Apple in price-fixing case

In a civil case in which the words of Steve Jobs play prominently, the US Government and Apple are set to square off over allegations the company conspired with the country's largest book publishers to make consumers pay more for electronic books.

US District Judge Denise Cote is scheduled to begin hearing the price-fixing case today in federal court in Manhattan.

The trial stems from an antitrust lawsuit brought last year by the Justice Department, which accused Apple of helping hatch the scheme at a meeting with publishers in 2009 as it was preparing to launch the iPad.

Its purpose was to force Seattle-based Amazon.com, marketer of Kindle e-book readers, to raise the $9.99 ($12.55) price it had set for the most popular e-book titles because that was substantially below their hardcover prices.

"Apple wanted to sell e-books to the public, but did not want to compete against the low prices Amazon was setting," the Government wrote in its court papers. "Apple knew that the major publishers also disliked Amazon's low prices and saw Apple's potential entry as a pathway to higher retail prices industrywide."

The Justice Department accuses the conspirators of agreeing that instead of selling books to retailers and letting them decide what to charge, the publishers would convert the retailers into "agents" restricted from lowering the publisher-set retail price. The arrangement guaranteed Apple a 30 per cent commission on each e-book it sold.

The Government says the scheme cost consumers tens of millions of dollars by adding US$2 or US$3, sometimes as much as US$5, to e-book prices.

It also argues part of the proof is Jobs' account of the arrangement.

The former Apple chief executive "conceded the price-fixing conspiracy when, the day after publicly announcing Apple's forthcoming iBookstore, he told his authorised biographer Apple had told the publishers, 'We'll go to the agency model, where you set the price, and we get our 30 per cent, and yes, the customer pays a little more, but that's what you want anyway", the Government says in court papers.

Apple's lawyers have accused the Government of basing its case "on mere allegations, faulty assumptions and unfounded conclusions". The company has denied its agreements required publishers to force Amazon to charge more for e-books. The agreements "required no such thing," the defence says.

The Government has reached settlements with the publishers named in the suit, Hachette, HarperCollins, Simon & Schuster, Holtzbrinck Publishers, doing business as Macmillan, and the Penguin Publishing Co that requires them to lift restrictions on discounting and other promotions they had imposed on e-book retailers. The judge urged Apple to settle.AP