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Seven juicy allegations in the Apple price-fixing lawsuit

Some of the most damaging excerpts from of the U.S. Department of Justice's e-book price-fixing case against Apple

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Backroom deal Starting no later than September of 2008 and continuing for at least one year, the Publisher Defendants' CEOs (at times joined by one non-defendant publisher's CEO) met privately as a group approximately once per quarter. These private meetings provided the Publisher Defendants' CEOs the opportunity to discuss how they collectively could solve “the $9.99 problem.” These meetings took place in private dining rooms of upscale Manhattan restaurants and were used to discuss confidential business and competitive matters, including Amazon's e-book retailing practices. No legal counsel was present at any of these meetings. In September 2008, Penguin Group CEO John Makinson was joined by Macmillan CEO John Sargent and the CEOs of the other four large publishers at a dinner meeting in “The Chefs Wine Cellar,” a private room at Picholene (pictured). The CEOS returned to Picholene on at least one other occasion.

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Customer pays more As Apple CEO Steve Jobs described his company's strategy for negotiating with the Publisher Defendants, “We'll go to [an] agency model, where you set the price, and we get our 30 per cent, and yes, the customer pays a little more, but that's what you want anyway.” Apple was perfectly willing to help the Publisher Defendants obtain their objective of higher prices for consumers by ending Amazon's “$9.99” price program as long as Apple was guaranteed its 30 per cent margin and could avoid retail price competition from Amazon.

Beck Diefenbach/Reuters

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Apple Chief Executive Officer Steve Jobs, inset bottom, introduces some of the publishing houses that will license iBooks during the launch of Apple's new tablet iPad computing device in San Francisco, California, in this January 27, 2010. According to the DOJ, by the time Apple arrived for a second round of meetings during the week of December 21, 2009, the agency model had become the focus of its discussions with all of the Publisher Defendants. In these discussions, Apple proposed that the Publisher Defendants require all retailers of their e-books to accept the agency model. Apple thereby sought to ensure that it would not have to compete on retail prices. The proposal appealed to the Publisher Defendants because wresting pricing control from Amazon and other e-book retailers would advance their collusive plan to raise retail e-book prices.

KIMBERLY WHITE/Kimberly White/Reuters, and Paul Sakuma/AP files

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All about Amazon As one Publisher Defendant executive acknowledged Amazon's bargaining strength, “we've always known that unless other publishers follow us, there's no chance of success in getting Amazon to change its pricing practices.” In the same e-mail, the executive wrote, “without a critical mass behind us Amazon won' t 'negotiate,' so we need to be more confident of how our fellow publishers will react ...” Pictured here, Amazon CEO Jeff Bezos displays a Kindle during an interview Tuesday, Oct. 6, 2009, in Cupertino, Calif.

Ben Margot/Ben Margot/AP

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While the Publisher Defendants were discussing e-book distribution terms with Apple during the week of January 18, 2010, Amazon met in New York City with a number of prominent authors and agents to unveil a new program under which copyright holders could take their e-books directly to Amazon – cutting out the publisher – and Amazon would pay royalties Of up to 70 per cent, far in excess of what publishers offered. For example, Penguin USA CEO David Shanks reported being “really angry” after “hav[ing] read [Amazon's] announcement.” After thinking about it for a day, Mr. Shanks (pictured) concluded, “[o]n Apple I am now more convinced that we need a viable alternative to Amazon or this nonsense will continue and get much worse.” Another decision maker stated he was “p****d” at Amazon for starting to compete directly against the publishers and expressed his desire “to screw Amazon.”

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If you have nothing to hide... Publisher Defendants took steps to conceal their communications with one another, including instructions to “double delete” e-mail and taking other measures to avoid leaving a paper trail. [This is allegedly a practice that after deleting an e-mail, you also empty your exchange ‘trash can’]

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The government's conclusion: "Now that the Publisher Defendants control the retail prices of e-books – but Amazon maintains control of its print book retail prices – Publisher Defendants' e-book prices sometimes are higher than Amazon's prices for print versions of the same titles." We found this example: MacMillan title "Killing Lincoln" by Bill O'Reilly and Martin Dugard. List price $28, Amazon price $16.80. Kindle edition: $16.52; and on iTunes: 14.99. Strangely, MacMillan is selling the e-book from its own store for $12.99


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