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The Steve Jobs video that sealed Apple's fate in the DOJ case
Apple yesterday came up on the losing end of a decision from US District Judge Denise Cote who ruled that Apple did, in fact, collude to artificially raise the price of e-books. In looking over the decision, I found it interesting that statements made by Steve Jobs were construed as compelling evidence in the eyes of Cote. Compelling evidence of Apple's participation in the conspiracy came from the words uttered by Steve Jobs, Apple's founder, CEO, and visionary. Apple has struggled mightily to reinterpret Jobs's statements in a way that will eliminate their bite. Its efforts have proven fruitless. Jobs's statements to James Murdoch that he understood the Publishers' concerns that "Amazon's $9.99 price for new releases is eroding the value perception of their products . . . and they do not want this practice to continue," and that Apple was thus "willing to try at the [$12.99 and $14.99] prices we've proposed," underscored Apple's commitment to a scheme with the Publisher Defendants to raise e-book prices. Jobs's purchase of an e-book for $14.99 at the Launch, and his explanation to a reporter that day that Amazon's $9.99 price for the same book would be irrelevant because soon all prices will "be the same" is further evidence that Apple understood and intended that Amazon's ability to set retail prices would soon be eliminated. When Jobs told his biographer the next day that, in light of the MFN, the Publisher Defendants "went to Amazon and said, 'You're going to sign an agency contract or we're not going to give you the books,'" Jobs was referring to the fact that Sargent was in Seattle that very day to deliver Macmillan's ultimatum to Amazon. Cote again stresses that Apple was unable to persuasively explain away Jobs' comments as being benign. In reaching the conclusion that Jobs was aggressively trying to get publishers to raise the price of e-books across the board, Cote not only relied on emails from Jobs, but also the aforementioned video where Jobs smugly told Walt Mossberg that the price of e-books on Amazon will be the same as the price of e-books on Apple's iBookstore. The damning video, which was shot by Kara Swisher on her Flipcam, is below. The pertinent part of the video begins at 1:54 when Mossberg curiously asks Jobs why someone would buy an e-book for $14.99 from Apple when they can get it for $9.99 from Amazon. "The prices will be the same," Jobs explained, before adding that "publishers are actually withholding" books from Amazon because they aren't happy with the terms of their contract. So just how damning was this video? Well, Cote cited it as "compelling evidence" in her decision, and we should also point out that Simone & Schuster executives, upon being made aware of the video, were none too pleased with Jobs' remarks, going so far as to label them "incredibly stupid." The following is a slide from the DOJ's initial presentation during the trial.
Judge finds Apple guilty of fixing e-book prices (Updated)
According to Reuters, US District Judge Denise Cote has ruled against Apple in its big e-book price-fixing trial. The judge found that Apple conspired to raise the retail price of e-books and will now face a trial to determine damages. Update: Both Apple and the Department of Justice have released statements about this decision, according to AllThingsD. Not surprisingly, Apple is disappointed with the ruling and will appeal, while the DOJ is pleased. Apple spokesman Tom Neumayr confirmed the company will appeal and says, "Apple did not conspire to fix e-book pricing and we will continue to fight against these false accusations. When we introduced the iBookstore in 2010, we gave customers more choice, injecting much-needed innovation and competition into the market, breaking Amazon's monopolistic grip on the publishing industry. We've done nothing wrong and we will appeal the judge's decision." Assistant Attorney General Bill Baer writes, "This result is a victory for millions of consumers who choose to read books electronically ... Companies cannot ignore the antitrust laws when they believe it is in their economic self-interest to do so. This decision by the court is a critical step in undoing the harm caused by Apple's illegal actions."
