June 14, 2013

DOJ’s “smoking gun” turns out to be leaky super soaker


The DOJ thought it had a “smoking gun” in the form of an email from the late Steve Jobs (above). That email turned out to be a draft. D’oh!

On Tuesday, the Department of Justice introduced “Plaintiff’s Exhibit 55” as evidence in its ongoing price-fixing trial againt Apple, an email from Steve Jobs that read: “I can live with this as long as they move Amazon to the agent model too for new releases for the first year. If not, I’m not sure we can be competitive…” The email was written on January 14, 2010; Apple would unveil the iPad less than two weeks later.

This piece of evidence was immediately labeled as a “smoking gun” by many commenters. Why? Because, as All ThingsDigital’s John Paczkowski reported Wednesday:

Apple has maintained it didn’t care what sort of deals publishers arranged with other retailers, as long as they honored the terms of their agreement to sell books on its iTunes store. Apple’s lead counsel Orin Snyder claimed as much in his opening arguments in the Department of Justice’s e-book antitrust case against the company last week.

“The negotiations make clear that the interests of the publishers and Apple were not aligned,” Snyder said. “Apple wanted lower prices on its own book store, and was indifferent to prices throughout the rest of the industry.”

This revelation apparently “shook up” the head of Apple’s iBoosktore, who was giving testimony at the time, and, according to Fortune’s Philip Elmer-DeWitt,

Orin Snyder, Apple’s chief counsel, wasted no time trying to disarm the new evidence.

“Are you aware,” he asked Moerer, “that the e-mail was never sent?”

The government immediately objected, and Judge Cote ordered the question stricken from the record.

Still, the evidence seemed damning enough, as Elmer-DeWitt wrote at the time, “The admission was particularly painful because U.S. District Judge Denise Cote—who will decide the non-jury case—seemed to be coming around to Apple’s point of view.”

The DOJ’s momentum didn’t last long. On Wednesday, it became clear that its “smoking gun” had never been fired—Apple submitted the email Jobs actually sent, making it clear the the DOJ’s Jobs email was, in fact, a mere draft.

The actual email differs substantially from the draft that would have been damning if it wasn’t, well, a draft:

“I can live with this as long as they also agree to the other thing you told me you can get: The retail price they will set for any book will be the LOWER of the applicable “iTunes” price below OR the lowest wholesale price they offer the book at to anyone else, with our wholesale price being 70% of such price. For example, normally our retail price for a $26 book will be $12.99 and we will pay 70% of that, or $9.10. However, if they offer the same book to Amazon for a wholesale price of, say $12.50, then our retail price for the same book shall be set at $12.50 and we will pay 70% of that price for the book.”

Paczkowski broke down the implications of the real email for All Things Digital:

That’s a very different message from the unsent draft showcased by the DOJ earlier today. It’s much more fully thought out; it shows Jobs concerned only about Apple potentially being discriminated against on price; it outlines the Most Favored Nation (MFN) agreements Apple would ultimately strike with publishers that ensured it would always be able to sell e-books at least as cheaply as rivals; and it omits the phrase that the DOJ presents as damning: “I can live with this as long as they move Amazon to the agent model too for new releases for the first year.”

In other U.S. v. Apple news: Apple’s Eddy Cue took the stand yesterday.


Alex Shephard is the director of digital media for Melville House, and a former bookseller.