Was Apple the grand ring leader in a nefarious e-book price-fixing scheme with top publishers? We’re about to find out.
Monday marks the first day of the three-week long in the Southern New York District Court, in which the Justice Department aims to argue that Apple conspired with publishers to raise the prices of e-books and ultimately kill Amazon’s stranglehold on the market. The case, United States v. Apple, was originally filed in April 2012 — and, not surprisingly, there’s been plenty of drama leading up to the trial.
Ahead of the iPad’s debut in 2010, Apple allegedly worked together with five publishers — Hachette, Simon & Schuster, Penguin Group, Macmillan, and HarperCollins — to adopt an agency model for e-books, wherein the publishers would be able to set their own prices. That’s in stark contrast to the wholesale model used by Amazon up until that point, which allowed it to control e-book pricing.
Before Apple entered the market, Amazon priced most new Kindle e-books at $9.99. With Apple’s plan, publishers were able to price their books at $12.99 or $14.99. As publishers moved towards the new model, Amazon ended up delisting some publisher’s titles in retribution. Eventually though, it had to play ball and allow the higher prices.
The coordinated efforts of the five publishers and Apple seems to hint that something is afoot. The publishers were originally listed as defendants in the case, but they’ve all ended up settling with the U.S. government for a total of $164 million.
So now Apple is going to trial alone — and it’s outlook doesn’t look so good. The trial’s judge, U.S. District Judge Denise Cote, seems to have made up her mind already about Apple’s guilt: “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 told Reuters a few weeks ago.
It also seems like the feds are out for blood. The government labeled Apple the “ringmaster” of the price-fixing scheme in documents filed last month, and it’s gearing up to present a significant amount of evidence to make its case. In particular, an e-mail from Steve Jobs to News Corp’s James Murdoch (which also owns HarperCollins) seems pretty damning: “Throw in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99.”
If found guilty, Apple would be ordered to avoid similar behavior in the future. And while the company won’t face any damages from the federal government, it may end up having to cough up cash in separate trials by several states.
Opening remarks for the U.S. v. Apple trial begin at 9:30 a.m. Eastern on Monday. Check back for updates.
Photo: Dean Takahashi/VentureBeat