Bits Blog: Daily Report: E-Book Services Track Readers’ Habits

Judge Considers Limits on Apple’s Future E-Book Deals

In a sometimes testy hearing in United States District Court in Lower Manhattan, Judge Denise L. Cote said that she was considering a plan in which Apple would negotiate contracts with publishers in a staggered fashion — possibly six to eight months apart — to prevent them from engaging in another price-fixing conspiracy.

Judge Cote ruled in July that Apple colluded with publishers to raise the price of e-books before the introduction of its iPad in 2010. Those charges were brought against Apple and five major publishers by the Justice Department in 2012. The publishers all settled, but Apple held out and went to trial.

The judge’s proposal was a scaled-back version of the guidelines put forth by the government last week, when it suggested that Apple be forced to end its agreements with the five settling publishers and avoid entering similar agreements with producers of movies, TV and music. Apple responded by calling the proposal a “draconian and punitive intrusion” into its business.

The publishers who settled also objected to the Justice Department’s proposed remedy, saying that it would fundamentally change their existing settlements.

In court on Friday, Judge Cote said that she wanted an injunction to be tailored so that it would encourage innovation in a rapidly changing e-book business and yet prevent collusion on price in the future.

“I have no desire to regulate the App Store,” she said.

But Judge Cote also slammed the publishers for lacking “contrition” and said that she feared future collusion in the e-book market. Although the publishers eventually agreed to settlements, none of them admitted wrongdoing.

Judge Cote said that the publishers had played “a rough and tumble game” and engaged in “blatant price fixing.”

“None of the publisher defendants have expressed any remorse,” she said. “They are, in a word, unrepentant.”

Lawyers for Apple and the government said in court that they would meet in the next week and discuss the judge’s proposal. Another hearing is expected later this month.

Apple and the Justice Department declined to comment.

Hachette Book Group, HarperCollins and Simon & Schuster settled in April 2012; Penguin Group USA and Macmillan settled later. Penguin has since merged with Random House, which was not named in the lawsuit.

Bits Blog: U.S. Proposes Solutions for Apple’s E-Book Price-Fixing

E-Book Ruling Gives Amazon an Advantage

A federal judge ruled on Wednesday that Apple had illegally conspired with five of the six biggest publishers to try to raise prices in the budding e-books market.

The decision came two days after Barnes & Noble lost its chief executive and said it would not appoint another, signaling that the biggest chain of physical bookstores could be immediately broken up.

The verdict in the Apple case might have been a foregone conclusion, telegraphed by the judge herself, but it emphatically underlined how the traditional players in the book business have been upended. Only Amazon, led by Mr. Bezos, seems to have a plan. He is executing it with a skill that infuriates his competitors and rewards his stockholders.

“We’re at a moment when cultural power is passing to new gatekeepers,” said Joe Esposito, a publishing consultant. “Heaven forbid that we should have the government telling our entrepreneurs what to do, but there is a social policy issue here. We don’t want the companies to become a black hole that absorbs all light except their own.”

The Apple case, which was brought by the Justice Department, will have little immediate impact on the selling of books. The publishers settled long ago, protesting they had done nothing wrong but saying they could not afford to fight the government. But it might be a long time before they try to take charge of their fate again in such a bold fashion. Drawing the attention of the government once was bad enough; twice could be a disaster.

“The Department of Justice has unwittingly caused further consolidation in the industry at a time when consolidation is not necessarily a good thing,” said Mark Coker, the chief executive of Smashwords, an e-book distributor. “If you want a vibrant ecosystem of multiple publishers, multiple publishing methods and multiple successful retailers in 5, 20 or 50 years, we took a step backwards this week.”

Some in publishing suspected that Amazon had prompted the government to file its suit. The retailer has denied it, but it still emerged the big winner. While Apple will be punished — damages are yet to be decided — and the publishers were chastened, Amazon is left free to exert its dominance over e-books — even as it gains market share with physical books. The retailer declined to comment on Wednesday.

