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Apple opposes Department of Justice settlement in e-book case, blames Amazon for lawsuit

Apple has objected to a settlement proposed by the US Department of Justice – and accepted by three book publishers - over an antitrust lawsuit levelled against the company and a handful of book publishers by federal prosecutors. In a legal memo opposing the settlement (below), Apple described the deal as "fundamentally unfair, unlawful, and unprecedented."

The suit, which dates back to April, alleged that Apple and five book publishers colluded to raise e-book prices in a deliberate price-fixing scheme. Three of those publishers - Hachette, HarperCollins, and Simon & Schuster - immediately agreed to settle, while Apple and the two other publishers chose do defend themselves in the case.

In Apple’s foray into the e-book market, following the release of the wildly popular iPad, it adopted a pricing model that let publishers, and not retailers, set prices. That led to a spike in e-book prices, with online retailers, including Amazon, being prevented from offering discounts on their stock, the DOJ alleges.

"As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles," Attorney General Eric Holder said during an April press conference.

Under the DOJ’s proposed settlement, e-book publishers are to terminate their existing contracts with Apple, a prospect that the company said would unfairly and irreversibly impact its business.

The government “seeks to terminate and rewrite Apple’s bargained-for contracts before a single document has been introduced into evidence, before any witness has testified, and before the Court has resolved the disputed fact,” the company wrote in its memo.

“Nullifying a non-settling defendant’s negotiated contract rights by another’s settlement is fundamentally unfair, unlawful, and unprecedented. The Government does not cite a single case in which such relief was granted without a trial or merits determination,” it argued.

Apple also alleged that Amazon is behind the lawsuit, and that it is being favoured by prosecutors.

Many critics “expressed concerns about the possibility that the Government has unwittingly placed a thumb on the scales in favour of Amazon, the industry monopolist. Amazon was the driving force behind the Government’s investigation, and it told a story to the Government that has yet to be scrutinised. Amazon talked with the Government repeatedly throughout the investigation, even hosting a two-day meeting at its Seattle headquarters,” Apple wrote in the memo.

“In all, the Government met with at least fourteen Amazon employees—yet not once under oath. The Government required that Amazon turn over a mere 4,500 documents, a fraction of what was required of others,” it added.

In comments about the case addressed to the DOJ from more than 800 publishers, booksellers, and consumers, many opponents of the lawsuit said that Amazon’s monopoly over the e-book market represents a greater threat than Apple’s alleged price-fixing.

At the time, the agency said it had "received many comments that sought to excuse price fixing as necessary to end Amazon's reported 90 per cent share of the e-book market, and noted that Apple's entry effectuated erosion of Amazon's share and spurred all sorts of innovations, such as color e-books."

A trial is set to begin on 3 June 2013, though more status conferences will likely happen before then.