US federal judge rules Apple conspired to raise e-book prices
Following a non-jury trial that ended on June 20th, US District Judge Denise Cote has ruled that Apple conspired to raise the retail prices of e-books, according to a Reuters report published this morning. Apple has been at the focus of the Manhattan-based antitrust trial, which began last month, with publishers Macmillan and Penguin Group named as co-defendants. The violation here centered on Apple's agency pricing model, in which publishers set the price of each book and give sellers a 30 percent cut, rather than a traditional wholesale model in which retailers set the pricing at their own stores. Eddy Cue, Apple's SVP of Internet Software and Services, who was tagged as the "chief ringleader of the conspiracy" by the DOJ, went on the record earlier this year to say that some prices were inflated since the launch of the iBookstore in April of 2010 -- a statement which likely didn't help Cupertino's case. A trial for damages will reportedly follow soon. Update: TechCrunch has received the below statement from an Apple spokesperson. Apple did not conspire to fix ebook pricing and we will continue to fight against these false accusations. When we introduced the iBookstore in 2010, we gave customers more choice, injecting much needed innovation and competition into the market, breaking Amazon's monopolistic grip on the publishing industry. We've done nothing wrong and we will appeal the judge's decision.
Apple tells price fixing courtroom it owns 20 percent of the e-book market
Apple director Keith Moerer said in court on Tuesday that the company holds about 20 percent of the US e-book market, double the size commonly assumed. The revelation came after the Department of Justice tried to bolster its price fixing case against the company by asserting that "Apple forgot to focus on customers, that's why the iBookstore is a failure." Moerer responded that the online store has consistently held a 20 percent share since just after launching, adding that "sales grew 100 percent last year at the iBookstore and it had over 100 million customers." The government will continue trying to prove that Apple colluded with publishers like Macmillan and Harper Collins -- who settled out of court -- with testimony later today from Senior VP Eddy Cue.
US Justice Department clears Softbank acquisition of Sprint
Softbank and Sprint have been on pins and needles ever since January, when the US Department of Justice asked the FCC to delay the carriers' merger as it scrutinized the deal over national security concerns. The two networks can breathe a little easier this weekend, as the DOJ just dropped its request for more time. There's "no objection" to the acquisition following a review, the agency says. Not that the companies are completely out of the woods: the FCC has to approve the buyout, and there's still the small matters of Dish's bids for both Sprint and Clearwire. Softbank may not want to drop its backup plan just yet.
Apple/DOJ e-book price-fixing trial begins today
The Apple e-book price-fixing trial is set to begin today in New York, according to Reuters. The trial begins 14 months after the US Department of Justice accused Apple and five other book publishers of fixing the cost of e-books. In April 2012 the DOJ accused Apple, Penguin, HarperCollins, Simon & Schuster, the Hachette Book Group and MacMillan of conspiring to fix the prices of e-books in order to break the stranglehold Amazon had on the market. Though the five book publishers decided to settle out of court, Apple has refused to do so. When asked about a settlement, CEO Tim Cook has said Apple was "...not going to sign something that says we did something we didn't do." The Department of Justice is not seeking financial damages from Apple if the government wins the case. Instead they are looking for a legal ruling that will block Apple from making similar arrangements with third-party companies in the future.
Mobile Miscellany: week of April 22nd, 2013
If you didn't get enough mobile news during the week, not to worry, because we've opened the firehose for the truly hardcore. This week, a familiar smartphone leaked that's said to join the prepaid ranks at Verizon Wireless, AT&T swung back against the DOJ, and Rogers issued its quarterly earnings. These stories and more await after the break. So buy the ticket and take the ride as we explore all that's happening in the mobile world for this week of April 22nd, 2013.
DOJ identifies lower frequency spectrum as key to wireless competition
The Department of Justice has provided the FCC with new recommendations for governing spectrum auctions, and with a heavy emphasis on leveling the playing field, the findings are likely to draw the ire of AT&T and Verizon. In its briefing, the DOJ made its case that the nation's two largest carriers currently hold market power, which is due to the heavy concentration of lower frequency spectrum (below 1,000MHz) allocated to the two incumbents. According to DOJ officials, "This results in the two smaller nationwide carriers having a somewhat diminished ability to compete, particularly in rural areas, where the cost to build out coverage is higher with high-frequency spectrum." Although the DOJ never came right out and said it, one can easily surmise that it's guiding the FCC to establish rules that favor smaller carriers -- namely Sprint and T-Mobile -- in future low-frequency spectrum auctions. In the DOJ's opinion, an incumbent carrier would need to demonstrate both compelling evidence of capacity constraints and an efficient use of its current licenses in order to gain additional lower frequency spectrum. Otherwise, the opportunity exists for AT&T and Verizon to snap up licenses simply in attempt to harm competitors. Given that the FCC and DOJ share the responsibility of ensuring competition in the marketplace, it seems unlikely that this latest brief will fall on deaf ears.
