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Saturday, May 18, 2013

Apple Fights Back in Antitrust Case Over E-Book Prices

Apple Fights Back in Antitrust Case Over E-Book Prices

Kimberly White/Reuters

In 2010, Steve Jobs introduced some of the publishing houses that would license iBooks.

WASHINGTON - Don't mess with the legacy of Steve Jobs.

That is one of several factors that seem to be motivating Apple's vigorous defense against a Justice Department antitrust lawsuit accusing the company of conspiring with five of the largest publishing houses to fix prices on electronic books, according to people close to the case.

Unlike the five publishers, all of which have settled the case, filed in April 2012, Apple is aggressively disputing the government's assertions that Apple and the publishers wanted to force Amazon, which controlled 90 percent of the e-book market before Apple entered it, to raise its prices, according to court papers filed this week. A trial is scheduled to begin June 3 in Federal District Court in New York.

Among other defenses, Apple says that both Amazon and the publishing companies were already contemplating a move to a different pricing model in 2009, before Apple entered the e-book business. Apple cites one Amazon executive who referred in an e-mail to the idea that Amazon got publishers to accept what it wanted all along as “Jedi mind tricks.”

Apple, whose 2010 introduction of the iPad corresponded with its opening of a digital bookstore, denies that it tried to convince publishers to enforce a regime that would allow them to set their own retail prices for books, above the $9.99 price that Amazon was then charging.

In addition, Apple says that the Justice Department has selectively edited and distorted e-mails between executives of Apple and the publishers.

“Apple injected much-needed competition and innovation into the e-book business,” said Orin Snyder, a lawyer at Gibson, Dunn & Crutcher who represents Apple. “The DOJ's case is based on fictions and incomplete quotations. The actual evidence proves that Apple did not conspire to fix prices in the e-book business. We look forward to trial.”

The Justice Department accuses Apple of its own selective quotation. And, it said, the evidence shows that the publishing companies threatened to withhold books unless Amazon allowed them to set higher prices and that Apple “encouraged them to do so.”

Apple seems particularly peeved about the government invoking e-mails of its former chief executive, Steven P. Jobs, to assert its case, saying the government's selective editing of those e-mails deliberately distorts Mr. Jobs's intentions.

The government's court papers quote from an e-mail that Mr. Jobs sent on Jan. 24, 2010, to James Murdoch, who as head of News Corporation oversaw its publishing company, HarperCollins. That was three days before the introduction of the iPad, as Apple was furiously negotiating deals with publishers that would allow it to introduce its bookstore on the same day.

Apple says the government left out of its papers the fact that Mr. Jobs said Amazon might have the right price for e-books already, at $9.99. “Maybe they are right and we will fail,” Mr. Jobs wrote.

Taken in total, Apple said, the e-mail “shows a new entrant with no market power proposing an alternative business model to HarperCollins, and candidly recognizing that Apple has no power to predict or influence other retailers,” Apple said in pretrial papers.

Sarah Rotman Epps, an analyst at Forrester who follows the publishing industry, said Apple still has a relatively small share of the e-book market.

“Even though they have a big brand, their actions have had relatively little impact on the overall industry,” Ms. Rotman Epps said.

Since Apple's entry, e-book prices have gone down, the company said, with the average retail price of an electronic book falling 63 cents since April 2010, from $7.97 to $7.34.

Michael Cader, the creator of Publishers Lunch, an industry publication, said there were multiple ways of interpreting what had happened to e-book prices since the start of Apple's iBookstore. He said at least part of the decline might reflect the exponential growth in older books, self-published books and books from an array of small and digital-only publishers, many of which are often sold for as little as 99 cents to $3.

Edward Wyatt reported from Washington, and Brian X. Chen from San Francisco.

This article has been revised to reflect the following correction:

Correction: May 18, 2013

An article on Friday about Apple's battle with the Justice Department over charges of price-fixing on e-books characterized incorrectly a comment by Michael Cader, of the industry publication Publishers Lunch, on the decline in e-book prices. He speculated that the growth in older books, self-published books and books from small and digital publishers might account for part of the decline; he did not state that as a fact.

A version of this article appeared in print on May 17, 2013, on page B7 of the New York edition with the headline: Apple Fights Back in Antitrust Case Over E-Book Prices.