Federal Judge Sides with U.S. DOJ in Apple E-Books Preliminary Hearing
May 24, 2013 11:46 AM
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This judge will oversee the trial starting June 3
A federal judge's preliminary statement in the
price fixing case seemed to fall in favor of the U.S. Department of Justice (DOJ).
"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," said U.S. District Judge Denise Cote.
Cote, who will oversee Apple's e-book trial starting June 3, said that this statement made Thursday morning was by no means final and based on only part of the evidence presented.
"We strongly disagree with the court's preliminary statements about the case today," said Orin Snyder, a lawyer for Apple.
The hearing on Thursday discussed pretrial topics like which witnesses could testify in the trial.
Apple is the target of the e-books investigation along with book publishers Hachette Livre (Lagardère Publishing France), Harper Collins (News Corp., U.S.A.), Simon & Schuster (CBS Corp., U.S.A.), Penguin (Pearson Group, United Kingdom) and Verlagsgruppe Georg von Holzbrinck (owner of inter alia Macmillan, Germany).
However, all the book publishers have already settled with the DOJ. Apple is the only one who hasn't settled yet, and is looking to go to trial June 3.
This all started in April 2012, when the
U.S. Department of Justice (DOJ) sued Apple and the five book publishers
over anticompetitive practices concerning e-book sales. The book publishers were accused of partaking in an agency sales model with Apple, which meant that publishers were allowed to set the price of a book and Apple would take a 30 percent cut. In addition, the publishers could not let rivals sell the same book at a lower price. Traditionally, publishers sell physical books to retailers for about half of the cover price, which is considered a wholesale model. Retailers then had the ability to sell those books to customers for a lower price if they wanted to.
But when e-books came along, this model was challenged. Amazon started selling best sellers for as low as $9.99 to encourage its Kindle e-reader sales. Publishers were not happy.
Apple then came along
, and publishers began to worry that it would take over the book industry the way Apple's iTunes took over the music industry, where customers would choose to purchase cheap, digital books instead of physical books.
However, Apple attempted to resolve this when it struck a deal with publishers to implement the agency model in 2010. This helped Apple at the time of its iPad and iBooks launch.
But its deal with publishers made it seem like an attempt to thwart Amazon's dominance.
Earlier this month, DOJ used
an old email from former Apple CEO Steve Jobs
as evidence in the e-books case. The email (dated in 2010) from Jobs to James Murdoch of News Corporation said, "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.”
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5/27/2013 12:57:09 PM
That would be true if the major cost of producing a book were the manufacturing process, but it's not: typical production costs for a book amount to about $2.50 for a hardcover and $0.50-$1 for a paperback. The editorial costs, layout, cover design, author's commission, and publisher's overhead make up the majority of costs; and those don't change when you move to e-books.
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