Apple under the gun as US e-book trial starts

Apple faces off with DOJ alone after publishers settle antitrust charges

Apple appears to face an uphill battle as it goes to trial Monday in New York on e-book price fixing charges brought by the U.S. government.

The company will square off alone against the U.S. Department of Justice in a non-jury trial presided over by Judge Denise Cote for the U.S. District Court for the Southern District of New York, who in a pre-trial hearing had already indicated her inclination to rule against the company.

The DOJ filed the antitrust lawsuit in April last year alleging that Apple and five publishers -- Penguin Group, HarperCollins, Simon & Schuster, Hachette, and Macmillan -- had conspired to raise e-book prices. The publishers, however, have since all settled, agreeing to stop prohibiting wholesale discounts and to pay a cumulative $164 million, earmarked to benefit consumers.

The DOJ charges that Apple and the five publishers colluded to raise prices of e-books, working together to compete against Amazon, which set the price of most e-books at $9.99 beginning in late 2007. At that time, the rising popularity of Amazon's Kindle made it the dominant player in the e-book market, with about 90 percent market share by 2009.

The New York trial is expected to feature testimony from high-ranking publishing executives, who will face questions on the behind-the-scenes power plays in the increasingly high-stakes world of e-books.

Apple, in a court filing in May, said that the publishers in 2009 had on their own pursued a so-called agency business model to sell e-books where the publisher would set the price or a price range for each e-book and the retailer, acting as an agent, would receive a commission on each e-book sale. The publishers also discussed raising wholesale prices of e-books, Apple said in the filing.

Apple said at that point it stepped in to negotiate with publishers to set up its own iBooks e-book store. As an agency business model had helped the company in its App Store, where the developer fixed the consumer price, Apple said it favored an agency model with the publishers that gave it 30 percent commission.

By the time Steve Jobs unveiled the iPad on Jan. 27, 2010, Apple had content deals in place with Hachette, Macmillan, Penguin, and Simon & Schuster.

However, Apple said it did not enter into or facilitate a conspiracy to eliminate price competition or raise prices in the e-book industry.

On its part, the DOJ said in a May court filing that Apple and the publishers exercised their market power when they collectively increased the average price of trade e-books. Average prices of trade e-books sold by the defending publishers increased by 18.6 percent at Amazon and by 19.9 percent at Barnes & Noble through the transition to agency, the DOJ said.

"Stripped of the glitz surrounding e-books and Apple, this is an unremarkable and obvious price-fixing case," the DOJ said in the filing.

In a pretrial hearing last month, U.S. District Judge Denise Cote said she believed the government has a strong case.

"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," Cote said, according to published reports.

The U.S. government is not seeking monetary damages or a fine, but wants the judge to order Apple not to engage in conduct related to price fixing in the future.

If the judge rules against Apple, however, it could face a separate trial by state attorneys general and consumers pursuing class actions and seeking monetary damages. Apple last year settled an e-book price-fixing antitrust case with the European Commission.

Join the Good Gear Guide newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags Appleantitrustconsumer electronicslegalindustry verticalse-readers

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Marc Ferranti

IDG News Service
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Matthew Stivala

HP OfficeJet 250 Mobile Printer

The HP OfficeJet 250 Mobile Printer is a great device that fits perfectly into my fast paced and mobile lifestyle. My first impression of the printer itself was how incredibly compact and sleek the device was.

Armand Abogado

HP OfficeJet 250 Mobile Printer

Wireless printing from my iPhone was also a handy feature, the whole experience was quick and seamless with no setup requirements - accessed through the default iOS printing menu options.

Azadeh Williams

HP OfficeJet Pro 8730

A smarter way to print for busy small business owners, combining speedy printing with scanning and copying, making it easier to produce high quality documents and images at a touch of a button.

Andrew Grant

HP OfficeJet Pro 8730

I've had a multifunction printer in the office going on 10 years now. It was a neat bit of kit back in the day -- print, copy, scan, fax -- when printing over WiFi felt a bit like magic. It’s seen better days though and an upgrade’s well overdue. This HP OfficeJet Pro 8730 looks like it ticks all the same boxes: print, copy, scan, and fax. (Really? Does anyone fax anything any more? I guess it's good to know the facility’s there, just in case.) Printing over WiFi is more-or- less standard these days.

Ed Dawson

HP OfficeJet Pro 8730

As a freelance writer who is always on the go, I like my technology to be both efficient and effective so I can do my job well. The HP OfficeJet Pro 8730 Inkjet Printer ticks all the boxes in terms of form factor, performance and user interface.

Michael Hargreaves

Windows 10 for Business / Dell XPS 13

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?