DoJ now in favor of using search warrants to access user email
The United States Justice Department seems to be listening to cries from Google (among others) that the 1986 ECPA (Electronic Communications Privacy Act) should be revised to reflect the vastly different universe that we now live in. DoJ attorney Elana Tyrangiel testified before the US House Judiciary Subcommittee on Crime, Terrorism, Homeland Security, and Investigations today, and in a nutshell, she now seems willing to think about the use of search warrants to access all types of email. Previously, the entity wanted the use a far less strict method for gaining access -- giving less privacy to opened emails or emails that were over half a year old. In part, she stated: "We agree, for example, that there is no principled basis to treat email less than 180 days old differently than email more than 180 days old. Similarly, it makes sense that the statute not accord lesser protection to opened emails than it gives to emails that are unopened." Certainly, this is a step in the right direction, but we're a long way from having a genuine solution. We'll be covering the saga as it unfolds, but for now, have a look at the full brief in the source below.
DOJ lets waiting period expire on T-Mobile / MetroPCS merger, hints it's good to go
We're sure that MetroPCS and T-Mobile USA executives were on pins and needles wondering whether or not their proposed merger would clear all the regulatory hurdles. While they're not officially free and clear, the Department of Justice has given a strong hint that the carrier union will go through. The government branch just let the mandatory waiting period expire without raising any objections; if it had thought there were serious antitrust issues, it would have piped up by now. Before anyone pops the champagne corks, though, there's still a number of formalities -- the Committee on Foreign Investment, the FCC and the companies' shareholders still need to sign off on the deal, which could take weeks or longer. Considering the troubles T-Mobile had the last time it tried a merger, though, waiting will seem like a walk in the park.
Macmillan settles up with DoJ, Apple now stands alone in e-book price fixing case
It took awhile to read the writing on the wall, but Macmillan has finally settled the antitrust lawsuit brought by the US Justice Department for the publisher's alleged e-book price fixing. In doing so, Macmillan joins Hachette, HarperCollins, Simon & Schuster and Penguin in choosing not to go to trial against the DoJ's lawyers. It's an about-face from Macmillan's initial stance in settlement negotiations, when it claimed that the DoJ's terms were far too onerous. Why settle now? Company CEO John Sargent told the Wall Street Journal that the company changed its tune not because it was guilty, but "because the potential penalties became too high to risk even the possibility of an unfavorable outcome." Should the settlement terms be approved by the court, retailers will be able to discount Macmillan titles, regardless of existing contracts, for 23 months starting from December 18, 2012. With Macmillan bowing out, Apple remains as Uncle Sam's lone legal opponent at the trial scheduled in June. Given Apple's staunch denial of wrongdoing and general willingness to litigate, it seems we may be in for some more legal fireworks this summer.
US Justice Department asks FCC to delay Sprint's merger with Softbank (update: Sprint statement)
It appears that Dish wasn't the only one who wants the FCC to put the brakes on Softbank's merger with Sprint. Bloomberg reports that the US Justice Department has just requested that the FCC delay the deal as well. No word on why governmental lawyers are making the request, but we'll update this post as soon as more information is available. Update: While the DOJ has recommended that the FCC delay its approval of the deal due to national security concerns, it turns out that Dish has decided not to stand against the merger, after all. So, Sprint and Softbank have exchanged a private sector problem for a governmental one. The DOJ's scrutiny certainly provides a significant hurdle for the deal to clear, but it doesn't necessarily mean that the two telcos can never be together. We'll have to wait and see whether Uncle Sam gives the merger its final stamp of approval. Update 2: Sprint has issued a statement on the matter: 'This is a routine request when working with the CFIUS agencies regarding national security." So, it seems that the folks in Overland Park aren't overly concerned with the DOJ's snooping.
