Apple 2.0

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Apple keeps it simple: The DOJ's case is 'simply not true'

April 13, 2012: 6:13 AM ET

Cupertino breaks its silence, laying out its legal defense in four sentences

The company's response to US v. Apple Inc. et al., when it came Thursday evening, was as succinct and carefully crafted as any Apple (AAPL) marketing slogan.

What the Department of Justice characterized as a "per se violation" of the Sherman Antitrust Act, Apple is going to paint as an act of liberation.

We got our copy the company's four-sentence response to the DOJ complaint from Natalie Kerris in Apple PR. Let's break it down.

1.  "The DOJ's accusation of collusion against Apple is simply not true."

Apple is famous for keeping things simple and that's what it is trying to do here. The government, it asserts, is flat-out wrong. Note, however, that the statement is addressing only the accusation of collusion -- the charge that Apple and five publishers conspired to fix e-book prices and reduce competition. The DOJ seems to have an abundance of evidence that the publishers conspired -- by phone, e-mail and face-to-face at fancy New York restaurants -- to do something about "the $9.99 problem" (i.e., the fact that Amazon (AMZN) was selling their books below cost). There's no evidence in the government's 36-page complaint, however, that Apple ever colluded with -- or even talked to -- its own competitors about the price of e-books.

2. "The launch of the iBookstore in 2010 fostered innovation and competition, breaking Amazon's monopolistic grip on the publishing industry."

Here Apple takes on the role of the hammer-throwing athlete in the 1984 Big Brother commercial. The government's antitrust division, Apple claims, has it backwards. Amazon, with its 90% share of the e-book market, was the monopolist squeezing the publishers in its anticompetitive grip. Apple was the liberator, fostering (not suppressing) competition and innovation. The proof that it worked: two years later, Amazon's share of the e-book market, according to some reports, is down to 60%.

3. "Since then customers have benefited from eBooks that are more interactive and engaging."

The DOJ's case rests on the assertion that the alleged conspiracy harmed consumers by raising e-book prices. Apple is trying to move the goal posts. It's saying that sticker price is just one measure of benefit. The e-books that once cost $9.99 and now cost a few dollars more are a better product in ways that are harder to measure but no less valuable to consumers. Besides, do you expect Apple to miss an opportunity to mention interactivity and engagement, virtues closely associated with its brand?

4. "Just as we've allowed developers to set prices on the App Store, publishers set prices on the iBookstore."

"Set prices? Us? Better talk to our co-defendants about that. We're just humble iBooksellers, taking our 30% cut." Apple here is invoking the business model that worked so famously for the App Store -- which as any judge will know unleashed a flood of innovation and competition. Are the DOJ's lawyers going to make the case that there was something wrong with that?

Pull up your lawn chairs. This is going to be an interesting fight.

See also: The Apple e-book conspiracy: Three days in January

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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