Apple and DOJ's e-books court battle kicks off
At the start of the three-week trial, the DOJ argues Apple was the ringleader in the e-book pricing plan. Apple, meanwhile, says "this is a bizarre antitrust case."
NEW YORK -- Apple and the U.S. Department of Justice finally headed to court on Monday for a high-profile trial over e-book price fixing, and one side already has expressed worries about an unfair disadvantage.
The Justice Department is trying to prove to the court that Apple was the ringleader in a scheme to push book publishers toward raising their prices, and change the pricing model to better compete with Amazon. Apple's fought back, arguing that the U.S. government took the various e-mails between Apple executives and publishers out of context, and that its entry into the e-books business helped the market.
Both sides made opening statements to a packed lower Manhattan courtroom on Monday, though as soon as Apple began presenting its side, one of its attorneys voiced concerns that his client might not be given a fair shake. Apple attorney Orin Snyder said pro-DOJ comments made by U.S. District Court judge Denise Cote at a pretrial hearing last month suggested that she already believed Apple to be at fault.
Snyder requested the judge "hit the delete button on any tentative view that might exist in the court's mind today."
"All we want is a fair trial with all evidence being considered and testimony being heard," he added.
Cote almost immediately cut off Snyder, saying that she only gave the opinion because both sides agreed to it, and that she wouldn't consider any documents as evidence until they're officially submitted. She noted that Apple had months to think about whether it wanted a tentative view, and her view was just that -- tentative.
"This isn't a vote about whether I like Apple or anyone else does," Cote told both sides. "The deck isn't stacked against Apple. ... You have my firm commitment ... that I will do my very best to follow the law."
In the Justice Department's opening statements, which ran about an hour and a half, DOJ attorney Lawrence Buterman brought out a string of e-mails between executives at Apple and book publishers, many of whom are slated to testify during the three-week trial. The key argument the government's trying to make is that Apple worked together, in concert, with the publishers to make dramatic changes to e-book pricing that ended up leaving consumers to pay more, and alter the playing field for longtime and dominant e-book seller Amazon.
The DOJ argued that Apple was the ringleader in the e-book pricing plan, and that such a plan wouldn't have happened without the company. In particular, the DOJ called out Apple Senior Vice President Eddy Cue, who oversees all of Apple's digital stores and its Web services, for his role in establishing Apple's e-book policies and pricing. Cue, who Buterman called "the chief ringleader of the conspiracy," is scheduled to testify June 13.
Buterman also argued that the late Apple CEO Steve Jobs admitted to the plot in interviews with The Wall Street Journal and with his biographer, Walter Isaacson.
"Apple had knowledge publishers desired to raise prices ... and it consciously committed to making that a reality," Buterman said. "Apple's conduct cannot be excused."
Apple's argument takes an opposite stance, suggesting that any correspondence it had with the various publishers was part of a normal business practice that was involved with entering a new market. Furthermore that any deals it reached with the publishers was "contentious and hard fought," versus some greedy deal that was made in closed-door dealings.
"Apple has been waiting for this day for a long time ... Apple is going to trial because it did nothing wrong," Apple's Snyder said. "Even our government is fallible, and sometimes the government gets it wrong."
And Snyder, who presented Apple's opening argument over the course of nearly three hours, also cautioned the court against using Jobs' comments without him being there to explain or defend them. He noted that Apple didn't want to ban all comments from its co-founder, but wanted them put into context. In the case of the e-books-related comment in the Isaacson tome, Snyder argued that Jobs' remarks simply showed that Apple had reached a certain pricing model where it had a guarantee that it could meet any other retailers' lower prices. Such a clause, known as most-favored nation, isn't illegal.
Snyder also argued that e-book pricing actually has fallen since Apple launched the iBooks store, and the number of books available in digital format has increased. And he argued that Apple's so-called most-favored nation status meant it didn't care what prices other retailers, such as Amazon, chose for e-books, as Apple would still be able to meet those levels and still generate a 30 percent cut.
"This is a bizarre antitrust case," he said. "It's the first time in the history of antitrust laws that a new entrant coming into a concentrated market ... is condemned" even though signs point to a healthy market. Snyder added that Apple should be "applauded, not condemned" for benefiting hundreds of millions of consumers.
The inauspicious start comes a little more than a year after the Justice Department first filed its suit against Apple along with five of the six major book publishers. Those publishers have since settled, leaving Apple a lone, and staunch, holdout. Apple last week noted it had, in fact, even been offered a settlement to end the spat, but that it didn't bite given that it would have been required to sign something admitting fault.
The first -- and only -- person to testify Monday was Kevin Saul, an Apple attorney who works on the company's iTunes, apps, and iBooks operations. Formal testimony was submitted to the court for each witness, and the time in court involved cross examination. Saul said during his grilling by the DOJ that he helped Apple develop the agreements it signed with publishers, and Apple early on told the publishers it "had no interest in helping them fix the problems they had with Amazon pricing."
The trial continues Tuesday morning with additional questioning of Saul. The trial is scheduled to run another three weeks, as both sides have 29 hours to make their case. Still ahead are key testimonies from top publishers, as well as Cue and other executives.