“Amazon is not in most of the headlines, but all of the big events in the book world are about Amazon,” said Paul Aiken, executive director of the Authors Guild. “If the publishers colluded, it was to blunt Amazon’s dominance. Barnes & Noble’s troubles may stem from a misstep with its Nook tablets, just as Borders’ bankruptcy might have been hastened by management mistakes, but its precarious position is that of any rent-paying retailer facing a deep-pocketed virtual competitor.”

Last week, Penguin and Random House officially merged, creating a publishing behemoth that might be able to determine its future rather than suffer the fate of Barnes & Noble, a once-swaggering entity that now seems adrift. Random House was not a target of the Justice Department; Penguin was.

Penguin and Random House were innovators who made paperbacks into a disruptive force in the 1940s and ’50s. They were the Amazons of their era, making the traditional book business deeply uneasy. No less an authority than George Orwell thought paperbacks were of so much better value than hardbacks that they spelled the ruination of publishing and bookselling. “The cheaper books become,” he wrote, “the less money is spent on books.”

Orwell was wrong, but the same arguments are being made against Amazon and e-books today. Amazon executives are not much for public debate, but they argue that all this disruption will ultimately give more money to more authors and make more books more widely available to more people at cheaper prices, and who could argue with any of that?

This was not a prospect that many on Wednesday were putting much faith in.

Amazon, its detractors argue, is not a nonprofit or public trust but a hard-nosed company whose investors hope will make lots of money someday soon. It shares closed Wednesday at $292.33, a record.

“The Justice Department’s guns seem pointed in the wrong direction,” Mr. Aiken said.

But the more pressing concern for the industry is the fate of Barnes & Noble. When Borders collapsed two years ago, analysts said there was an unexpected consequence to the loss of 400 stores: the e-book growth rate began to taper off, as readers could no longer examine new titles before ordering them from Amazon.

E-books, in other words, were not a magical technology that could shed all the existing infrastructure of publishing. They needed the existing ecosystem.

“If all of those corporate outlets vanish, there is suddenly a hell of a lot less space devoted to showcasing a large number of titles,” said J. B. Dickey, owner of the Seattle Mystery Bookshop. “We’ll probably see a continuing shrinking in print runs, maybe fewer titles published, fewer authors published and the New York houses retreating into the known best-sellers. Which means more novice and midlist authors scrambling to find a way to stay in print and more authors self-publishing their print books — or more likely releasing their works as e-files.”

All of that sounds dire. Perhaps the only consolation for those who fear the power of Amazon is the knowledge that all companies eventually peak, no matter how unlikely that seems when they are in the ascendance.

Mr. Esposito, the consultant, remembered that 30 years ago there was a book called “The Media Monopoly,” which worried about the excessive power of the Gannett chain of newspapers as well as the three major television networks.

“The book reads almost quaint now,” Mr. Esposito said.

Outcome of E-Book Case Could Hurt Competition, Apple Lawyer Says

Orin Snyder, a lawyer at Gibson, Dunn & Crutcher who represents Apple, made that point in a Manhattan courtroom on Thursday, the last day of the three-week antitrust trial. He told Judge Denise L. Cote of United States District Court that if Apple was found liable for conspiring with publishers to raise e-book prices, “that precedent will send shudders through the business community.”

In the future, he said, retailers negotiating with content providers might then feel pressured to “not utter a word” about their discussions with other companies and offer substantially different terms to each party.

He said that in negotiations, businesses typically inform one competitor what another competitor is willing to do. “It is perfectly lawful to do all of that,” he said.

In its antitrust case brought a year ago, the federal government accused Apple of being the “ringmaster” in a conspiracy with five big book publishers to raise e-book prices across the industry. Before Apple entered the market in early 2010, Amazon controlled 90 percent of e-book sales, and the publishers were not happy with Amazon’s uniform price of $9.99 for e-books. The publishers have all settled their cases, but Apple has said it is fighting as a matter of principle because it has done nothing wrong.

Much of the debate at the trial has centered on a condition, known as the “most-favored-nation” clause, that Apple made in its contracts with publishers. It guarantees that if a publisher offers an e-book at a lower price to one retailer, the book will cost the same in Apple’s e-book store. The Justice Department argues that Apple and the publishers used the most-favored-nation clause to defeat price competition and pressure Amazon to change the way it sold books and raise its prices as well.

