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Apple Inc. (AAPL) Gets Comic-al Defense in E-book Case

Apple Inc. (NASDAQ:AAPL) is fighting the U.S. Department of Justice and its proposed settlement of an alleged price-fixing deal between Apple and five publishers in the e-book market, which the DOJ claimed was intended to harm the e-book market leader, Inc. (NASDAQ:AMZN). Apple has been accused to colluding with the publishers to set e-book prices so that Apple could be competitive with Amazon, which was forced to raise its retail prices for e-books due to the prices set by the publishers, also known as the “agency model” of pricing. In 2010, the e-book market changed from the “wholesale model” – in which the retailers set the prices of the e-books – to the agency model, which allows the publishers to set the prices.

Apple Inc. (NASDAQ:AAPL)

The DOJ had reached a settlement with three of the publishers in the lawsuit, but Apple Inc. (NASDAQ:AAPL) and a couple other publishers have not agreed to the terms and are fighting the settlement in court. In defense of Apple’s stance, a unique friend-of-the-court brief was filed by music licensing expert Bob Kohn, who apparently moonlights as a comic-strip artist. When given the assignment to make his case in defense of Apple Inc. (NASDAQ:AAPL) in five pages or less, rather than resorting to trying to explain the defense and Apple’s stance in complex legalese and cite numerous precedents in gray copy, he decided to take a different approach, deciding that making the case was easier in a small amount of space by drawing a comic strip. You can see the unique legal argument here.

The crux of the comic was to show that Inc. (NASDAQ:AMZN) has been conducting “predatory pricing” practices, and the prices were not reasonable or legal and thus the actions of Apple and the publishers to institute the “agency model” of pricing was to counterbalance Amazon and create “efficiency” of the pricing structure in e-books. But why a comic strip as a brief? As the final panel of the comic reads, “… it’s impossible to tell a complex story in only five pages!”

Who knows how the brief will be received by the court? One thing is for sure, investors in Apple Inc. (NASDAQ:AAPL) stock – like hedge-fund manager David Einhorn of Greenlight Capital – will likely be looking to see the impact of this court battle on Apple’s ability to compete in the e-book market.

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