The government agency cited scores of emails and handwritten memos from Apple and five different publishers Photo: AFP
8:52PM BST 03 Jun 2013
The US Department of Justice accused the technology giant of "knowingly
and intentionally" corralling publishers to raise the price of ebooks
from the $9.99 Amazon had established as standard, and to force Amazon to
follow suit by withholding key titles if it refused to comply.
The government agency cited scores of emails and handwritten memos from Apple
and five different publishers - Hachette, Harper Collins, Penguin, Simon &
Schuster and Macmillan - in which they spoke openly about a plan to push
prices up to $12.99 or $14.99 across the entire industry.
On Monday, as proceedings got under way in room 15b of the austere Manhattan
court, Apple lawyers fought to be able to disregard that evidence, unless
the Department of Justice was willing to nominate a ﾓsponsorﾔ for each
message used, who was willing to be cross-examined.
Apple could not be tried on a "document dump" including messages
from Steve Jobs, Apple's founder who died in 2011, the company argued.
It has a battle on its hands. All five publishers settled with the Department
of Justice before the case went to trial, leaving the determined technology
giant to fight it out with the government agency alone. The DoJ is known for
its success rate in convicting its opponents, and only pursuing cases it
thinks it can win.
US District Judge Denise Cote, who is presiding over the case at a Federal
Court in New York, indicated before the trial even started that the evidence
weighed heavily against Apple.
"I believe that the government will be able to show at trial direct
evidence that Apple knowingly participated in and facilitated a conspiracy
to raise prices of e-books, and that the circumstantial evidence in this
case, including the terms of the agreements, will confirm that," she
said last month.
Apple claims the allegations are "simply not true". "Let me
clear, Apple is going to trial because Apple did nothing wrong," its lawyer,
Orin Snyder said on Monday.
Instead, he argued, the technology giant ratcheted up competition and drove
down the cost of ebooks, ereaders and tablets across the board. Mr Snyder
accused the government of using emails selectively, whilst ignoring the fact
that "every single indicator of market health improved after Apple entered
the market."
The US Department of Justice claimed that the iPad and iPhone maker wanted to
enter the ebook market without getting involved in price wars, and used
industry-wide concern over the low prices Amazon was charging to bring
publishers onside.
Publishers typically price ebooks 20pc lower than they do print copies, and
charge retailers half of the cover price. By selling books that cost $25 a
copy in print for $9.99, Amazon was only just about breaking even.
Publishers still made their money, but they worried that the low price
undervalued their output and would help Amazon establish such a stranglehold
on the market that it would be able to force prices even lower in the
future.
By contrast, Apple signed publishers up to the so-called agency model of
charging, whereby book publishers were allowed to dictate the price of
ebooks as long as it handed Apple a 30pc margin and guaranteed that no other
retailer would be allowed to sell the books for less.
The Cupertino behemoth was not concerned with the methods publishers would use
to force Amazon's hand, the DoJ claimed. However, on one occasion it
suggested that book publishers used the threat of "windowing", so
that Amazon's rivals would get a head start on selling highly anticipated
titles.
According to the DoJ, Eddy Cue, senior vice president of internet software and
services at Apple, was "the chief ringleader" of the conspiracy,
who held meetings with the chief executives of the five publishers and got
them to sign up to the agency model of pricing within 72-hours of each
other.
According to memos and emails revealed in court, the chief executives of the
publishers compared notes and addressed the issue at meetings in the private
room of a restaurant in New York.
They were remarkably open about their plan to get the whole industry on board
Apple's pricing scheme, although David Young, chief executive of Hachette,
appeared to acknowledge that the alleged conspiracy could get them into
trouble.
On one occasion, he asked his colleague to "double delete" an email.
The case continues.