Amazon: Victim or Aggressor? Issue Will Frame Apple E-book Trial

Photograph by Will Ireland/Future Publishing via Getty Images

Apple and the Department of Justice are set to spar in a closely watched price-fixing trial set for early June, but increasingly, attention in the case is turning to a third party—Amazon. In pre-trial filings, Apple is trying to expose redacted evidence that the company claims will “embarrass” Amazon and show that the retailer engaged in the same activities for which Apple is now on trial.

The claims are set out, in part, in a letter last week from Apple’s law firm, which urges U.S. District Judge Denise Cote to reveal information about Amazon’s pricing as well as “internal discussions about the inferiority” of its Kindle e-reader compared with the iPad. Apple also says the redacted information will help expose the “fiction” that Amazon was “forced” to adopt a new pricing system as a result of a 2010 arrangement between Apple and five big publishers.

This arrangement—known as “agency pricing”—resulted in publishers requiring retailers to sell e-books on a commission basis, in which publishers could set the price. This led the Department of Justice, state governments, and class-action lawyers to sue Apple and the publishers. The latter settled the cases and agreed to pay out millions, but Apple is holding its ground.

Apple argues that the Department of Justice is wrong to portray Amazon as a victim, along with consumers, of a conspiracy to raise prices. Instead, the company claims that Amazon was contemplating agency pricing, too, and was pleasantly surprised when the publishers took it up on their own. Apple is also using colorful e-mails obtained from Amazon executives to make its point:

”I guess what we never figured in was the idea that five publishers would band together and insist on receiving worse terms,” the e-mail said. “And then Amzn would be ‘cornered’ into accepting them.”

“Hysterical, isn’t it?” the Amazon executive replied. “Jedi Mind Tricks here in Seattle.”

The e-mail exchange was reported by Reuters’ legal reporter, Alison Frankel, whose recent analysis portrayed Amazon as the “elephant in the (court)room.” Her report adds that Judge Cote stated that she doesn’t want the trial “distorted by a larger battle between two commercial giants.”

What do others think? Apple’s view is likely to find support in at least some quarters. The publishing community continues to fume about Amazon’s enormous clout in the book business. Meanwhile, some copyright lawyers have joked to me in the past that Amazon should send U.S. Attorney General Eric Holder a holiday card for suing Apple and the publishers.

Amazon will get to offer it own views directly; its executives, along with publishing executives, will be among the witnesses testifying on behalf of the Department of Justice.

For now, Judge Cote has decided that the evidence Apple is seeking will remain redacted. But the issue will no doubt arise again if the trial, scheduled to begin on June 3, goes ahead as planned. There is a pretrial conference planned for later this Thursday—we’ll let you know if any new twists emerge.

Here’s the letter from Apple’s law firm.

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