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Judge shows opposition to government's case at start of Apple's e-book antitrust appeal

Apple's appeal of the U.S. government's e-book antitrust case got underway Monday, with one judge presiding over the hearing questioning whether the government's original case was legitimate.


Apple's closing slide in its e-book antitrust case. | Source: U.S. District Court

In the appeal, Apple hopes it will be able to overturn a verdict that found it and book publishers guilty of a price fixing conspiracy. If Apple can win the appeal, it will pay no penalty, but if it loses, it must pay $450 million in damages and attorney's fees.
Judge Dennis Jacobs is one of three appeals judges hearing the case. On Monday, he appeared to question the government's pursuit of Apple.
As hearings got underway on Monday, Judge Dennis Jacobs —one of three judges on the appeals panel —was seen as "openly hostile to the government's case," in a report by AFP. Jacobs appeared to doubt the government's case against Apple, and expressed his view that the iPad maker was taking on "predatory pricing" strategies by the dominant player in the e-book market, Amazon.

"What we're talking about is a new entrant who is breaking the hold of a market by a monopolist who is maintaining its hold by what is arguably predatory pricing," Jacobs reportedly said.

Apple officials have said they continue to fight the case out of principle, because the company exists that no illegal collusion took place between itself and book publishers, even if book prices did in fact rise.

In its appeal, Apple has pointed out Amazon's continuing dominant position in the e-book market. At the time of the iBookstore's launch, Amazon accounted for nine out of every ten e-book sales.

Under negotiations led by Apple executive Eddy Cue, the Cupertino, Calif., company and book publishers opted to switch to a so-called "agency" pricing model. That prevented content owners from being able to sell the same titles at a lower price elsewhere, without offering the same price on Apple's iBooks platform —a "most favored nations" clause.

In contrast, the e-book industry prior to the launch of the first iPad was under the "wholesale model" preferred by Amazon. In that model, resellers such as Amazon had the power to set prices, selling titles at or below cost if they chose to do so.

Apple has argued that publishers openly discussed their desire to raise prices on books, as they felt titles were being sold for far too little by Amazon under the wholesale model.

As a result of the U.S. government's ruling, Apple is saddled with an injunction that bars it from entering into any unsavory deals with publishers, and the company is under the watch of antitrust monitor Michael Bromwich. The iPad maker's appeal was formally filed in February of this year, asking for a dismissal or a retrial.