Apple exec denies e-book price-fixing scheme

Eddy Cue, left, who led Apple negotiations with

Eddy Cue, left, who led Apple negotiations with publishers in what the government says was a scheme to fix e-book prices, leaves federal court in Manhattan after testifying on Thursday. (June 13, 2013) (Credit: Bloomberg)

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A top Apple Inc. executive described as Steve Jobs' right-hand man testified Thursday in 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 on its Kindle reader.

"They expressed to us that they wanted higher prices," he testified under questioning by a government lawyer.

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 then-new iBookstore. But he denied 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 there was a chance that once the iBookstore launched, publishers would withhold bestsellers and new releases from Amazon if it didn't adjust its prices, he responded, "I believe so, sure. Smart guy."

Cue also claimed he had no knowledge 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.

The trial stems 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 percent commission on each e-book it sold.

The publishers -- Hachette, HarperCollins; Simon & Schuster; Holtzbrinck Publishers, doing business as Macmillan; and The Penguin Publishing Co. Ltd., doing business as the Penguin Group -- settled with the government before the nonjury trial.

Apple chose to go to trial, denying claims its agreements required publishers to force Amazon to charge more. Lawyers for the Cupertino, Calif.-based company claim the government case is based "on mere allegations, faulty assumptions and unfounded conclusions."

Evidence in the case includes emails by Jobs before he died in 2011. In one email to Cue about news McMillan and Amazon were in a dispute over McMillan's demand for higher prices, Jobs wrote, "Wow. We have really lit the fuse on a powderkeg."

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