Justice Department claims Steve Jobs was ‘ringmaster’ in price-fixing scheme

The late Apple CEO Steve Jobs orchestrated a plot with a group of publishing companies in 2010 to raise the price of e-books, the Justice Department claimed in court filings released on Tuesday.

According to the documents, Jobs emailed James Murdoch of News Corp. in January 2010, urging him to “throw in with Apple and see if we can all make a go of this to create a real mainstream ebooks market at $12.99 and $14.99.” At the time, Amazon had set the price of most e-books at $9.99.

News Corp. is the parent company of HarperCollins, which the DOJ alleges joined Apple’s plot along with Macmillan, Penguin Group, Hachette and Simon & Schuster.

{mosads}The government claims that Apple was the “ringmaster” of a price-fixing conspiracy. 

“Apple knew exactly what it was doing. Apple assured Publisher Defendants that it understood and would support their goal of raising retail e-book prices as part of Defendants’ grand agreement,” the Justice Department writes in a filing.

Jobs died in October 2011.

The case, which was first filed last year, is scheduled to go to trial next month. All of the publishing companies agreed to settle with the federal government, leaving Apple as the only company still fighting the charges.

“Apple did not conspire to fix eBook pricing,” Apple spokesman Tom Neumayr said. 

“We helped transform the eBook market with the introduction of the iBookstore in 2010, bringing consumers an expanded selection of eBooks and delivering innovative new features. The market has been thriving and innovating since Apple’s entry, and we look forward to going to trial to defend ourselves and move forward,” he said.

According to the government’s case, the publishers were frustrated with Amazon’s $9.99 price for e-books, and Apple wanted a 30 percent share of e-book sales in its iBookstore for iPad users. In early 2010, with Apple’s coordination, the publishers all agreed to switch from a wholesale model where booksellers set prices to an “agency model,” where the publishers set the prices, the Justice Department claims.

Amazon initially resisted the pricing change, but ultimately relented when it realized it would lose access to most popular books.

“Millions of e-book readers suffered the consequences,” the Justice Department wrote in the court filings. 

Jobs explained to his biographer that he told the publishers, “We’ll go to the agency model, where you set the price, and we get our 30 percent, and yes, the customer pays a little more, but that’s what you want anyway.”

Penguin CEO David Shanks said Apple was “the facilitator and go between” in the plot and Simon & Schuster CEO Carolyn Reidy described Apple’s role as “herding us cats,” according to the court filings.

Critics of the Justice Department’s case argue that the agency model helped to free the e-book market from Amazon’s dominance. Under the old model, Amazon controlled about 90 percent of the market, but after the publishers instituted the new pricing scheme, Amazon’s share fell to 60 percent.