TECHNOLOGY
image

Apple

Apple prepares to fight e-book conspiracy claim

Tech giant accused of being the 'ringmaster' of scheme to challenge Amazon and raise prices

PUBLISHED : Monday, 03 June, 2013, 12:00am
UPDATED : Monday, 03 June, 2013, 4:53am

Apple goes on the defensive today with the start of a trial in which US officials allege the company was the "ringmaster" of a conspiracy to raise prices of electronic books.

In the trial set to open in US District Court in New York, the technology icon is going solo in its fight against the US Justice Department after five large publishers named in the lawsuit settled the charges.

US antitrust watchdogs allege Apple orchestrated a collusive shakeup of the e-book business in early 2010 that resulted in higher prices. Apple is expected to argue its actions shook up a sector that had been dominated by Amazon, and boosted competition.

Early signals suggest the three-week, non-jury trial could be a tough ride for Apple, which has been struggling amid a dearth of new products and recent allegations that it avoids billions in taxes.

Five publishers originally named as defendants reached settlements in which they agreed to terminate their e-book agreements with Apple.

The largest settlement was with Penguin for US$75 million.

Apple chief executive Tim Cook dismissed the idea of a settlement because it would call for the company to sign an admission of wrongdoing.

"We didn't do anything wrong there," Cook said recently. "We're going to fight."

The government's case centers on a period when Amazon dominated the e-book business, selling most bestseller titles for US$9.99. Leaders of the major publishing houses held "CEOs dinners" at which they discussed the threat from Amazon.

Into this environment stepped Apple, which was readying the launch of its iPad. Rather than following the Amazon "wholesale" pricing model in which the retailer sets the price, Apple favoured the so-called "agency model" where the publishers set the price and the seller - in this case Apple - received a 30 per cent commission. The result was a price rise to US$12.99 or US$14.99 for most books.

Apple throughout the negotiations informed the publishers of the status of its dealings with other publishers. It was the "ringmaster" of the "conspiracy", the complaint alleges.

The government is expected to use e-mails and comments from the late Apple CEO Steve Jobs, which indicated that as part of a deal to force a new pricing model, publishers should "hold back your books from Amazon".