DOJ declines to reveal policy memos on GPS tracking
The US Supreme Court might have ruled last year that GPS tracking is equivalent to a search, but that doesn't mean the government's practices are transparent. If anything, they may be more opaque than ever. The Department of Justice has responded to an ACLU Freedom of Information Act request for a pair of GPS tracking policy memos by providing almost completely redacted versions that, effectively, say nothing. Not surprisingly, the ACLU isn't satisfied -- it's worried that the government is playing fast and loose with definitions of where GPS tracking is usable, and when it requires a warrant under the Fourth Amendment. Whether or not the allegations are true, the civil liberty advocates are going through the courts to push for more access; we may know the truth before too long. [Image credit: Frédéric Bisson, Flickr]
Penguin joins publishers settling with the DOJ over e-book prices
The US Department of Justice may have only reached settlements with three of the five major publishers it had sued for allegedly fixing e-book prices, but it's improving its track record through a new deal with Penguin. Like its peers, the firm has agreed to end any pacts that prevent it from lowering e-book prices, whether the arrangements are with Apple or any other store operator. While Penguin hasn't immediately commented on its change of heart, a company spokesperson made clear to The Guardian that an EU settlement was for "clearing the decks" ahead of a joint venture with Random House -- Penguin didn't want government scrutiny looming over its union. The truce leaves Macmillan as the last book giant still slated to go to court in the US, and it may not get much support when Apple was part of the European agreement.
Department of Justice asks MetroPCS for more info regarding T-Mobile merger
We can't say we're exactly surprised, but it's still worth noting that the United States DOJ has contacted MetroPCS to ask for additional information about the company's recently announced merger with T-Mobile. The adequately-named "Second Request" will be essential before an actual consolidation approval can be made, and MetroPCS has stated it plans on being fully cooperative so that it can "obtain the approval of the transaction as soon as possible." Additionally, the Wireless for All carrier says it's pretty confident on the Department of Justice's ability to see the proposed merger is "both pro-competitive and pro-consumer." In the end, it's nothing more than a required hurdle before the two telcos can move on with their original plans. Official word from MetroPCS can be found inside the presser below.
Apple calls Dept. of Justice settlement proposal unlawful
Apple is making it known that it will not accept the ebook settlement terms proposed by the Department of Justice, says a report in Paid Content. Under the DOJ's proposal, Apple would have to sever its current contracts and renegotiate new ones with three book publishers - HarperCollins, Hachette and Simon & Schuster. Apple says that this outcome is "fundamentally unfair, unlawful, and unprecedented" and denies the company its right to a fair trial. This settlement is the result of an investigation into Apple's agency model pricing agreement with book publishers. In this model, publishers are allowed to set ebook prices in the iBookstore and cannot sell the electronic books at a lower price through another retailer. This hurt Amazon, which was paying publishers the wholesale cost, but selling the books to customers at extremely low prices, often at a loss. Rather than accept the settlement, Apple asked the court to defer judgement on the settlement until the case made its way through the court. The trial is expected to begin in June 2013. [Via Apple Insider]
DOJ, FCC clear Verizon buyout of cable companies' spectrum, require giving up some airwaves (update: not quite for the FCC)
Verizon has been fighting hard to get its acquisition of cable companies' wireless frequencies past legal hurdles, and it just surged over the most important of the bunch: both the Department of Justice and the FCC have signed off on the agreement. To get the $3.9 billion deal through the door, Big Red will have to offload some of its spectrum to other companies, the FCC argues. The DOJ, meanwhile, is more concerned that Verizon is getting a little too cozy with Bright House, Comcast, Cox and Time Warner Cable in terms of marketing and reselling bundles that include cellular and cable access. Closing the deal also requires setting up a new joint venture in technology research. We're still working to learn the full details of the deal, but the spectrum handover will likely give a swift kick to Verizon's 4G capacity -- and anger a few rivals who wouldn't have wanted any handover to go through. Update: Since we posted, it's become clearer that FCC chairman Julius Genachowski has only recommended a vote in favor of the deal; the agency hasn't formally greenlit the deal just yet.
