A top Apple Inc. (AAPL) executive on Thursday defended the
technology company's approach to selling electronic books when it
first entered the market in 2010, even if consumers had to pay a
higher price for some e-books at the time.
The U.S. Department of Justice, in a civil trial being heard in
federal court in Manhattan, has accused Apple of colluding with
five major publishers to raise the price of e-books in 2010 in
response to Amazon.com Inc.'s (AMZN) discount pricing of $9.99 for
best-selling and newly released e-books. The government has argued
that prices for e-book bestsellers rose to $12.99 and $14.99
following the alleged collusion.
The publishers have all since entered into settlements with the
Justice Department and in a separate lawsuit by a group of state
attorneys general. Apple denies the allegations.
Testifying in federal court in Manhattan, Eddy Cue, an Apple
executive who played a key role in negotiating the deals with the
publishers, said the technology firm acted in the best interest of
consumers, offering e-books that were found nowhere else at a fair
price.
"We gave them a great offer," Mr. Cue said.
The civil anti-trust trial against Apple, which began earlier
this month, is expected to last about three weeks and is being
heard by U.S. District Judge Denise Cote, who said in May that she
believes the government will likely be able to prove its case.
Apple last year settled an antitrust case with the European
Commission over e-book pricing but didn't admit any wrongdoing.
Mr. Cue, who serves as Apple's senior vice president of Internet
Software and Services, has been with Apple for more than two
decades and worked closely with Steve Jobs, the company's
co-founder who died in 2011.
He showed a feisty side Wednesday as Lawrence Buterman, a
Justice Department lawyer, pressed him on whether Apple's decision
to shift to a so-called agency model in which publishers, rather
retailers, set the price of e-books, was in the best interest of
the general public.
As part of its deals with the publishers, Apple received a 30%
commission on each book sold and was allowed to match the price of
a competitor if their price was lower.
"I didn't raise prices," Mr. Cue said.
"You just gave them [the publishers] the opportunity to raise
prices?," Mr. Buterman said.
"The publishers set the prices," Mr. Cue said.
The five publishing companies--Lagardere SCA's (MMB.FR) Hachette
Book Group, CBS Corp.'s (CBS) Simon & Schuster, HarperCollins
Publishers, Pearson PLC's (PSO) Penguin Group (USA) and
Verlagsgruppe Georg von Holtzbrinck GmbH's Macmillan-have
terminated their 2010 agreements with Apple as part of the
settlements. HarperCollins is owned by News Corp. (NWS), the
publisher of The Wall Street Journal.
Mr. Cue said Wednesday that he wasn't aware the publishers were
meeting to discuss their pacts with Apple, prior to the government
filing its lawsuit last year.
"I struggled and fought with them about many, many things," Mr.
Cue said. "If they had been talking to each other, I would assume I
would've had a much easier time getting those deals done."
Write to Chad Bray at Chad.Bray@wsj.com
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