Among the relief requested by the department in the lawsuit is the nullification of
the Apple Agency Agreements and «any agreement between a Publisher Defendant and an ebook retailer that restricts, limits, or impedes the ebook retailer's ability to set, alter or reduce the retail price of any ebook or to offer price or other promotions to encourage consumers to purchase any ebook, or contains a retail price MFN (most favored nation status.)
In January 2010, Apple sent to each Publisher Defendant substantively identical term sheets that would form the basis of the nearly identical agency agreements that each Publisher Defendant would sign with Apple («
Apple Agency Agreements»).
Jobs later confirmed his understanding that
the Apple Agency Agreements fulfilled the publishers» desire to increase prices for consumers.
To the extent Publisher Defendants expressed doubts during the negotiations about whether to sign
the Apple Agency Agreements, Apple persuaded the Publisher Defendants to stay with the others and sign up.
The volume of Publisher Defendants» communications among themselves intensified during the ensuing negotiation of
the Apple Agency Agreements.
The negotiations between Apple and Publisher Defendants culminated in all five Publisher Defendants signing
the Apple Agency Agreements within a three - day span, with the last Publisher Defendant signing on January 26, 2010.
The Apple Agency Agreements contained two primary features that assured Publisher Defendants of their ability to wrest pricing control from retailers and raise e-book retail prices above $ 9.99.
Two days later, Penguin and two other Publisher Defendants signed
Apple Agency Agreements.
Second,
the Apple Agency Agreements contained pricing tiers (ostensibly setting maximum prices) for e-books — virtually identical across the Publisher Defendants» agreements — based on the list price of each e-book's hardcover edition.
The Apple Agency Agreements included MFN clauses that ensured Publisher Defendants would take away retail pricing control from all other e-book retailers.
Indeed, at the time the Publisher Defendants snatched retail pricing authority away from Amazon and other e-book retailers, not one of them had built an internal retail pricing apparatus sufficient to do anything other than set retail prices at
the Apple Agency Agreements» ostensible caps.
The Publisher Defendants» collective adoption of
the Apple Agency Agreements allowed them (facilitated by Apple) to raise, fix, and stabilize retail e-book prices in three steps: (a) They took away retail pricing authority from retailers; (b) they then set retail e-book prices according to the Apple price tiers; and (c) they then exported the agency model and higher retail prices to the rest of the industry, in part to comply with the retail price MFN included in each Apple Agency Agreement.
d. Declare null and void
the Apple Agency Agreements and any agreement between a Publisher Defendant and an e-book retailer that restricts, limits, or impedes the e-book retailer's ability to set, alter, or reduce the retail price of any e-book or to offer price or other promotions to encourage consumers to purchase any e-book, or contains a retail price MFN;
By entering
the Apple Agency Agreements, each Publisher Defendant effectively agreed to require all of their e-book retailers to accept the agency model.
After executing
the Apple Agency Agreements, the Publisher Defendants all then quickly acted to complete the scheme by imposing agency agreements on all their other retailers.
To begin to restore competition to the e-books marketplace, the proposed Final Judgment requires the Settling Defendants to terminate immediately
the Apple Agency Agreements that they used to collusively raise and stabilize e-book prices across the industry.
In fact, once
the Apple Agency Agreements took effect, Publisher Defendants almost uniformly set e-book prices to maximum price levels allowed by each tier.
Defendants knew that the inclusion of the Price MFN in
the Apple Agency Agreements would lead to the adoption of the agency model by all of Publisher Defendants» e-book retailers.
Millions of e-books that would have sold at retail for $ 9.99 or for other low prices instead sold for the prices indicated by the price schedules included in
the Apple Agency Agreements — generally, $ 12.99 or $ 14.99.
The final version of the pricing tiers in
the Apple Agency Agreements contained the $ 12.99 and $ 14.99 price points for bestsellers, discussed earlier, and also established prices for all other newly released titles based on the hardcover list price of the same title.
The proposed Final Judgment therefore broadly defines banned «Price MFNs» to include not only MFNs requiring publishers to match retail e-book prices across e-book retailers (the MFNs in
the Apple Agency Agreements), but also MFNs requiring publishers to match the wholesale prices at which e-books are sold to e-book retailers, and MFNs requiring publishers to match the revenue share or commission given to other e-book retailers.
As its battle with Amazon continued, Macmillan knew that, because the other Publisher Defendants, via
the Apple Agency Agreements, had locked themselves into forcing agency on Amazon to advance their conspiratorial goals, Amazon soon would face similar edicts from a united front of Publisher Defendants.
Both Penguin and the other Publisher Defendant signed
their Apple Agency Agreements later that day.
Apple flatly refused to sell the holdout publisher's e-books unless and until it agreed to an agency relationship substantially similar to the arrangement between Apple and the Publisher Defendants defined by
the Apple Agency Agreements.
But, as set forth in provisions described below, the proposed Final Judgment will ensure that the new contracts will not be set under the collusive conditions that produced
the Apple Agency Agreements.
g. Raised the retail prices of their newly released and bestselling e-books to the agreed prices — the ostensible price caps — contained in the pricing schedule of
their Apple Agency Agreements.
