Steve Jobs’ arrogance was part and parcel of who he was. It has now come back to bite his company on the butt as a judge now forces Apple to suck it up and let the market decide the price of eBooks. This is a black and white case where Apple bullied the publishing world to control eBook pricing.
US District Court Judge Denise Cotes had written her opinion of the anti-trust lawsuit brought by the government in July of this year. It is comprehensive and well written meaning that it would be hard for an appellate court judge to overturn her judgement. Essentially, Apple was damned, and it’s easy to see why when you look at the case in totality:
Apple and the Publisher Defendants shared one overarching interest — that there be no price competition at the retail level. Apple did not want to compete with Amazon (or any other e-book retailer) on price; and the Publisher Defendants wanted to end Amazon’s $9.99 pricing and increase significantly the prevailing price point for e-books. With a full appreciation of each other’s interests, Apple and the Publisher Defendants agreed to work together to eliminate retail price competition in the e-book market and raise the price of e-books above $9.99.”
Jobs’ role in the affair proved damning in the government case. However, Jobs was also suffering through his illness at the time and Apple’s executives were complicit in pushing the company’s agenda aggressively. They played up the publishers’ fears of Amazon, even though they were offering to replace Amazon the bully with Apple the bully. The carrot was, obviously, more margin and money in the co-conspirators pockets:
On January 27, Jobs launched the iPad. As part of a beautifully orchestrated presentation, he also introduced the iPad’s e-reader capability and the iBookstore. He proudly displayed the names and logos of each Publisher Defendant whose books would populate the iBookstore. To show the ease with which an iTunes customer could buy a book, standing in front of a giant screen displaying his own iPad’s screen, Jobs browsed through his iBooks “bookshelf,” clicked on the “store” button in the upper corner of his e-book shelf display, watched the shelf seamlessly flip to the iBookstore.
When asked by a reporter later that day why people would pay $14.99 in the iBookstore to purchase an e-book that was selling at Amazon for $9.99, Jobs told a reporter, “Well, that won’t be the case.” When the reporter sought to clarify, “You mean you won’t be 14.99 or they won’t be 9.99?” Jobs paused, and with a knowing nod responded, “The price will be the same,” and explained that “Publishers are actually withholding their books from Amazon because they are not happy.”
With that statement, Jobs acknowledged his understanding that the
Publisher Defendants would now wrest control of pricing from Amazon and raise e-book prices, and that Apple would not have to face any competition from Amazon on price.
The import of Jobs’s statement was obvious. On January 29, the General Counsel of S&S wrote to Reidy that she “cannot believe that Jobs made the statement” and considered it “[i]ncredibly stupid.”
The final instructions on the outcome are documented below. In a nutshell:
Apple shall not enter into or maintain any agreement with an eBook Publisher where such an agreement will increase, fix, or set the price at which other eBook Retailers can acquire or sell eBooks.
The enforcement will come through external monitoring of Apple. According to Assistant Attorney General Bill Baer:
The monitor, whose salary and expenses will be paid by Apple, will work with an internal antitrust compliance officer who will be hired by and report exclusively to the outside directors comprising Apple’s audit committee. The antitrust compliance officer will be responsible for training Apple’s senior executives about the antitrust laws and ensuring that Apple abides by the relief ordered by the court.
I am surprised that Apple is not getting reamed by consumers more on this issue. This is clearly an example of an 800 pound gorilla wanting to abuse its power, and there is nothing here that shows any love or concern for its beloved users. You can feel the disdain in the approach taken by Apple’s executives at the time.