Apple also included a condition in its contracts, called the most-favored nation clause, requiring the publishers to allow Apple to sell e-books at the same price as the books would be sold in any other store.
The Justice Department said that the publishers used their relationship with Apple, combined with the most-favored nation clause, to threaten Amazon to switch to the agency model so they could raise prices. If Amazon did not agree to those terms, the government said, the publishers intended to withhold their e-books from the retailer until the more expensive hardcover books had been on the market for awhile.
I still can’t figure out why the DOJ is doing Amazon.com’s dirty work.
For reasons personal and professional, I’ve been closely following the Federal government’s price-fixing case against Apple, set to go to trial in New York next month.
Buried in the material released in the case are a series of emails between Steve Jobs and several people at News Corp, chief among them James Murdoch. Long story, short version: with several deft moves, Jobs brings Murdoch around to his way of thinking and closes the deal – on Apple’s terms. This is negotiating at its best.
Quartz Magazine has done a really good narrative piece stitching the emails together to show how Jobs did it. This should be required reading in business and law schools.
Regarding the trial
I think Apple wins this one. Their main argument to the jury will likely be this: The government is going after the wrong party. The real villain is Amazon.com, which has been engaging in illegal business practices to drive everyone else out of the market with artificially low, unsustainable, predatory prices. Apple sought to upset Amazon.com’s criminal applecart, brining sanity to the marketplace for the long-term benefit of producers (writers and publishers), booksellers (bookstores and, yes, even Amazon.com), and consumers (readers). If Apple made a tidy profit along the way, well, they are a company and are in the business of making money (by making truly magical products, as Jobs would say). The argument is simple, understandable, and has the added virtue of being true.
Finally, does anyone think it is a coincidence that the government primed the pump against Apple this week with its attacks on the company for their corporate tax policies? If you do, I have a bridge I’d like to show you.
As I wrote the other day, everybody hates a winner.