Jun 21st, 2013, 5:25 pm


Apple characterised allegations that it was a ringleader in a conspiracy with publishers to fix ebook prices as a “misguided story” that lacked evidence during closing arguments on Thursday in its antitrust case.


In the three-week trial, the Department of Justice presented a series of emails written by Steve Jobs and other Apple and publishing executives, tales of lavish Manhattan dinners, a spiderweb of phone calls between executives and charts depicting price increases as evidence that Apple developed a scheme to help publishers increase the price of ebooks as it launched its digital books business.





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The DoJ claimed that the alleged conspiracy led to a “dramatic” increase in the average price of ebooks, costing consumers hundreds of millions of dollars.


Orin Snyder, an attorney representing Apple, said that the government “failed to come close” to proving that Apple’s actions were a “concerted, unlawful” scheme rather than ordinary business practices.


“This new industry, less than two years old, was in the midst of fundamental change,” Mr Snyder said. “Apple walked into revolt and conflict.”


Before Apple entered the ebook market with the 2010 launch of its iPad and iBookstore, Amazon controlled nearly a 90 per cent share of the digital book business. Publishers typically sold ebooks to retailers through a “wholesale” model, where a retailer such as Amazon bought books from publishers then set consumer-facing price. Amazon typically bought new ebooks from publishers for $10, then sold them to consumers for $9.99.


Increasingly distraught by Amazon’s $9.99 price, publishers were seeking new business models and started delaying the release of popular new ebooks. Amazon described such delays as “an absolute declaration of war”.


Apple met with publishers in December 2009 to explore launching its digital bookstore. It eventually struck deals to sell books through a so-called “agency” model, where publishers set the price and Apple took a 30 per cent cut. Publishers also agreed to a clause that allowed Apple to match prices with other retailers.


By 2011, Amazon’s market share was down to 63 per cent, thanks to Apple’s entry and the rise of Barnes & Noble’s Nook ebook reader.


Mr Snyder said Apple’s interactions with publishers were not evidence of collusion but rather standard business negotiations. The goal, he said, was to launch a digital bookstore stocked with new ebooks available at competitive prices.


The DoJ pointed to the agreements and the price-matching clause as vehicles of Apple’s scheme to give publishers the power to act as a group to increase prices across the industry as well as ammunition to change their selling relationships with Amazon.


“The publishers were unwilling to take Amazon on alone,” said Mark Ryan, a DoJ attorney. “Only a united industry front could move Amazon off its $9.99 price.”


The price-matching clause was “the insurance and the reassurance that the publishers would – as they did – move together to fix the Amazon problem, and so they did,” he said.


In response to questions from Judge Denise Cote, of the US District Court for the Southern District of New York, who is presiding over the case, Mr Snyder said that Apple knew that the threat of retaliation from Amazon was a concern of some of the publishers but not a prime concern. Apple did not force the publishers to change their contracts with other retailers but expected that was a likely outcome, he said.


Judge Cote is expected to issue a verdict for the non-jury trial in the coming weeks or months.


During a preliminary hearing last month, she said that she thought that the government would be able to show direct evidence that Apple participated in and facilitated a conspiracy to increase the price of ebooks. On Wednesday, she said that the issues during the trial had shifted.


The trial comes after all five of the publishers charged in the case reached settlements with the DoJ. The five publishers are: Hachette, HarperCollins, Holtzbrinck, Simon & Schuster and Penguin – which is owned, like the Financial Times, by Pearson.


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Jun 21st, 2013, 5:25 pm