On Thursday, as the lawyers wrapped up their arguments, Judge Cote peppered both Apple and the government with questions.

Several of her questions to the government revolved around one thought: why would Apple want to change the industry’s business model? Mark W. Ryan, a lawyer for the Justice Department, argued that Apple believed its iPad hardware was so ahead of anyone else’s, it wanted to eliminate price competition in the e-book market so that the iPad could compete with the Amazon’s Kindle solely on hardware, not book prices.

Mr. Ryan noted that the government’s concern was not solely the most-favored-nation clause, but the way that Apple and the publishers deliberately used the clause to force Amazon’s hand. “It’s the collusion to move the market to the place where competition would not otherwise take it,” he said.

If Amazon had continued the way it sold books under what is called the wholesale model — where publishers charged retailers about half the cover price for a book and Amazon sold the books for $9.99 — then the retailers would have lost a substantial amount of money selling the books for $9.99 to Apple because Apple takes a 30 percent cut.

That, Mr. Ryan said, is why the publishers understood they had to collectively force Amazon into the agency model, where the publishers, not the retailers, set the price of the books. They could use the most-favored-nation clause to put pressure on Amazon while also threatening to delay the release of their e-books until after the more expensive hardcover versions had been on the market for a while, he said.

Judge Cote challenged the government’s interpretation that Apple was deliberately scheming to help the publishers raise prices. Allowing them to raise their prices in Apple’s e-book store could be viewed as a “sales pitch” to get the publishers to agree to sign on with Apple in the month and a half leading up to the iPad introduction, she said.

In Apple’s closing statements, Mr. Snyder spent most of his time trying to illustrate that Apple fought “tooth and nail” with the publishers before cementing the contracts. He showed e-mails between Eddy Cue, Apple’s senior vice president of Internet software and services, and the chief executives of the big publishers that demonstrated they were negotiating rather than cooperating.

Judge Cote asked Mr. Snyder whether Apple took the position that it had not understood that the publishers were forming a collective effort to raise prices industrywide, when the fact they were working together seemed obvious from articles published by The New York Times and The Wall Street Journal. Those articles said a group of publishers had announced plans to “window,” or delay, the release of e-books.

Mr. Snyder said that the articles just showed how business was done, and that they did not prove that the publishers were already conspiring. “When one company does one thing, the other companies take notice and do the same thing,” he said.

The big question surrounding the trial is whether there will be a change to the way businesses negotiate if Apple loses, as Mr. Snyder suggested. Charles E. Elder, an antitrust lawyer at Irell & Manella, which is not involved in the case, said that most-favored-nation clauses present unusual challenges under antitrust laws. While they ensure a customer gets the best deal, they can discourage price-cutting because the consequence of lowering prices for one retailer will be lowering prices for other retailers protected by the clause.

Mr. Elder said that he “would be very surprised” if the judge found Apple’s most-favored-nation clause illegal, and that he was not aware of any case where such a thing has happened. He said this antitrust case was based on the theory that the most-favored-nation clause resulted from a price-fixing conspiracy among the publishers that was furthered by Apple. If the judge holds Apple liable, he said, this case will be unlikely to have a “revolutionary impact” on businesses.

“Horizontal conspiracies to fix prices have always been illegal,” Mr. Elder said.

Judge Cote is expected to write her decision in the coming weeks.

Outcome of E-Book Case Could Hurt Competition, Apple Lawyer Says

Orin Snyder, a lawyer at Gibson, Dunn & Crutcher who represents Apple, made that point in a Manhattan courtroom on Thursday, the last day of the three-week antitrust trial. He told Judge Denise L. Cote of United States District Court that if Apple was found liable for conspiring with publishers to raise e-book prices, “that precedent will send shudders through the business community.”

In the future, he said, retailers negotiating with content providers might then feel pressured to “not utter a word” about their discussions with other companies and offer substantially different terms to each party.

