The antitrust probe dates back to a deal Steve Jobs cut with five publishers in Jan. 2010
The language of the European Commission’s press release Tuesday announcing the start of a formal antitrust investigation of Apple (AAPL) and five major book publishers doesn’t address the obvious question: If Amazon (AMZN) is the 500-lbs. gorilla in the e-book trade, why has Apple’s much smaller iBookstore been targeted?
The answer lies in a deal that Steve Jobs cut with the five publishers named in the probe shortly before the iPad press conference in January 2010, when he announced the formation of the iBookstore.
Apple was more that two years late to the e-book market. Amazon had launched the Kindle in November 2007 and was selling untold numbers of e-books for $9.99 apiece. According to a class action suit filed in the US District Court for the Northern District of California by the Hagens Berman litigation group, the booksellers were “terrified” by the heavily discounted e-book price structure — which lowered the perceived value of printed books — and were looking for a way to force Amazon to raise its prices.
Enter Steve Jobs.
“Fortunately for the publishers,” according to Steve Berman, Hagens Berman’s lawyer, “they had a co-conspirator as terrified as they were over Amazon’s popularity and pricing structure, and that was Apple.” (link)
Here’s how the Hagens Berman complaint describes the alleged conspiracy:
This is the theory the EC seems to be pursuing. In preparation for the formal proceedings announced Tuesday the commission raided the offices of some or all of the five publishers named in the probe. They are:
- Hachette Livre, owned by Lagardère Publishing
- Harper Collins, owned by News Corp (NWS)
- Simon & Schuster, owned by CBS (CBS)
- Penguin, owned by Pearson Group (PSO)
- Macmillan, owed by Verlagsgruppe Georg von Holzbrinck
Apple could not be reached for comment.