By JOE PALAZZOLO

David Shanks, CEO of Penguin Group, leaves Manhattan Federal Court after testifying in Apple trial Tuesday.

A publishing executive said Tuesday that Apple Inc.'s

entry into the electronic-book market in 2010 marked the beginning of a dramatic shift away from prices set by retailers to ones set by the publishers themselves.

But the testimony of David Shanks, chief executive of Penguin Group (USA) since 2001, appeared at odds with allegations by the Justice Department that Apple conspired with Penguin and four other major publishers to hoist prices industry wide.

Far from conspirators, Mr. Shanks said during the second day of an expected three-week trial, Apple and Penguin clashed on many things.

Mr. Shanks said, for instance, Penguin initially proposed an agreement with Apple in which the technology company would have set the prices of e-books sold in its digital bookstore. But Apple decided against that wholesale pricing model, opting for a so-called agency model that placed pricing in the hands of the publisher, while Apple received a 30% commission on each sale.

Mr. Shanks said he tried unsuccessfully to get Apple to abandon price caps of $12.99 and $14.99, and a price-matching provision that ended up in the final contract between the two companies.

"I did not get the deal I wanted, but I wanted to be sold to Apple's customers," said Mr. Shanks, the first publishing executive to take the stand in the trial, which stems from a lawsuit filed last year by the Justice Department and a group of states.

The Justice Department says e-book prices spiked after Apple struck the agreements, while the company's lawyers argue that book sales increased and the innovations of the iPad led to better e-readers and tablets.

Mr. Shanks said he sought assurances from Apple that his competitors were agreeing to the same terms—but only partly because he feared the repercussions of adopting the agency model without the other publishers. Penguin, a unit of Pearson

PLC, also wanted to be sure the selection in Apple's digital library was large enough to draw in customers, he said.

Kevin Saul, an in-house lawyer for Apple, testified Tuesday that negotiations with the publishers spanned more than 100 hours, and he described them as "challenging, difficult, harried."

After an initial email to publishers in late 2009, in which Apple said it wanted them to move their other resellers into an agency model, the demand was never pursued, Mr. Saul said.

Instead, Apple conditioned the agreements on a provision that said if another retailer were selling a newly released e-book at a lower price, the publisher would have to match the lower price in Apple's bookstore.

Penguin brokered a similar deal with Barnes & Noble Inc.,

after which Penguin decided it would have to convert all its retail partners to an agency model, because it couldn't afford to match Amazon's $9.99 prices for newly released books and best sellers, Mr. Shanks said.

To that point, in early 2010, Amazon used a wholesale model, allowing it to set prices at or below cost for certain titles. Mr. Shanks testified that his company wanted to see what price consumers would pay, believing that Amazon was keeping prices artificially low.

Penguin and the four other publishing companies—HarperCollins, Lagardère

SCA's Hachette, CBS Corp.'s

Simon & Schuster and the Macmillan unit of Georg von Holtzbrinck GmbH—have settled the antitrust claims. HarperCollins is owned by News Corp

., as is The Wall Street Journal.

A judgment against Apple could expose the company to claims for damages by a group of states that joined the Justice Department in the 2012 antitrust suit.

Write to Joe Palazzolo at [email protected]

A version of this article appeared June 5, 2013, on page B3 in the U.S. edition of The Wall Street Journal, with the headline: Penguin CEO Testifies in Apple Trial.