He said that in negotiations, businesses typically inform one competitor what another competitor is willing to do. “It is perfectly lawful to do all of that,” he said.

In its antitrust case brought a year ago, the federal government accused Apple of being the “ringmaster” in a conspiracy with five big book publishers to raise e-book prices across the industry. Before Apple entered the market in early 2010, Amazon controlled 90 percent of e-book sales, and the publishers were not happy with Amazon’s uniform price of $9.99 for e-books. The publishers have all settled their cases, but Apple has said it is fighting as a matter of principle because it has done nothing wrong.

Much of the debate at the trial has centered on a condition, known as the “most-favored-nation” clause, that Apple made in its contracts with publishers. It guarantees that if a publisher offers an e-book at a lower price to one retailer, the book will cost the same in Apple’s e-book store. The Justice Department argues that Apple and the publishers used the most-favored-nation clause to defeat price competition and pressure Amazon to change the way it sold books and raise its prices as well.

On Thursday, as the lawyers wrapped up their arguments, Judge Cote peppered both Apple and the government with questions.

Several of her questions to the government revolved around one thought: why would Apple want to change the industry’s business model? Mark W. Ryan, a lawyer for the Justice Department, argued that Apple believed its iPad hardware was so ahead of anyone else’s, it wanted to eliminate price competition in the e-book market so that the iPad could compete with the Amazon’s Kindle solely on hardware, not book prices.

Mr. Ryan noted that the government’s concern was not solely the most-favored-nation clause, but the way that Apple and the publishers deliberately used the clause to force Amazon’s hand. “It’s the collusion to move the market to the place where competition would not otherwise take it,” he said.

If Amazon had continued the way it sold books under what is called the wholesale model — where publishers charged retailers about half the cover price for a book and Amazon sold the books for $9.99 — then the retailers would have lost a substantial amount of money selling the books for $9.99 to Apple because Apple takes a 30 percent cut.

That, Mr. Ryan said, is why the publishers understood they had to collectively force Amazon into the agency model, where the publishers, not the retailers, set the price of the books. They could use the most-favored-nation clause to put pressure on Amazon while also threatening to delay the release of their e-books until after the more expensive hardcover versions had been on the market for a while, he said.

Judge Cote challenged the government’s interpretation that Apple was deliberately scheming to help the publishers raise prices. Allowing them to raise their prices in Apple’s e-book store could be viewed as a “sales pitch” to get the publishers to agree to sign on with Apple in the month and a half leading up to the iPad introduction, she said.

In Apple’s closing statements, Mr. Snyder spent most of his time trying to illustrate that Apple fought “tooth and nail” with the publishers before cementing the contracts. He showed e-mails between Eddy Cue, Apple’s senior vice president of Internet software and services, and the chief executives of the big publishers that demonstrated they were negotiating rather than cooperating.

Judge Cote asked Mr. Snyder whether Apple took the position that it had not understood that the publishers were forming a collective effort to raise prices industrywide, when the fact they were working together seemed obvious from articles published by The New York Times and The Wall Street Journal. Those articles said a group of publishers had announced plans to “window,” or delay, the release of e-books.

Mr. Snyder said that the articles just showed how business was done, and that they did not prove that the publishers were already conspiring. “When one company does one thing, the other companies take notice and do the same thing,” he said.

The big question surrounding the trial is whether there will be a change to the way businesses negotiate if Apple loses, as Mr. Snyder suggested. Charles E. Elder, an antitrust lawyer at Irell & Manella, which is not involved in the case, said that most-favored-nation clauses present unusual challenges under antitrust laws. While they ensure a customer gets the best deal, they can discourage price-cutting because the consequence of lowering prices for one retailer will be lowering prices for other retailers protected by the clause.

Mr. Elder said that he “would be very surprised” if the judge found Apple’s most-favored-nation clause illegal, and that he was not aware of any case where such a thing has happened. He said this antitrust case was based on the theory that the most-favored-nation clause resulted from a price-fixing conspiracy among the publishers that was furthered by Apple. If the judge holds Apple liable, he said, this case will be unlikely to have a “revolutionary impact” on businesses.

