Justice Department’s Trial Against Apple Begins

Michael Teague  |

It is a case that a one-time policy director for the U.S. Federal Trade Commission said “will effectively set the rules for internet commerce.”

The Justice Department’s case against tech giant Apple Inc. (AAPL), filed in April of last year, begins on Monday. The company is alleged to have conspired with five of the U.S.’s biggest book publishers to raise the price of books in order to upset Amazon’s (AMZN) dominance in book sales that allows it to have an enormous amount of say when it comes to how much e-books cost.

The suit was originally filed against Apple, along with News Corp’s (NEWS) Harper Collins, Hachette Book Group Inc., Pearson PLC-owned Penguin Books (PSO), MacMillan, and CBS’s (CBS) Simon & Schuster. U.S. district judge Denise Cote, who is presiding over the case, said at a pre-trial hearing in May that she believes the government will be able to demonstrate that Apple was indeed involved in a conspiracy whose aim was to increase the price of e-books.

The five publishers have been dropped from the litigation as a result of their having agreed to settle out of court to the tune of $164 million in customer benefits, and well as having agreed to ease up restrictions on wholesale discounts.

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Amazon launched its incredibly successful Kindle reader in 2007, and by 2009 had cornered 90 percent of all e-book sales. When Apple introduced the iPad, it was also looking for a means to enter into the e-book market. The suit alleges that at around that time the company, with encouragement in particular from Hachette and Harper Collins, considered an agency sales model according to which the publisher would set the price, and Apple would take a fixed cut.

The suit also accuses Apple of guaranteeing the publishers the cooperation of their rivals in the scheme. Apple claims that it acted on its own impetus when it got in to e-books, and was unaware of any collusion taking place between the publishers. Unlike the publishers, however, Apple refuses to settle out of court, because, according to CEO Tim Cook, the company will not admit to an act it did not commit.

Instead of seeking damages, the government is attempting to order Apple to not participate in such conduct again. The trial commences the same week that the U.S. International Trade Commission announces its decision in the copyright infringement case between Samsung and Apple.

Samsung claims that Apple infringed on its patents, particularly those having to do with data transmission. In the worst-case scenario, Samsung could block the company from selling any of its products that are in violation of patents.

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