An interview published by Fortune today suggests that Apple is unrepentant over the allegedly conspiratorial launch of the iBookstore in 2010, as Apple Senior VP Eddy Cue and CEO Tim Cook “feel we have to fight for the truth” by appealing a 2013 ruling that Apple had illegally fixed digital book prices in violation of the Sherman Act. According to Cue, who led Apple’s negotiations with publishers, Apple wrestled with a number of potential antitrust legal issues before opening the iBookstore, legally negotiating from a standard contract, using an agency rather than a wholesale pricing model, and setting price tiers and caps for books. The company also attempted to act legally by using a “Most Favored Nation” (MFN) clause, providing that publishers’ iBookstore prices would be no higher than competing digital bookstore prices—normally not an issue.
However, U.S. District Judge Denise Cote ruled that the publishers and Apple had colluded to raise prices, based on evidence of deliberately-deleted emails between publishers, as well as an admission by then-Apple CEO Steve Jobs that $14.99 book “prices will be the same” between Apple and its competitor Amazon, which was then routinely selling books for $9.99. Cote found that Apple had effectively pressured the publishers to switch en masse from wholesale to agency pricing models with Amazon, including an initial contract clause requiring such a switch, which was removed in writing but lived on as “never rescinded,” according to Cote.
Cue told Fortune that Apple worked with each of the publishers individually, effectively seeking to avoid a major issue—“windowing” or holding back a digital release until after the more expensive printed book’s release—by bringing the digital and print prices closer together. Apple hadn’t actually conspired with the publishers collectively to raise prices, Cue said, but rather had freed them to offer digital books at price tiers that weren’t artificially low as Amazon’s, though not as unrealistically high as they had originally wanted. At the time, Amazon was actually selling books at major losses to build the Kindle business.
