The Department of Justice has shared direct testimony from three Amazon executives about tempestuous negotiations over the agency model for setting eBook prices in 2010.
These discussions rest at the heart of the U.S. v. Apple et al. case, as a federal judge decides if publishers and Apple colluded to fix eBook prices.
In the executive testimony, MyHabit general merchandise manager (and former Kindle Books director) Laura Porco testified about a fateful January 2010 dinner with her former colleague, Random House COO Madeline McIntosh. This conversation prompted evasive legal action at Amazon.
According to Porco’s testimony, Amazon’s lawyers “were preparing a letter to the government antitrust agencies” by the end of that rocky month. She explained:
During our dinner, Madeline told me that she had heard that HarperCollins, Simon & Schuster and Hachette were going to do a deal with Apple that would allow the publishers to control the ebook consumer price and that the publishers would release new titles only to Apple and to other retailers that went along with this new model. Madeline was worried that Random House would be the only publisher that decided to stay with the reseller model and that they would be unable to sell books in the Apple store. Madeline also told me that she was under pressure from other publishers for Random House to move to this agency model because Apple had made it clear that unless all of the Big Six participated, they wouldn’t bother with building a bookstore. She was concerned because she believed that other publishers were talking with one another and were making plans to move to the agency model … I was uncomfortable with the subject of this conversation and I immediately reported it to my supervisors and Amazon’s legal counsel.
In another interview, Kindle VP Russ Grandinetti talked about the behind-the-scenes drama in early 2010. He described his negotiations with Macmillan executives:
On January 28, John Sargent and Brian Napack of Macmillan came to Seattle to meet with us and John delivered an ultimatum: we would either move to agency terms with them, or they would withhold Kindle versions of all new releases for seven months. We clearly expressed our view that this was a terrible move for them, for customers and for authors, it made no sense for them economically. John was not open to discussing the option of staying on reseller terms with us, so the meeting was cut short. Later that night, we decided to stop selling Macmillan titles –both print and Kindle–in an attempt to convince them to reconsider their position.
Finally, Kindle content VP David Naggar complained about agency negotiations in his testimony.
It was clear throughout the negotiation process that the publishers were talking to
each other about their discussions with us. We would make a concession on an important deal point and have it come back to us from another publisher asking for the same thing or proposing similar language … In addition to being improper, this was irritating and made negotiations from our standpoint much more complex, because we knew if we gave on one point with one publisher, the others would all know about it.