The DOJ asserted that Apple was only interested in ensuring that it would get a 30 percent cut of the sales, which was in line with what Apple gets with its sales of other content, such as music and television shows.Ĭue also downplayed any assertions that Apple was attempting to replicate what Amazon was doing with its Kindle-based ebook selling. Jobs responded in an email to the student that it was the publishers, not Apple, who were raising the prices. The DOJ also pointed to an email that one student sent to Jobs asking why Apple was raising the price of ebooks, which the student summarized as greedy. The publishers balked at this proposal, however. At one point., Apple offered to move away from the agency model, should the publishers offer it “Most Favored Nation” (MFN) pricing, in which the publishers guaranteed that Apple could sell their ebooks, with the 30 percent markup, at the lowest price offered by any retailer. “No one had knowledge that publisher meetings were happening,” he said.Ĭue was careful to point out that while Apple was promising that it could sell books at the publishers’ preferred rate, it made no promises as to whether these preferred rates would be accepted by other retailers.
The DOJ pointed to records of more than 100 phone calls the publisher CEOs had made among themselves in one month after Apple proposed the agency model. When the prosecutors asked Cue if, for instance, the publisher CEOs were talking among themselves about Apple’s proposed move to the agency model, Cue denied knowing anything about their discussions, or even admitting that he suspected that they were talking among themselves.
Apple pioneered the agency model in the electronic realm with its app store. Under that model, the publisher sets the price and the seller, in this case Apple, gets a fixed percentage. The company presented the idea of moving the book industry from a wholesale model, where retailers buy books at the wholesale rate and then charge whatever price they want, to an agency model. DOJ prosecutors spent the morning Thursday asking Cue to elaborate on his emails with publishing CEOs and Jobs.Īccording to the Justice Department, book publishers were worried in 2009 that Amazon, then the largest retailer of electronic books, was lowering the perceived wholesale value of the books, due to its strategy of discounting books for $9.99.Īpple, eager to get into the ebook business with the iPad, used the “Amazon threat” as a calling card for the publishers, according to the DOJ. The agency has offered a large collection of emails and phone records that strongly suggest that publishing company CEOs, Jobs and Cue worked together to hammer out an agreement. Asked who had decision-making authority regarding ebooks pricing, Cue replied that Jobs, who died in October 2011, was the ultimate arbitrator for all decisions made at Apple during that time.ĭepartment of Justice charges that Apple colluded with the book publishers, including Harper Collins, the Penguin Group and Simon & Schuster, to set up a new pricing model, in violation of the Sherman Antitrust Act.
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