Shouldn't Apple just call it a day and admit defeat?

Evidence submitted during the Apple e-book trial paints a picture of a scheming company clearly on the wrong side of the law.

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Let's stipulate from the outset that Apple is not going to suffer any damage after losing big to the government in the e-book price-fixing case. Yes, a few codgers may decide on principle not to buy iPads as a personal statement of protest, but those are the same cranks who picket at the slightest smell of bacon from a bacon restaurant.

But just because Apple may get off without paying a steep price in the public's eyes, the evidence submitted at trial paints a picture of a scheming company clearly on the wrong side of the law. The court has not yet scheduled a hearing to address proposed remedies.

The decision handed down Wednesday by Federal Judge Denise L. Cote found Apple guilty of orchestrating a conspiracy to cut out e-book competition and raise prices. (Here's a link to the full text of Cote's decision if you want to read along. It's worth spending the time.) Her reading of the evidence showed Apple demanding, as a precondition of its entry into the market, that it would not have to compete with Amazon on price.

"Thus, from the consumer's perspective -- a not unimportant perspective in the field of antitrust -- the arrival of the iBookstore brought less price competition and higher prices," Cote wrote.

Apple, which said it plans to file an appeal, did not budge from its repeated assertions of innocence since the Justice Department filed a lawsuit last spring over e-book pricing.

"Apple did not conspire to fix e-book pricing and we will continue to fight against these false accusations," said Apple spokesman Tom Neumayr. "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."

Good luck with that. Given the detail Cote produced chronicling how Apple colluded with five big publishers on e-book pricing, even Clarence Darrow would be at a disadvantage getting this verdict overturned. The publishers, who examined the same evidence, settled with the government before the case went to trial. Not Apple, which maintained all along that it was just trying to do the right thing by customers.

If this case does wind up getting reheard, Apple will make that same pitch. But any appeals court still will have to accept the facts submitted into evidence. And they paint an unflattering picture. According to Cote:

Some consumers had to pay more for e-books; others bought a cheaper e-book rather than the one they preferred to purchase; and it can be assumed that still others deferred a purchase altogether rather than pay the higher price. Now that the [publishers] were in control of pricing, they were also less willing to authorize retailers to give consumers the benefit of promotions.

Also, consider how e-book prices rose after the opening of the iBookstore. Apple tried to argue that prices actually dropped over the following couple of years. That argument failed to persuade. Again, from Cote's decision:

Apple's experts did not present any analysis that attempted to control for the many changes that the e-book market was experiencing during these early years of its growth, including the phenomenon of disintermediation and the extent to which other publishers decided to remain on the wholesale model. The analysis presented by the Plaintiffs' experts as well as common sense lead invariably to a finding that the actions taken by Apple and the Publisher Defendants led to an increase in the price of e-books.

Steve Jobs wasn't around to defend himself but the document trail he left behind helped clinch Apple's guilt in Cote's eyes. She noted that Jobs told News Corp.'s 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." That was yet another sign of Apple's determination to collude with the publishers as they schemed on how to jack up e-book prices, according to Cote.

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.

Also, Jobs subsequently told biographer Walter Isaacson how the publishers "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 Macmillan CEO John Sargent's trip to Seattle to deliver "an ultimatum to Amazon," she wrote.

In the end, Apple's lawyers couldn't talk away the statements by its former leader. Today's storyline points to Apple as the ringleader, both facilitating and encouraging what was a collective and illegal restraint of trade. Hardly the sort of description that we've come to associate with Silicon Valley's most iconic company.

U.S. Dept. of Justice

 

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