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DOJ calls Apple the 'ringmaster' in e-book price-fixing as trial looms

DOJ says Apple pressured publishers, while Apple denies the allegations.

By Husna Haq / May 15, 2013

The e-book price-fixing trial will begin June 3.

Mark Lennihan/AP

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The e-book price-fixing trial hasn’t yet begun and Apple and the Justice Department are already trading jabs.

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According to news reports, court filings suggest the Justice Department is now painting Apple as the “ringmaster” pressuring publishers to adopt higher e-book pricing in a wide-ranging price-fixing conspiracy.

“Apple knew exactly what it was doing,” the DOJ wrote in its filing in which it described Apple as the “facilitator and go-between,” strong-arming publishing companies to go along with its scheme. “Apple assured Publisher Defendants that it understood and would support their goal of raising retail e-book prices as part of Defendants’ grand agreement.”

The DOJ’s smoking gun? An email from the late Steve Jobs of Apple to James Murdoch of News Corp., the parent company of publisher HarperCollins, that reads: “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.”

As we reported in previous posts, the government’s suit, which was first filed last year, accuses Apple and five publishers of conspiring to fix e-book prices in a scheme to force Amazon to raise its e-book price of $9.99. The five publishers – Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster – have all since settled, leaving Apple to fight the government’s charges alone. The trial is set to begin June 3.

And if pretrial antics are any indication, this is going to be one contentious fight.

Not surprisingly, Apple isn’t taking Justice Department’s latest allegations lying down.

“Apple did not conspire to fix eBook pricing,” Apple spokesman Tom Neumayr said in a statement.  “We helped transform the eBook market with the introduction of the iBookstore in 2010, bringing consumers an expanded selection of eBooks and delivering innovative new features. The market has been thriving and innovating since Apple's entry, and we look forward to going to trial to defend ourselves and move forward.”

In its most recent filing, Apple put forward its counterclaim, that publishers had decided to eliminate discounts on wholesale book prices of e-books and to delay e-book sales to first sell more lucrative hardcovers (a practice called windowing), both decisions made independent of Apple in order to force Amazon to raise prices.

In fact, the tech giant claims it ran into opposition when it approached publishers to cooperate in setting up an online bookstore for its new iPad, then under development.

“Early – and constant – points of negotiation and contention were over Apple’s price caps and 30 percent commission,” Apple wrote in its filing. “After Apple sent draft agency agreements to each publisher CEO on Jan. 11, each immediately opposed Apple’s price tiers and caps.”

The DOJ’s and Apple’s dueling versions of the adoption of the agency model are likely to be front and center when the trial begins June 3.

Husna Haq is a Monitor correspondent.

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