Apple Facing Uphill Battle In Ebook Trial

Apple is slated to go on trial on June 3 for conspiring to increase the price of ebooks, but at this point any hearing might be a formality. That's because U.S. District Court Judge Denise Cote, who will decide the case, has already said she believes that the Department of Justice will be able to prove that Apple violated antitrust laws.

"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,” Cote said at a hearing on Thursday, according to Reuters.

She reportedly qualified the statement by calling it a “tentative view,” but also indicated that her belief was shaped by evidence she already saw -- especially emails between Apple and the publishers in the six weeks before Apple started selling ebooks in 2010.



Last year, the DOJ charged Apple and five publishers -- -- Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster -- with banding together to put an end to Amazon's $9.99 per-book prices. They allegedly did so by engineering an industry-wide shift to an agency model, where publishers set the retail price of ebooks and pay commissions to the retailers. Previously the industry operated on the wholesale model, which involved retailers purchasing books at wholesale and then selling them at any price they wished.

When the industry followed an agency model, Amazon sold bestsellers at less than $10 a book. Some critics have suggested that pricing model was predatory and would ultimately have resulted in a monopoly over ebooks by Amazon. But Cote ruled last year that even if Amazon's pricing was predatory, the publishers didn't have the right to conspire to fix prices.

The publishers agreed to settle the charges, but Apple says it didn't do anything objectionable. The company argues in court papers that it negotiated with the publishers individually, and didn't conspire with them to force Amazon to accept an agency agreement. Still, the shift to an agency model benefited Apple by enabling it to sell ebooks for the iPad at competitive rates with Amazon.

Cote's comments yesterday indicate that she's not inclined to accept Apple's interpretation of the evidence. Of course, the company still has the opportunity to present proof at a trial. But it doesn't seem likely that Cote would have made such a strong statement, in open court, if she hadn't already made up her mind.

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