Most company executives would not be happy to be described as having “yelled, screamed and threatened.” But that claim about Amazon management could be a key factor in shooting down one of Apple’s main arguments in the ongoing e-book pricing case.
The case, pitting the government against Apple, is now in its fourth day of trial. It centers on claims that Apple and book publishers unfairly colluded to replace the traditional print book pricing structure (publishers sets wholesale price, retailer sets retail price and keeps profit) with the ‘agency model’ (publisher sets retail prices, retailer takes fixed percentage.)
In particular, prosecutors claim the publishers forced Amazon to agree to the pricing structure under threat that they would stop supplying it with e-books and hand a huge advantage to Apple’s iBookstore. The publishers have all settled claims against them (without legally admitting guilt), but Apple has chosen to defend itself in court.
The most striking claim so far in the trial has been Apple arguing that Amazon was already considering adopting the measures before publishers raised the idea. That led the prosecuting attorney to ask the CEO of Penguin Group how Amazon responded when it made such a proposal, prompting the aforementioned reaction.
The main thrust of the prosecution case so far has been that Amazon was hit with an explicit ultimatum: agree to the agency model (which could mean publishers fixing higher retail prices and retailers not being able to discount) or lose supply.
Russell Grandinetti, the Amazon executive responsible for Kindle content at the time, says the chief executive of Macmillian expressly told him that if Amazon didn’t adopt the model, it would not get any new titles in electronic format until seven months after their release. He also says that after Amazon initially gave the suggestion short shift, MacMillan took the first steps to following through on the threat the next day.
Of course, the key to the case is not whether the publishers acted unfairly, but how much involvement Apple had. The prosecution is painting Apple as masterminding the threats, something Apple flatly denies.
The case continues.