“Horizontal conspiracies to fix prices have always been illegal,” Mr. Elder said.

Judge Cote is expected to write her decision in the coming weeks.

Apple Negotiator Defends Tactics in E-Book Trial

The executive, Eddy Cue, Apple’s lead negotiator with the publishers, said he was determined to close deals that would allow them to sell their e-books on Apple’s iBookstore in time for the introduction of the iPad in early 2010.

“I wanted to be able to get that done in time for that because it was really important to him,” Mr. Cue said, referring to Mr. Jobs. He was testifying in Federal District Court in Manhattan in the civil antitrust trial brought against Apple by the Justice Department.

“I pride myself on being successful, but this had extra meaning to me,” Mr. Cue added.

Those sped-up negotiations attracted the attention of the government, which filed a lawsuit against Apple and five publishers in April 2012. Mr. Jobs, the co-founder of Apple, died of cancer in October 2011.

Mr. Cue, the highest-ranking Apple executive to take the stand so far in a trial that began almost two weeks ago, mounted a vigorous defense of Apple, which is accused of colluding with the publishers to fix e-book prices.

Through a nearly full day of testimony on Thursday, Mr. Cue denied that he had encouraged publishers to impose a new business model on other retailers, including Amazon.com. Shown a slide displaying what the government has repeatedly called a “spider web” of communications among the publishing executives, Mr. Cue said he did not know that the executives, from publishers including the Penguin Group USA and Simon & Schuster, were talking to one another during their negotiations with him.

“I struggled and fought with them,” he said. “If they were talking to each other, I believe I would have had a much easier time getting those deals done.”

But he also revealed details of an unusually long and close working relationship between him and Mr. Jobs.

Mr. Cue, Apple’s senior vice president for Internet software and services, said he spoke or e-mailed with Mr. Jobs at nearly every step of the negotiations, once calling him on his way to the airport as he left a round of talks with publishers in New York.

In one e-mail, Mr. Jobs questioned Mr. Cue about the fledgling iBookstore. “Are we going to let anyone self-publish? Does Amazon?” he wrote.

“Yes and yes,” Mr. Cue replied.

After publishers signed agreements with Apple, shocking the publishing industry, Mr. Jobs e-mailed Mr. Cue: “Wow, we have really lit the fuse on a powder keg.”

The focus of the government’s questioning turned to December 2009 and January 2010, when Mr. Cue repeatedly flew to New York, met with publishers and tried to reach deals to make their e-books available in the iBookstore on the soon-to-be-unveiled iPad.

For publishers, the appeal of Apple getting into the e-book market was enormous. Amazon, which had introduced its Kindle e-reader in 2007, commanded a 90 percent share of e-book sales at the time. But the default price for newly released and best-selling books on Amazon.com was $9.99, a paltry sum in the publishers’ eyes and one that undermined the value of the authors’ work and cannibalized hardcover sales.

Apple encouraged publishers to switch to a so-called agency model, in which the publishers set the price of a book and the retailer takes a commission. Previously, e-books had been sold on a wholesale model, where the retailer pays the publisher about half the list price, then is free to set another price. The agency model prevented Amazon from sharply discounting the books.

Five publishers — the Penguin Group USA, the Hachette Book Group, Simon & Schuster, HarperCollins and Macmillan — have already settled with the government. But Apple, intent on protecting Mr. Jobs’s legacy, is fighting the charges in a nonjury trial that was expected to last several weeks.

The defense was questioning Mr. Cue when the day ended and he will return to the stand when the trial continues on Monday.

Lawrence Buterman, a lawyer for the Justice Department, occasionally raised his voice while he questioned Mr. Cue for several hours before a packed courtroom presided over by Judge Denise L. Cote.

“Isn’t it true, sir, that throughout your negotiations with the publishers, that you constantly pitched the deal that you were proposing as a way for them to change the entire e-books market?” Mr. Buterman said.

“No, that is not true,” Mr. Cue said.

Mr. Buterman asked Mr. Cue about a previous statement by David Shanks, the chief executive of the Penguin Group USA, that Penguin would only sign a deal with Apple if three other major publishers had done so first.

