Apple Denies DOJ Price Fixing EBook Allegations
June 4, 2013

Apple Stands Its Ground In Court Over E-Book Price-Fixing

Michael Harper for — Your Universe Online

Apple and the Department of Justice (DOJ) began what is expected to be a three-week long courtroom battle yesterday in a case concerning alleged antitrust behavior by the iPad maker. Last year the DOJ lobbed an antitrust lawsuit at Apple, claiming they and five other publishers had conspired to fix their book prices and band together to beat Amazon. Each of the five publishers settled with the DOJ in the months following this suit, leaving Apple as the sole hold out in this case. As proceedings got underway both sides repeated the stance they´ve held since the legal battle began. Apple claims they made smart business moves and did not conspire to fix prices; the DOJ insists that Apple used their size to bully publishers into giving the right price.

At the center of this debate is Apple´s agency pricing model, which allows publishers to set their own price for books and e-books so long as Apple gets a 30 percent cut from the sale. Previously publishers were stuck making deals with Amazon, a company which had been selling e-books at a $9.99 price point. The publishers were worried Amazon would take advantage of them when Apple entered the market in 2010 and offered them the ability to set their own price.

"Apple told publishers that Apple — and only Apple — could get prices up in their industry," said DOJ lawyer Lawrence Buterman during Monday´s opening statements according to Reuters.

"What the government wants to do is reverse engineer a conspiracy from a market effect," says Orin Snyder, an Apple attorney. "Even our government is fallible, and sometimes the government just gets it wrong."

The DOJ cited emails and memos obtained from Apple and the five other publishers that have already settled in this case. These documents contain discussions about the companies´ plans to push the price of e-books to $12.99 or $14.99. The agency also claimed that the late Apple CEO Steve Jobs even bragged about this alleged conspiracy in his biography by Walter Issacson.

“We told the publishers, ℠We´ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that´s what you want anyway,´” said Jobs in his biography. It´s a quote which the DOJ has often pointed to in this debate as well as a quote wherein Jobs refers to this deal as an “akimbo” move.

Prices in the e-book market did rise to $12.99 and $14.99 as a result of the deals made between the publishers and Apple. Once the publishers were earning more money from their deal with the iPad maker, they returned to Amazon to force them into matching Apple´s agency model. If they refused, the publishers threatened to give only Apple the rights to sell their new best sellers. Amazon finally gave in and adopted the agency model, giving publishers the power in the bargaining deals.

As the two sides began their opening statements on Monday, Orin Snyder asked US District Court Judge Denise Cote to give his client a fair trial. Earlier Cote said she felt the government would be able to prove that “Apple knowingly participated in and facilitated a conspiracy to raise prices of [eBooks],” a statement which Snyder believed meant Cote was going into the trial with a bias.

"All we want is a fair trial with all evidence being considered and testimony being heard," said Snyder. The trial is slated to continue through the next three weeks.