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Apple in Big Apple dock: iPhone goliath starts ebook price-fix trial

Still nothing to do with us, insists Cupertino

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Apple goes on trial today as the last man standing against charges of ebook price fixing brought by the US government.

Only Apple has refused to settle the case brought by the Department of Justice, which alleges that Cupertino colluded with five publishers to fix the price of ebooks in order to boost its margins and boot Amazon out of its dominant market position.

Penguin, HarperCollins, Macmillan, Simon & Schuster and Hachette have all bowed to the US government's will, dropping their agency contracts with Apple and agreeing to future contractual restrictions, as well as stumping up millions for their customers.

But Apple has maintained all along that its pursuit of agency contracts simply made good business sense - and if any price-fixing occurred, it was the publishers wot done it, definitely not the fruity firm.

The agency contracts at the heart of the dispute, which replaced the previous wholesale model, allowed publishers to set the price of books and give retailers a percentage of that price, instead of retailers setting prices after buying the books at wholesale prices. In the wholesale model, Amazon was buying books and then selling them on at below cost, taking the hit in order to promote sales of its Kindle ereaders and build up market share.

Apple ensured that many of its contracts also had a “most favoured nation” clause, which stopped publishers from offering a cheaper price to other retailers. The result was a normalisation of ebook prices at a higher level than before.

The DoJ argues that the publishers colluded with Apple to agree on what that price should be. Early signs indicate that District Judge Denise Cote is likely to agree. She said last month that she believed "the government will be able to show at trial direct evidence that Apple knowingly participated in and facilitated a conspiracy to raise the price of ebooks".

If her comments have shaken Apple, it hasn't showed it so far. CEO Tim Cook was still firm last week that the company was not considering settling the case, saying at the AllThingsD Digital Conference that Cupertino would not "sign something that says we did something we didn't do".

While the DoJ itself isn't seeking damages, Apple will face financial sanctions from cases brought by state attorneys general and class action suits from customers if it's found guilty at trial. ®

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