Publishers Allegedly Deleted Emails ‘To Avoid Leaving a Paper Trail’ in Agency Model Discussions

By Jason Boog Comment

In a 46-page brief from the Department of Justice, attorneys alleged that Apple and five major publishers engaged in a “substantial” conspiracy as they set up the agency model for eBook pricing–including deleting emails “to avoid leaving a paper trail.”

We’ve included more excerpts from the filing below. According to this proposed settlement document (PDF link via Publishers Weekly), HarperCollins, Hachette and Simon & Schuster will settle the case and end the agency agreement.

Follow this PDF link to read the DOJ complaint. Here is an excerpt (via Jane Litte): “Publisher Defendants took steps to conceal their communications with one another, including instructions to ‘double delete’ e-mail and taking other measures to avoid leaving a paper trail.”

Department of Justice Allegations about Publishers’ “Substantial” Conspiracy with Apple

Practices facilitating a horizontal conspiracy. The Publisher Defendants regularly communicated with each other in private conversations, both in person and on the telephone, and in e-mails to each other to exchange sensitive information and assurances of solidarity to advance the ends of the conspiracy.
Direct evidence of a conspiracy. The Publisher Defendants directly discussed, agreed to, and encouraged each other to collective action to force Amazon to raise its retail e-book prices.

Recognition of illicit nature of communications. Publisher Defendants took steps to conceal their communications with one another, including instructions to “double delete” e-mail and taking other measures to avoid leaving a paper trail.

Acts contrary to economic interests. It would have been contrary to the economic interests of any Publisher Defendant acting alone to attempt to impose agency on all of its retailers and then raise its retail e-book prices. For example, Penguin Group CEO John Makinson reported to his parent company board of directors that “the industry needs to develop a common strategy” to address the threat “from digital companies whose objective may be to disintermediate traditional publishers altogether” because it “will not be possible for any individual publisher to mount an effective response,” and Penguin later admitted that it would have been economically disadvantaged if it “was the only publisher dealing with Apple under the new business model.”

Motive to enter the conspiracy, including knowledge or assurances that competitors also will enter. The Publisher Defendants were motivated by a desire to maintain both the perceived value of their books and their own position in the industry. They received assurances from both each other and Apple that they all would move together to raise retail e-book prices. Apple was motivated to ensure that it would not face competition from Amazon’s low-price retail strategy.

Abrupt, contemporaneous shift from past behavior. Prior to January 23, 2010, all Publisher Defendants sold their e-books under the traditional wholesale model; by January 25, 2010, all Publisher Defendants had irrevocably committed to transition all of their retailers to the agency model (and Apple had committed to sell e-books on a model inconsistent with the way it sells the vast bulk of the digital media it offers in its iTunes store). On April 3, 2010, as soon as the Apple Agency Agreements simultaneously became effective, all Publisher Defendants immediately used their new retail pricing authority to raise the retail prices of their newly released and bestselling e-books to the common ostensible maximum prices contained in their Apple Agency Agreements.