Eddy Cue Speaks About iBooks Price-Fixing Case: 'We Feel We Have to Fight for the Truth'

In a new interview, Apple's Eddy Cue spoke with Fortune about the e-books pricing scandal that has plagued the company over the past several years. After a July 2013 judgment found the company guilty of conspiring to fix prices of electronic books, and a settlement in a class-action lawsuit was reached over the summer, the Apple negotiator at the center of the lawsuit has shared his thoughts on the case with Fortune ahead of Apple's appeals court appearance later this month.

The specifics of the case lie in the opening of the iBooks Store and the 17 percent industry-wide increase in e-book prices following its unveiling in April of 2010. Cue, Apple's "master negotiator", played a key role in convincing five of the then-six major publishing houses to start selling e-books through Apple's new store alongside the launch of the iPad. Part of the deal involved a shift in the pricing model for the entire e-books industry, eliminating Amazon's previous pricing advantage in which it would sometimes sell books at a loss in order to attract customers to Kindle hardware and other Amazon products.

These events led the Justice Department and thirty-three state attorneys general to sue Apple and those five publishing houses for horizontal price fixing in violation of the Sherman Act. While the publishing houses settled the lawsuits, Apple declined to do so and proceeded to trial in the federal case where the company was found guilty.

“Is it a fact that certain book prices went up?” asks Cue. “Yes. If you want to convict us on that, then we’re guilty. I knew some prices were going to go up, but hell, the whole world knew it, because that’s what the publishers were saying: ‘We want to get retailers to raise prices, and if we’re not able to, we’re not going to make the books available digitally.’ At the same time, other prices went down too, because now there was competition in the market.”

A settlement in the separate state and class-action consumer lawsuit worked out this past June sees Apple paying around $450 million if the company loses its appeal in the federal case and nothing if it wins. The case has dragged on far longer than most expect, and Cue argues that the company is fighting more for reputation than for monetary reasons.

Eddy Cue, Jimmy Iovine, Apple, Beats Music, Code Conference

“We feel we have to fight for the truth,” says Cue. “Luckily, Tim feels exactly like I do,” he continues, referring to Apple CEO Tim Cook, “which is: You have to fight for your principles no matter what. Because it’s just not right.”

Cue met with all six CEOs of the major publishing houses before the original iPad launched, and discovered most wanted the cost of e-books at price points both he and Steve Jobs considered too high. Cue proposed price tiers tied to the suggested retail prices of the hardback versions of the books.

As part of the shift to a new "agency model" of pricing similar to that used in the App Store, Cue also proposed a "most favored nation" clause, allowing Apple to match the price at which any retailer was selling a new e-book. When the iPad launched a few weeks later, most iBooks were priced between $12.99 and $14.99, higher than Amazon's typical $9.99 price point for best sellers but in the range of where publishers wanted to be selling their books. The agency model quickly became the industry standard, with Amazon also being required to adopt the pricing at the insistence of the publishers.

The sequence of events led Judge Denise Cote to rule in July 2013 that Apple was guilty of e-book price-fixing. When asked how he looks back on the "nightmare", Cue plainly stated, "If I had it to do all over again, I’d do it again. I’d just take better notes."

Apple will appear before the federal appeals court on December 15.

Top Rated Comments

(View all)
Avatar
77 months ago

You tell them, Fast Eddie.


Well, and there is Amazon which is _really_ trying to corner the eBook market. By all means. And there is Apple, trying to break the monopoly. And then there are people who have no idea what this case is about and deliberately misinterpret what Eddy Cue says.
Score: 31 Votes (Like | Disagree)
Avatar
77 months ago

Well, and there is Amazon which is _really_ trying to corner the eBook market. By all means. And there is Apple, trying to break the monopoly. And then there are people who have no idea what this case is about and deliberately misinterpret what Eddy Cue says.

Oh, the irony on calling others ignorant about the case and then saying that App tried to break a monopoly
Score: 12 Votes (Like | Disagree)
Avatar
77 months ago
You tell them, Fast Eddie.

How you kept your job after this blows my mind.


"Is it a fact that certain book prices went up?" asks Cue. "Yes. If you want to convict us on that, then we're guilty. I knew some prices were going to go up, but hell, the whole world knew it, because that's what the publishers were saying: 'We want to get retailers to raise prices, and if we're not able to, we're not going to make the books available digitally.' At the same time, other prices went down too, because now there was competition in the market."


Great, what are fighting? You admitted it. I give you credit for that.
Score: 12 Votes (Like | Disagree)
Avatar
77 months ago
I confess I never followed this one real closely ....

But it sounds to me like Apple's making a sound argument. Book publishers were basically saying, "Screw you, Apple. We won't give you the rights to digital versions of our content because we don't think we get paid enough money when we sell our stuff that way." Apple said, "Well, hold on guys... How about you do pricing in tiers, like THIS (tied to the in store prices of the physical books)? Then you can make more money selling in our store and we're still at a price point we think is reasonable." They agreed, and it generally worked. Other publishers copied the same pricing structure, since it was working. And then people saw nobody was offering those "selling below cost" deals Amazon had been doing, and cried "Price fixing!" to the government.



Good to see Apple execs are as pompous as their products (I'm an Apple user - the products are a bit pompous don't you think?)

Stick to your principles Eddie, don't forget to fall on your sword - if you have any honor.

Score: 11 Votes (Like | Disagree)
Avatar
77 months ago

Oh, the irony on calling others ignorant about the case and then saying that App tried to break a monopoly


Well the irony of posting "Oh, the irony".

Do you have any actual arguments why we shouldn't call Amazon the big bully in the eBook market that it is?
Score: 10 Votes (Like | Disagree)
Avatar
77 months ago

You tell them, Fast Eddie.

