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Publishers to testify against Apple in price-fixing trial

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The federal government, in a trial scheduled to begin on June 3, will rely on testimony from CEOs of New York’s largest publishing houses to argue that Apple(s aapl) brokered a conspiracy to raise the price of ebooks and harm its rival, Amazon(s amzn).

According to a court filing released on Tuesday, CEOs of the same publishing houses that once rejected the price-fixing theory will now offer evidence to suggest they colluded with Apple in order to increase ebook prices. The case involves allegations that Apple and its late CEO Steve Jobs organized a conspiracy with the Big Six publishers to introduce a commission-style pricing system in order to wrest pricing power from Amazon.

The new filing, posted below, says that the CEOs of Macmillan, Hachette, Harper Collins, Simon & Schuster and Random House will testify about various aspects of Apple’s role in the alleged conspiracy. All of these companies with the exception of Random House were also named in the antitrust lawsuit brought by the Department of Justice and agreed to settle the case last year.

The government’s new filing says Macmillan CEO John Sargent is expected to testify that:

“[T]he deal that 5 of us did with Apple meant someone was gonna have to do it. Just luck of the draw that it was me. . . . The optics make it look like I stood alone, but in the end I had no doubt that the others would eventually follow.”

Such evidence could prove damaging to Apple, which is also expected to confront testimony from Amazon executives. Apple will also be forced explain a growing list of possibly incriminating comments and emails. One of these, cited by the government to show Apple played an active role in the price changes, describes SVP of internet software and services Eddy Cue telling Jobs:

“In the end, they want us and see the opportunity we give them but they’re scared to commit! It [has] less to do with the terms and more about the dramatic business change for them. . . . They just have to get some balls.”

The new filing also includes the views of other prominent executives, including News Corp’s Rupert Murdoch. According to Harper Collins CEO Brian Murray, Murdoch was “pissed at Amazon” and wanted to “screw Amazon.”

In its own filings, Apple maintains its long-held position that it is not a “ringmaster” of a conspiracy, as the government alleges, but that it simply offered the same pricing system, which is based on a 30 percent commission, that it offers to any company that sells through its iTunes store. Apple also maintains that it helped to create competition at a time when Amazon dominated the ebook market.

The next important step of the proceedings will take place on May 23, when the parties meet before U.S. District Judge Denise Cote for a pre-trial conference.

Here’s the filing (all 156 pages of it!) with some of the key points underlined:

DOJ Motion of Facts and Law

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5 Responses to “Publishers to testify against Apple in price-fixing trial”

  1. Peter

    Amazon had a history anti-competitve practices, such as selling items under cost for the purpose of market share. The federal government did nothing about it. Amazon, as a result became a monopoly in many areas including book sales leaving the public with no competition. I don’t understand why the Justice Department doesn’t see this.

    • Peter

      I’m sure it has nothing to do with the fact that Amazon has a former Justice department director sitting on their executive board, or that the current DoJ director previously worked for a firm representing Amazon.

  2. These publisher CEOs to testify against Apple after they settled…so now, they are all innocent and under the spells of Jobs?

    Come on, this whole thing is a joke the longer they drag this out. If Apple pulls iBooks off today publishers would be crying even more having to deal with Amazon only. I agreed with Cue’s quote, “…get some balls.”