Apple VP Testifies For DOJ
June 14, 2013

Apple VP Testifies To DOJ On Price-Fixing Allegations

Michael Harper for — Your Universe Online

Yesterday, Apple´s senior vice president of Internet software and services Eddy Cue showed up in a Manhattan court to testify before the Department of Justice (DOJ) about claims of the iPad maker´s alleged price fixing scheme for ebooks. The DOJ has been working to bring Apple into court on charges they conspired with five book publishers to raise the prices of ebooks above Amazon´s long-held $9.99 price point. Cue has been pinpointed as the Apple executive who was most instrumental in persuading these publishers to switch to an agency pricing model and away from Amazon´s wholesale model.

According to CNN Money´s Phillip Elmer-Dewitt, Cue was an “unusually credible” witness, calmly answering each of the DOJ´s questions and not shying away from the accusations that Apple wanted to sell more ebooks to make more money.

As he took the stand to answer questions, the DOJ began asking Cue, who had previously arranged agency deals with app developers as well, about phone conversations which may have taken place between the five publishers in question wherein they discussed Apple´s agency model. According to All Things D, Cue claimed he didn´t even suspect the other publishers were coordinating.

“I don´t believe they were working together to do the deal that I was working on, because I did those deals and I struggled and fought with them for many, many days to get them to sign,” said Cue. “And they argued different points. So if they were talking to each other, I would have assumed that I would have had a much easier time getting those deals done.”

After Apple entered the ebook market with the release of the very first iPad, prices of some ebooks did increase, a point which the DOJ wanted to offer as proof that Cue and the publishers did conspire to force Amazon into an agency model. Cue admitted the cost of ebooks did, in fact, increase after they entered the market, saying it shouldn´t have come as any surprise as he was the first to ever let the publishers set their own price.

“They had expressed they wanted higher prices from us,” said Cue on Thursday. "I gave them the opportunity to raise their prices."

The VP also repeated Apple´s stance about these charges, claiming they weren´t responsible for raising prices, they only gave publishers the opportunity to do so. For their part, Cue and the rest of Apple´s executive team believe the company simply entered a competitive market and gave publishers control over their product.

“We gave consumers great prices and a great selection of books that weren´t available elsewhere, in a better bookstore,” Cue said. “We gave them a great offer.”

The DOJ has complained Apple used their agency model as a way to conspire against Amazon and raise prices of ebooks, thereby earning more money for themselves and the publishers.

When Apple first entered the market in 2010, publishers sold their ebooks to Amazon and Barnes & Noble at wholesale price. Amazon sold these ebooks at a loss for $9.99, and publishers became worried they´d never be able to sell at a higher price in the future. Apple introduced the agency model, which gave publishers permission to pick their own price, so long as they gave Apple a 30 percent cut off the top.

When this happened, prices of ebooks increased and Amazon was forced to switch to the same agency model.