How you kept your job after this blows my mind.


"Is it a fact that certain book prices went up?" asks Cue. "Yes. If you want to convict us on that, then we're guilty. I knew some prices were going to go up, but hell, the whole world knew it, because that's what the publishers were saying: 'We want to get retailers to raise prices, and if we're not able to, we're not going to make the books available digitally.' At the same time, other prices went down too, because now there was competition in the market."


Great, what are fighting? You admitted it. I give you credit for that.


I doubt Eddie is saying anything that's not setup by Apple legal at this point.
Score: 8 Votes (Like | Disagree)

Top Stories

New Photos Offer Better Look at iPhone 12 Color Options

Tuesday October 20, 2020 2:34 am PDT by
As we wait for the iPhone 12 review embargo to lift later today, more pictures are circulating of the devices in real-world lighting conditions, providing a better look at the different colors available. Leaker DuanRui has shared images on Twitter of the iPhone 12 in white, black, blue, green, and (PRODUCT)RED. The black and white colors are similar to the iPhone 11 colors, but the other...

iPhone 12 Pro in Graphite and iPhone 12 in Blue Shown Off in Unboxing Videos

Monday October 19, 2020 8:20 am PDT by
While the iPhone 12 Pro does not launch until Friday, we now have an early unboxing video of the device courtesy of Twitter account DuanRui, providing a closer look at the shiny new flat-edge design and sleek Graphite color option. Ben Geskin re-uploaded the unboxing video to YouTube, which we've embedded below: Geskin has also uploaded an unboxing video of the iPhone 12 in Blue: ...

Apple Releases iPadOS and iOS 14.1 With Multiple Bug Fixes Ahead of iPhone 12 Launch

Tuesday October 20, 2020 10:06 am PDT by
Apple today released iOS and iPadOS 14.1, the first major updates to the iOS and iPadOS 14 operating system updates that were released in September. iOS and iPadOS 14.1 come a week after Apple released the golden master versions of the updates to developers. The iOS 14.1 update can be downloaded for free and it is available on all eligible devices over-the-air in the Settings app. To access...

Watch: iPhone 12 and iPhone 12 Pro Unboxing Videos and First Impressions

Tuesday October 20, 2020 6:05 am PDT by
Apple's embargo has lifted for iPhone 12 and iPhone 12 Pro reviews. In addition to our detailed review roundups for each device, we've rounded up over a dozen unboxing videos and first impressions below. iPhone 12 in Blue on left and iPhone 12 Pro in Pacific Blue on right via Engadget Key new features of the iPhone 12 and iPhone 12 Pro include a flat-edge design, 5G support, a much faster A14 ...

Gold Version of iPhone 12 Pro Apparently Has a More Fingerprint Resistant Stainless Steel Frame

Tuesday October 20, 2020 11:56 am PDT by
iPhone 12 Pro reviews hit the web today, and one of the more interesting tidbits came from TechCrunch's Matthew Panzarino, who revealed that the Gold version of the device apparently has a more fingerprint resistant coating applied to the stainless steel frame. From his review:Most of the iPhone 12 Pro finishes still use a physical vapor deposition process for edge coating. But the new gold...

Photographer Austin Mann Tests the iPhone 12 Pro's Camera

Wednesday October 21, 2020 4:14 am PDT by
Travel photographer Austin Mann usually performs an in-depth review of new iPhone models to test their camera performance in real-world scenarios. To test Apple's new iPhone 12 Pro, Mann traveled to Glacier National Park, Montana. Mann focused on some of the biggest camera upgrades with the iPhone 12 Pro, including the upgraded Wide lens, Ultra Wide Night mode, and LiDAR autofocus, across a...

iPhone 12 Pro Max Has Smaller 3,687 mAh Battery According to Regulatory Filing

Tuesday October 20, 2020 8:48 pm PDT by
Apple's new iPhone 12 Pro Max is equipped with a 3,687 mAh battery, which is around 7% less capacity than the 3,969 mAh battery in the iPhone 11 Pro Max, according to a regulatory filing published by TENAA, the Chinese equivalent of the FCC. The regulatory filing, spotted by MacRumors, also lists the iPhone 12 Pro Max with 6GB of RAM as seen in benchmark results last week. Apple has filed ...

5G Drains iPhone 12 Battery 20% Faster Than 4G in Benchmark

Wednesday October 21, 2020 3:17 am PDT by
After the first reviews for the iPhone 12 and iPhone 12 Pro emerged yesterday, a new report by Tom's Guide reveals the extent of battery life reductions when using 5G. The report outlines a test wherein the iPhone surfs the web continuously at 150 nits of screen brightness, launching a new site every 30 seconds until the battery drains. Interestingly, the test was run on an iPhone 12 and...

Hands-On With Apple's iPhone 12 and 12 Pro MagSafe Cases

Tuesday October 20, 2020 1:33 pm PDT by
Apple's iPhone 12 and 12 Pro are launching this Friday, and ahead of that release date, Apple is shipping out various accessories like the MagSafe charger and MagSafe cases. Yesterday we took a look at the MagSafe charger, and today our MagSafe case came in the mail, so we thought we'd take another look at the charger to see how it works with the case and just how strong the case magnets are. S ...

Reliable Leaker Suggests AirTags 'Coming Soon' in Two Different Sizes

Tuesday October 20, 2020 1:53 am PDT by
Apple's rumored AirTags Bluetooth tracking devices could launch imminently and will be available in two size options, based on new tweets from cryptic-but-reliable leaker L0vetodream. In typical enigmatic style, the leaker first tweeted this morning that a "big one" and a "small one" are "coming soon," but withheld what they were referring to. However that was followed an hour later with the ...