04 PM
    It looks like everybody is missing the point. Every one is talking about price fixing but that is not what the law suit is about. It is about collusion.
    Anybody upstream in the publishing business can legally fix the price of a book. The author can tell the publisher, the publisher can tell the distributor, the distributor can tell the retailer and the retailer can tell the end user what the price is.
    Without collusion everything Apple did was totally legal. With collusion, everything that Apple did was Illegal.
    The plea bargain with publish says that in a few years they can go back to doing exactly what they were doing before. The price fixing and agency model are totally legal if done right.
  • 5 Hide
    whyso , March 5, 2013 10:13 PM
    This is kinda why people pirate books to begin with. Ebooks are great and all but are, for the most part, too expensive for what you are receiving. Most paperback books cost around $7-10. The ebooks of these books should be no more than $4. Why? There are no printing costs, there are no distribution, inventory, or other costs, so why do many ebooks cost as much as the full paperback version. I will refuse to pay any more than $4 for an ebook (read it from the library, etc). (Not to mention the DRM). The author will have lost a paying customer.

    If you charge a fair price for your books people will buy them.

    In my opinion: Typical paperback costs $8.99. Ebook should cost only $4. (the same amount of money goes to the author--publisher--You aren't printing anything so yes, you should be making less).
  • 6 Hide
    dalethepcman , March 5, 2013 10:44 PM
    pacomacBook publishers and writers should be able to set their own prices, not Amazon. Everyone is entitled to earn a living. I write tablet software fora living and charge what I think my software is worth to ensure I make a living out of it. The last thing I would want is someone telling me I can't do that.


    If you tell Amazon they can sell your software/book/song/movie but you get $100 / sale, do you care if Amazon sells it for $1.00?

    The issue isn't the starving writers / publishers, Amazon was paying them a flat rate fee as in my example above. The issue was Apple forcing the publishers hands to either take their business model and force other vendors to use it, or don't sell books on the Apple platform.
  • 4 Hide
    Uberragen21 , March 6, 2013 4:12 AM
    ericburnbySad day for justice. If you're being accused of something you have the right to face your accuser. This is how it's always been. People can't just make statements about you without you being allowed to cross-examine them.And in the case of witnesses, you can't bring in "surprise witnesses" at the last minute without the other party knowing about it (contrary to all the TV shows).But because its Apple suddenly people think its OK. Pathetic.

    You missed the little words that said the case inches closer to trial, meaning it's not in the trial phase yet. The defense does not legally have access to witness who meets with the prosecution before the trial phase. Witness intimidation anyone??? Witnesses are treated differently from evidence (and they may not be a witness, just an expert). You're thinking of the defense and prosecution exchanging evidence prior to the trial phase to help prepare their case; that's called Discovery. Google it.

    Witnesses can only be cross examined during the time they're on the witness stand. Then and only then.

    Knowing the law and thinking you know the law are two entirely different things.
  • 1 Hide
    Uberragen21 , March 6, 2013 4:19 AM
    ericburnbySo you're OK with Amazon selling e books at a loss in order to get a monopoly in the market by eliminating competitors who can't afford to sell at a loss?Do you actually think Amazon will sell e books at less than wholesale forever? If so I've got a bridge to sell you.

    What you just said shows your ignorance. Amazon doesn't sell e-books at a loss, rather that's how they make their money while selling the Kindles at a loss. Those electronics are what is sold lower than the cost to produce them. Get your facts straight...

    "We sell the hardware at our cost, so it is break-even on the hardware. We are not trying to make money on hardware; we want to make money when people use our devices, not when people buy our devices. After you buy Kindle Fire HD, you may use it to buy books, games, movies and so on. So that continuing relationship with the customer is what we hope to make money on over time," said Jeff Bezos, the founder and chief executive officer of Amazon, in an interview with BBC.
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