The trial pits the maker of the popular iPad and iPhone against the US justice department in a case that tests how Internet retailers interact with content providers.

Apple is going to trial alone after the five publishers agreed to eliminate prohibitions on wholesale discounts and to pay a collective $164 million to benefit consumers.

The US government is not seeking damages but instead an order blocking Apple from engaging in similar conduct. However, if Apple is found liable, it could still face damages in a separate trial by the state attorneys general and consumers pursuing class actions.

‘Direct evidence’

Based on a comment by the presiding judge at the final hearing before the trial, Apple may face an uphill battle.

“Apple might think, ‘We may lose at the trial level, but we may well convince an appellate court the trial judge mischaracterized the evidence,” Lopatka said.

‘Market in turmoil’

Neither side disputes that in 2009 publishers were concerned about low prices for e-books resulting from the dominance of Amazon.com, which launched its Kindle e-reader in 2007.

Amazon, which declined comment, was selling 90% of all e-books in 2009. It was buying books wholesale and at times selling them at a loss, pricing them at $9.99, with the goal of promoting its Kindle.

The justice department contends that Apple’s entry into the market provided publishers with a means to get together to increase prices.

At the suggestion of Hachette and HarperCollins, the government says Apple began considering an agency model in which publishers set the price and Apple took a fixed percentage.

The justice department said Apple provided assurances to publishers their rivals would join.

Apple says that it was unaware of efforts by the publishers to conspire before it entered the marketplace, and said when it did, it act independently.

It also contends that in the wake of its introduction of the iBookstore, prices have fallen rather than risen from $7.97 on average to $7.34.

Bigger issue

For the justice department, many of its goals have been accomplished, thanks to the settlements with publishers, which lifted restrictions on discounting and promotions by e-book retailers. Those deals have already lowered prices for consumers, the department says.

Among other things, the government lawsuit seeks to declare that certain provisions in the agreements between Apple and the publishers are unenforceable.

These provisions, known as most-favoured-nation clauses, provided that if other e-bookstores sold the books at cheaper prices, then Apple could reduce its prices. The government has said this provided an incentive for the publishers to raise prices at other retailers.

Similar types of most-favoured nation clauses have been central in other content industries such as music and television where content providers have a role in setting the price. They have also become a discussion point in certain antitrust communities, Manne said, and a government win could “send a pretty strong message” about their use.

“If the government wins this case, it would be because the court for some reason determines that most-favoured-nation clauses are more harmful to competition than helpful,” he said. Reuters