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Apple faces off with DOJ in e-books trialThe U.S. Department of Justice and Apple delivered opening statements in court Monday. Sumi Das speaks to CNET's Josh Lowensohn about why Apple turned down a settlement, and how it might defend itself against allegations of fixing prices on e-books.
-Hello and welcome to Inside Scoop. I'm Sumi Das and joining me is Josh Lowensohn, senior writer for CNET. Josh, thanks for being with us. -Great to be here. -Okay. So, Apple's corporate legal team is getting a workout last year. It was the patent trial of the century, which they won. This year, it's a slightly different set of players. It's Apple versus the DOJ. What is the case? What are the charges? -Sure. So, last year, the Department of Justice basically sued Apple along with a bunch of book publishers, the major book publishers, accusing them of fixing prices on e-books. So, their basic argument was that, when Apple came along, prices for e-books went from $10 up to $12, $13, $14, $15. So, the DOJ is really trying to figure out whether they all worked together to make that happen and how that really affected the e-books market. -And so far, it's just been day one of opening arguments, right? -Yeah, this thing basically just started. It's said to last about three weeks, so both sides kind of opened up today and they were gonna see witnesses from both sides including Apple's Eddy Cue who runs-- -Uh-huh. -the iBookstore and runs iTunes and iCloud along with some of the CEOs from the major publishers. -Apple was offered a settlement. They've said that they turned it down. They're the only ones, right? I mean, everybody else settled out of court? -Yup. And a lot of the legal experts we talked to before the trial started said that Apple is actually gonna settle. It's almost guaranteed. But then last week, Tim Cook, during an interview, said, "You know what, they offered us a settlement. We said we wouldn't sign it because-- -Right. -it basically said that we're wrong and we are making bad decisions." And they said they didn't wanna do that. -They didn't wanna make that admission. -Exactly. But at the same time, you know, the judge in this case in a pre-trial hearing said, "You know what, I kind of-- I'm siding with the DOJ. It looks like Apple doesn't really have quite the case. So, that's what kind of makes this interesting. What does Apple really have up its sleeve? They kind of make something. They're gonna win it. -Do we have an idea of what their case might be? I mean, based on sort of the responses we've seen so far? -Yeah. You know, so far, they really say that this is similar to music. Before they came along, you know, it was kind of scattered. People weren't really making as much money. It was hard for consumers and then they came along with the iPad and the iBookstore, and all of a sudden, everything worked out again. I don't know if people are gonna buy that. -Uh-huh. -I think one of the key problems here is that, before they came on, books were a lot cheaper,-- -Right. -but Apple's argument so far has really been the publishers weren't really making a lot of money. So, if you look at something like music-- -They were doing the publishers a favor. -Exactly. If you look at something like music, it made sense that, maybe, people weren't getting paid 'cause of piracy. And Steve Jobs at that time argued that if you price this any lower, people are just gonna stop buying it. -Okay. So, why is this case significant? I mean, we are seeing huge increases in the amount of people who were reading e-books, right? -Yeah, it's not just about the product itself or the e-books. It's also about how much control a company can have over fixing these prices if that's indeed what happened. If you look at something like this, it's all about a clause. It says, one company has to get the same price as another company-- -Uh-huh. -as long as it's lower and that's kind of been on-- you know, it's kind of a semantic issue, but it also kind of takes that idea and says, "What else could this be applied to? Not just books but also movies, TV shows, anything like that." -Any precedent that it might set? -And if you look at a company like Apple or Amazon or anybody else, well, they have their hands in all these different markets. Something like this can have a very big impact. -Uh-huh. You're gonna be keeping an eye on this case? -Absolutely, we're gonna be there in the court everyday. -We're looking forward to that. -Sure. -Thank you, Josh. We will check in with you again. For Inside Scoop, I'm Sumi Das. Thanks for watching.