Penguin may have settled out of court in the Department of Justice ebook price fixing trial Apple is dealing with, but that hasn't stopped the publisher from backing the iPhone and iPad maker on the stand. Penguin CEO David Shanks took the stand on Tuesday to say that Apple was fine if negotiations didn't pan out and was willing to stay out of the ebook selling space, contradicting the DOJ's claim that Apple was aggressively pushing to control pricing in the market.
Penguin CEO: Apple didn't care if ebook negotiations fell apart
According to Bloomberg, Mr. Shanks testified,
It was fairly clear that they could take or leave being in the book business. If they couldn't get it on their terms, they weren't going to take the jump into being in books.
An Apple attorney that participated in the ebook contract talks backed up Mr. Shanks when he took the stand and testified that Apple was “indifferent” to the pricing model publishers chose to use.
Apple, along with Penguin, MacMillan Simon & Schuster, HarperCollins, and Hachette Book Group were all accused of conspiring to push ebook prices higher by forcing retailers into using an agency pricing model. The agency model lets publishers set book prices instead of stores, which the DOJ said ultimately forced retailers into charging more.
All of the publishers eventually settled out of court instead of taking their chances at trial. Apple, however, held strong that it did nothing wrong and is now the only company left squaring off against the DOJ.
Mr. Shanks also called the negotiations with Apple “typical,” and that Penguin considered using the agency model with Apple while maintaining its existing deal with Amazon where the online retailer set its own book prices. Sticking with that agreement, however, would've let Amazon continue to sell books at a loss and undercut the competition.
The DOJ contended that Apple spearheaded an effort to force the agency model on retailers, allowing publishers to take control of book prices and artificially drive costs up. Apple's legal team argued that the company was negotiating with each book publisher independently and was unaware of any plans on the part of the companies to manipulate ebook prices.
Another point the DOJ targeted was the “most favored nation” clause in Apple's contracts that prohibited retailers from selling ebooks at prices that undercut the iBookstore. While the DOJ said that was a move to force ebook prices up, Apple argued it was actually a way to ensure that it could match the lower prices competitors were charging for the same titles.
Apple's Senior Vice President of Internet Software and Services Eddy Cue is scheduled to take the stand next week on June 13. The DOJ will likely try to use his testimony to back up its claims that he was instrumental in a plot with publishers to raise book prices, while Apple will try to show its iBookstore negotiations were no different than its efforts to get record labels on board when the iTunes Store launched.
Odds are that the other publishers will offer testimonies in line with Mr. Shanks since saying otherwise would contradict their own position that they didn't collude to raise book prices.