These telephone communications increased significantly during the two - month period in which the Publisher Defendants considered and entered
the Apple Agency Agreements.
The Apple Agency Agreements took effect simultaneously on April 3, 2010 with the release of Apple's new iPad.
Apple understood that the final
Apple Agency Agreements ensured that the Publisher Defendants would raise their retail e-book prices to the ostensible limits set by the Apple price tiers not only in Apple's forthcoming iBookstore, but on Amazon.com and all other consumer sites as well.
To persuade one of the Publisher Defendants to stay with the others and sign an agreement, Apple CEO Steve Jobs wrote to an executive of the Publisher Defendant's corporate parent that the publisher had only two choices apart from signing
the Apple Agency Agreement: (i) Accept the status quo («Keep going with Amazon at $ 9.99»); or (ii) continue with a losing policy of delaying the release of electronic versions of new titles («Hold back your books from Amazon»).
Apple thus knowingly served as a critical conspiracy participant by allowing the Publisher Defendants to signal to one another both (a) which agency terms would comprise an acceptable means of achieving their ultimate goal of raising and stabilizing retail e-book prices, and (b) that they could lock themselves into this particular means of collectively achieving that goal by all signing
their Apple Agency Agreement.
Not exact matches
Asked if the higher pricing of e-books, in the wake of publishers» new
agency agreements with Amazon, had also figured in the slowdown of e-book sales, Reidy noted that in the wake of publisher settlements over e-book price - fixing charges in the case with
Apple, «I'm not supposed talk about pricing,» but added that «our data says that our pricing is effective.»
The company's hand had been forced by a preceding announcement that
Apple had accepted an
agency agreement with five of the six largest publishers.
The DOJ's suit builds a compelling case that, through a combination of phone calls, e-mails, and secret meetings in the wine cellars of upscale Manhattan restaurants, five of the six big publishers (Macmillan, HarperCollins, Hachette, Penguin, and Simon & Schuster) arranged
agreements with
Apple to enter into
agency - model publishing, wherein retailers act as retail agents (and take 30 % of every sale).
What is wrong is the collusion that is alleged to have taken place immediately prior to the big five publishers and
Apple entering into the
agency model
agreement, an
agreement that then had to be made with other retailers or those same publishers would be in violation of their contract with
Apple.
In light of this new
agency commission model where Amazon and
Apple will no longer carry the product per se but have an
agreement to sell titles via their site in exchange for a 30 % commission on the sale (see earlier post to get up to speed), suddenly agents need to re-examine the whole definition of net receipts in publishing contracts.
The proposed final settlement would require the settling publishers to terminate existing
agreements with
Apple and would end
agency pricing for those publishers for two years.
Defendants» conspiracy and
agreement to raise and stabilize retail e-book prices by collectively adopting the
agency model and
Apple price tiers led to an increase in the retail prices of newly released and bestselling e-books.
I thought with that case they also required the publishers
agency agreements to be scrapped and they had to renegotiate contracts to sell ebooks with
Apple, Amazon and other ebook distributors.
Amazon directly opposes the price fixing «
Agency Model» while
Apple made closed door
agreements with publishers when it launched their own online digital bookstore.
HarperCollins only agreed to an
agency agreement with
Apple, he said, because News Corp wanted to retain a good relationship with the company.
He also alleged that Amazon initiated discussions about changing the pricing model with publishers before
Apple signed its own
agency agreements.
Buterman argued that
Apple conspired with publishers to move to
agency agreements (in which the publisher sets an ebook's retail price and the retailer takes a cut) with
Apple and then forced other retailers — namely Amazon — to move to
agency as well.
Like the U.S. settlement, the proposed EU settlement requires
Apple and settling publishers to terminate their
agency agreements and, for two years, prevents publishers from «restrict [ing], limit [ing] or imped [ing] ebook retailers» ability to set, alter or reduce retail prices for ebooks and / or to offer discounts or promotions.»
Earlier Wednesday, Simon & Schuster CEO Carolyn Reidy testified that after the CBS Corp unit decided to sign
Apple's
agency agreement, she called Amazon to say her company would «want to change business terms with them.»
While wholesale
agreements gave publishers about 50 percent of the hardcover list price on e-book sales,
Apple's
agency deals provided 70 percent of the final e-book retail price.
After each round of negotiations with
Apple over the terms of their
agency agreements, Publisher Defendants» CEOs immediately contacted each other to discuss strategy and verify where each stood with
Apple.
The EC also calls attention to most - favored nation clauses (MFNs) in
Apple's
Agency agreements: «to avoid lower revenues and margins for their ebooks on the iBookstore, the publishers had to pressure other major e-book retailers offering ebooks to their consumers in the EEA to adopt the agency model.&
Agency agreements: «to avoid lower revenues and margins for their ebooks on the iBookstore, the publishers had to pressure other major e-book retailers offering ebooks to their consumers in the EEA to adopt the
agency model.&
agency model.»
The evidence proves that
Apple acted independently, to further its own legitimate business goals, in negotiating
agency agreements with the publishers to enter the e-book market,» the company said in a court filing.
He explained that, under the
agreements,
Apple would «go to [an]
agency model, where [publishers] set the price, and we get our 30 %, and yes, the customer pays a little more, but that's what [publishers] want anyway.»