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Justice Department calls Apple the 'ringmaster' in e-book price fixing case


Back in April 2012, the US Justice Department filed an antitrust lawsuit against Apple and a number of publishers for allegedly colluding to raise the price of e-books on the iBookstore.

The original suit targeted five publishing companies; Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster. While Macmillan and Penguin were initially keen on fighting the allegations, all five publishers have since settled with the US Justice Department.

As such, Apple is the last man standing.

As part of its investigation into Apple's actions, the Justice Department collected evidence which it claims demonstrates that Apple was the "ringmaster" in a price fixing conspiracy.

According to the New York Times, which took a look at various court filings in the case, one such piece of evidence is an email from former Apple CEO Steve Jobs to James Murdoch of News Corp.

The email 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."

While that in and of itself seems rather innocuous, that's just the tip of the iceberg.

The Times adds:

In July 2010, Mr. Jobs, Apple's former chief executive, told the chief executive of Random House, Markus Dohle, that the publisher would suffer a loss of support from Apple if it held out much longer, according to an account of the conversation provided by Mr. Dohle in the filing. Two months later, Apple threatened to block an e-book application by Random House from appearing in Apple's App Store because it had not agreed to a deal with Apple, the filing said.

When Random House ultimately signed on the dotted line, Eddy Cue sent an email to Jobs stating that one of the reasons Random House agreed to Apple's terms was because "I prevented an app from Random House from going live in the app store."

Apple, for its part, seems intent on defending itself fully. Indeed, Apple believes its strategy was simply a means to break what it affectionately calls "Amazon's monopolistic grip on the publishing industry."

Remember that in the wake of the Justice Department's allegations, Apple in April 2012 issued the following statement:

The DOJ's accusation of collusion against Apple is simply not true. The launch of the iBookstore in 2010 fostered innovation and competition, breaking Amazon's monopolistic grip on the publishing industry. Since then customers have benefited from eBooks that are more interactive and engaging. Just as we've allowed developers to set prices on the App Store, publishers set prices on the iBookstore.

In recent filings, Apple argues that there was no collusion amongst the parties involved to the extent that it negotiated contracts with each publishing company independently of the others. Apple further claims that the particulars of each agreement varied from publisher to publisher.

Apple also argues that publishers, on their own accord, had already decided to abandon the wholesale pricing model championed by Amazon, a model wherein the price of e-books is determined by retailers and not publishers.

To that end, Apple contends that publishers did not need to be coerced into Apple's agency model for e-books, a model where publishers themselves determine the pricing structure. Indeed, Apple notes that one of the consistent points of contention during the negotiation process actually centered on "Apple's price caps" and its desire for a 30 percent commission on e-books sold. In other words, the publishers were, by and large, already on board -- it was only the details that needed to be ironed out.

One thing's for sure -- this will certainly be an interesting case to keep an eye on. Two months ago we reported that Apple CEO Tim Cook will testify during the trial, which is scheduled to begin on June 3.

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