NEW YORK, N.Y. – A top Apple Inc. executive described as Steve Jobs’ right-hand man took the witness stand at a Manhattan price-fixing trial and denied scheming with major book publishers to drive up the cost of electronic books.
Eddy Cue was questioned about meetings he had in 2009 with chief executives of publishing houses about what they called their “Amazon problem” — the discounted $9.99 price that Amazon.com set for e-books.
“They expressed to us that they wanted higher prices,” he said.
Cue was the chief negotiator in deals with the publishers that allowed them to set prices as high as $14.99 for sales in Apple’s new iBookstore. But he denied that the deals were calculated to force Amazon into similar agreements that would raise its prices as well.
Jobs closely monitored the negotiations but was “indifferent” about the outcome for Amazon, Cue testified. However, when asked if Jobs knew that there was a chance that once the iBookstore launched, publishers would withhold bestsellers and new releases from Amazon, he responded, “I believe so, sure. Smart guy.”
Cue also claimed he had no knowledge that the publishers were colluding with each other as he negotiated with them, despite phone records showing their chief executives were in constant communication.
“I don’t believe they were working together to do the deal I was working on,” Cue said.
Cue, a senior vice-president of Internet and Software Services at Apple, oversees the iTunes Store, App Store, iBookstore and iCloud services.
He testified at a trial stemming from an antitrust lawsuit brought last year by the Justice Department accusing Apple and the publishers of harming consumers by devising a plan that allowed publishers to convert retailers into “agents” who were restricted from lowering the publisher-set retail price. The arrangement guaranteed Apple a 30 per cent commission on each e-book it sold.
The five publishers settled with the government, but Apple took the case to trial, denying claims that its agreements required publishers to force Amazon to charge more for e-books.
Lawyers for the Cupertino, Calif.-based company have accused the government of basing its case “on mere allegations, faulty assumptions and unfounded conclusions.”
Evidence in the case includes emails written by Jobs before he died in 2011. During questioning of Cue on Wednesday, government lawyers cited an unsolicited email a college student sent to Jobs in 2010 complaining that the higher prices in the iBookstore were a burden.
“You have so much,” he wrote. “Wouldn’t it be OK for us little guys to have something?”
Jobs responded: “It’s the publisher who are raising prices, not Apple.”
The settlements with the publishers named in the suit — Hachette, HarperCollins, Simon & Schuster, Holtzbrinck Publishers, doing business as Macmillan, and The Penguin Publishing Co. Ltd., doing business as the Penguin Group — requires them to lift restrictions on discounting and other promotions they had imposed on e-book retailers.