Macmillan, Penguin Finally Respond to DoJ eBook Lawsuit

Macmillan and Penguin have officially denied any wrongdoings in the recent eBook price fixing fiasco surrounding the original Apple iPad. The two book publishers have filed their separate responses to a lawsuit submitted by the Department of Justice back in April which claim they conspired with Apple to raise the price of eBooks just before the launch of the popular tablet.

"Macmillan did not participate in any illegal conspiracy," Macmillan’s filing states (pdf). "The lack of direct evidence of conspiracy cited in the Government’s Complaint is telling…[it is] necessarily based entirely on the little circumstantial evidence it was able to locate during its extensive investigation, on which it piles innuendo on top of innuendo, stretches facts and implies actions that did not occur and which Macmillan denies unequivocally."

The company also states that Apple proposed Agency terms on a "take it or leave it" basis. Unlike the wholesale model which allows retailers to set their own prices, the Agency model sees publishers setting their own pricing, forcing retailers to follow. Macmillan claims the decision to move to the Agency model -- to accept Apple's "take it or leave it" proposal -- was made by CEO John Sargent alone.

Penguin offered a longer response, claiming that the company began to consider the agency model on a serious note when Apple proposed it as a method of doing business for the then-proposed iBookstore. Penguin said it actually offered the wholesale/retail distribution agreement to Apple on January 4, 2010. But the iPad company rejected the proposal, and offered up the Agency model as a "take it or leave it" scenario instead.

"[Penguin] admits that it believed that Apple could not have a successful iBookstore without the participation of and supply of books from other publishers, because if the iBookstore’s inventory was limited to only a small percentage of available eBooks, the iBookstore would almost certainly fail," reads Penguin's response (pdf). "Penguin sought assurances from Apple that Apple could deliver the breadth of participation Penguin felt was necessary for a successful eBook store."

As with the reply submitted by Macmillan, Penguin claims that many publisher conversations cited by the Department of Justice suit had nothing to do with the Agency model. Instead, those conversations related to participation in the U.S. and UK eBook joint ventures aNobii and Bookish. However the publisher defends the Agency model, claiming that it doesn't eliminate price competition. The company even notes that the iPad changed the eBook sector by supporting an enhanced format.

"There is more dynamic pricing of eBooks, which has resulted in lower consumer prices on many, many eBook titles, more robust competition at the device level in terms of both the cost and variety of eReading devices, handsome and imaginative enhanced, full-color eBooks, which did not even exist as a category before Apple introduced the iPad, and more vibrant and differentiated marketing of eBooks by Penguin’s agents, all to the benefit of consumers," the filing reads.

Macmillan and Penguin are the only two publishers that have chosen to fight the DoJ's price-fixing lawsuit -- all others have settled out of court. Apple has naturally chosen to fight as well, and was the first to respond to the lawsuit, calling it fundamentally flawed.

"Apple's entry into e-book distribution is classic pro-competitive conduct [that created competition where none existed]," Apple said in its court papers. "For Apple to be subject to hindsight legal attack for a business strategy well-recognized as perfectly proper sends the wrong message to the market. The government's complaint against Apple is fundamentally flawed as a matter of fact and law."