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E-book trial: Government says Apple conspiracy raised prices

June 03, 2013|By Andrew Tangel and Chris O'Brien
  • A digital book is displayed on an Apple iPad.
A digital book is displayed on an Apple iPad. (Scott Eells / Bloomberg )

NEW YORK -- Apple and major publishers conspired in a scheme to fix prices on e-books, costing consumers hundreds of millions of dollars, a U.S. Justice Department attorney argued during the first day of a marquee antitrust trial.

In April 2010, when Apple launched its online bookstore, prices jumped 50%, Justice Department lawyer Lawrence Buterman said during his opening statement for the government.

"This dramatic price increase was no accident," Buterman said. "Apple knowingly and actively participated in a scheme to raise e-book prices."

Story: Apple e-book price-fixing trial about to get underway

Apple's attorney, however, launched into a vigorous defense, saying the government was drawing "sinister inferences" from out-of-context, misquoted e-mail excerpts.

Orin Snyder, said Apple merely helped bring innovation to a broken e-book market, and engaged in no conspiracy to fix prices. Consumers ultimately benefited, he said.

The trial grew out of Apple's entrance into the e-book market in 2010, when it launched the iBookstore in tandem with the first iPad. Apple had persuaded five publishers to sign on to the iBookstore using a pricing model different from the one that was used by Amazon, the company that continues to dominate the e-book market. 

Publishers were hopeful that Apple's service would allow them to have more control over setting the prices for e-books. But in a lawsuit filed last year, the Justice Department accused Apple of being a ringleader of a cartel aimed at gouging consumers.

All five of the publishers have since settled with the government.

The only holdout is Apple, and the company appears to be facing a tough battle as the trial gets underway. Last month, the judge in the case indicated that she was inclined to find in favor of the Justice Department.  

Addressing why Apple was going to trial instead of settling like the publishing companies, Snyder declared: "Apple is going to trial because it did nothing wrong."

The civil trial in U.S. District Court in Manhattan is expected to last up to three weeks. Two publishing executives and an Apple attorney are expected to be among the first witnesses.

Here are the slides from the Justice Department's opening statements: 

U.S. v. Apple Et Al Opening Slides

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