Senator Schumer calls on DOJ to drop e-book price-fixing suit
Believe it or not, but that whole e-book price fixing fiasco is still an ongoing issue for the Justice Department. New York's senior senator, Chuck Schumer wishes it wasn't however, he simply wants the DOJ to drop the case and walk away. In a lengthy (factually questionable) op-ed in the Wall Street Journal the distinguished gentleman from the great state of New York said that a successful suit against Apple (he didn't bother to call out the others involved) would set the e-book industry back several years and allow Amazon to dominate the market unchallenged. He also makes a broader call for the administration to develop more clear guidelines for deciding what non-merger cases to pursue. Unfortunately, we have to point out, that his argument is undercut by some questionable data referenced in the editorial. According to Schumer Amazon once owned 90 percent of the e-book market -- a number that, if true, most certainly predates the release of the Nook. This is followed by an insinuation that Apple all but single-handedly toppled the retail giant with the launch of iBooks, cutting Amazons market share to just 60 percent. While the latter number sounds about right we'd hesitate to lay responsibility for that 30 point drop entirely at Apple's feet. To dig into Schumers op-ed yourself hit up the source link.
DOJ looking into whether Comcast, other TV giants are unfairly (knee)capping Hulu, Netflix
The Department of Justice may have taken Netflix chief Reed Hastings' net neutrality complaints about Comcast as a lot more than just sour grapes. It's reportedly conducting an investigation into whether Comcast, AT&T and other TV providers are anti-competitive in their data restrictions. The Wall Street Journal cites primary concerns that Comcast's Xfinity TV cap exemption might unfairly punish competing services, but also claims that officials are worried the caps themselves steer viewers away from internet video, helping the incumbents cling to legacy TV for just a little while longer. On top of its cap anxiety, the DOJ may be looking into policies requiring traditional TV subscriptions just to watch online. None of the involved parties have commented on or confirmed the investigations, so there's no guarantee of any full-fledged lawsuit. Still, while TV operators insist they're being fair and need to keep data use in check, that might not deter legal action when the DOJ has supposedly questioned Hulu, Netflix and other relative newcomers who feel they're being squeezed. When Sony postpones its IPTV goals after fretting over US data caps, it's hard to imagine that there aren't at least a few raised eyebrows in Washington.
MPAA may let Megaupload users retrieve non-infringing files, does it for the Armed Forces
Megaupload's still immersed in hot water, but there are signs the legal temperature could be cooling... slightly. Don't breathe a sigh of relief just yet though, as a significant portion of that confiscated cache of cloud-stored files remains somewhat indefinitely under lock and key. A minor reprieve may be on the way, however, owing to a much more "sympathetic" MPAA which has asked the court to consider releasing non-illegally obtained content to previous users. And lest your evil eye be trained too heavily upon the Hollywood group behind the shutdown, the association's made it quite clear that, under the site's TOS, users were never guaranteed continued access to uploaded content anyway. The change of heart comes in response to a motion filed by the Electronic Frontier Foundation, on behalf of a member of the U.S. military, petitioning the return of personal, non-IP infringing files. According to the now-defunct site's founder Kim Dotcom, that group of "legitimate" users comprised nearly 16,000 accounts utilized primarily to share photos and video with far away family and friends. Of course, should this retrieval request be granted, a requisite procedure will need to be put in place to filter out copyrighted media -- a system that's sure to pose countless headaches for those involved. Nothing's yet been decided so, for now, the fate of your lost files rests firmly in the court's hands. Such are the perils of the cloud.