“Did that strike you as a little bit like, ‘I’m only doing this deal if my competitors do it?’ “ Mr. Buterman said.

“It’s not unusual,” Mr. Cue said. “Nobody likes to be the first to sign. Everybody thinks that you get a better deal by signing last.”

According to Mr. Cue, Apple approached the negotiations with publishers the same way it did with record companies and other content providers in the iTunes store.

After Apple and other retailers started selling e-books on the agency model, prices on many best-selling and new books rose to the $12.99 to $14.99 range, infuriating many consumers.

“Who protected them?” Mr. Buterman said.

“I did,” Mr. Cue said.

“By charging them higher prices?” Mr. Buterman said.

E-Book Antitrust Case Against Apple to Begin

But the evidence in the case will not just determine whether Apple has violated antitrust laws. It will also tell a broader story of how the introduction of e-books created upheaval in the publishing industry — with guest appearances by major players like Amazon and Barnes & Noble and e-mails from the late Steven P. Jobs, Apple’s former chief executive.

In the case, brought a year ago, the Justice Department accused Apple and five book publishers of conspiring to raise e-book prices. The idea, the government said, was to allow publishers to set their own prices rather than letting retailers do so.

Their motivation, according to the Justice Department, was to defend themselves against Amazon, which was setting the price of most new e-books at $9.99 and becoming increasingly dominant in the market. Simon & Schuster, HarperCollins and the Hachette Book Group settled the day that charges were filed; Penguin and Macmillan settled months later.

Complaints by Amazon, which now controls at least 60 percent of the e-book market, are widely believed to have incited the investigation. Amazon declined to comment.

After the lawsuit was filed, the expectation was that e-book prices would drop sharply; the publishers that settled agreed to allow retailers to discount their e-books for two years. But the price drop has still not happened.

A government victory against Apple, which would not involve monetary damages, might also not affect e-book prices.

“Are consumers going to be better off as a result of any government win here?” said Charles E. Elder, an antitrust lawyer at Irell & Manella, which is not involved in the case. “That’s going to have to be seen depending on what happens to book publishing generally. It’s in trouble, and e-books are either the savior or they’re going to hasten the demise of book publishers.”

Apple declined to comment, but has said it has done nothing wrong.

“The e-book case to me is bizarre,” Timothy D. Cook, Apple’s chief executive, said during an onstage interview at a business conference last week in Southern California. “We’ve done nothing wrong there, and so we’re taking a very principled position of this. We were asked to sign something that says we did do something, and we’re not going to sign something that says we did something we didn’t do. And so we’re going to fight.”

Apple certainly has the money to fight, and a brand to protect, at a time when its stock is sagging and its tax practices and manufacturing processes are under scrutiny. Yet it is bigger than ever — with hundreds of millions of its iPhones and iPads in the hands of customers all over the globe.

The trial, before Judge Denise L. Cote of United States District Court, is expected to feature testimony from chief executives from the five publishers, who will offer a window into their world of fierce price negotiations. But the star witness may well be Mr. Jobs, even though he died in October 2011.

In the case, the government cast Apple as the “ringmaster” of the conspiracy. It said that when the company entered the e-book industry in 2010 with the introduction of the iPad, it wanted to pressure Amazon to raise its prices above its uniform $9.99 for new e-books.

At the time, publishers’ agreements to sell e-books were made under the so-called wholesale model of print books; publishers charged retailers about half the cover price for a book, and the retailers then set their own prices. The government said Mr. Jobs had persuaded publishers to agree to agency pricing, which allowed publishers to set their own prices for e-books, giving Apple a 30 percent commission for books sold in its online store.

The publishers’ contracts with Apple included a “most favored nation” clause, requiring that no other retailer sell e-books for a lower price; if they did, the publisher would have to match the price of the e-book in Apple’s store. That, the Justice Department said, resulted in higher prices that harmed consumers.

Apple Fights Back in E-Book Antitrust Case

That is one of several factors that seem to be motivating Apple’s vigorous defense against a Justice Department antitrust lawsuit accusing the company of conspiring with five of the largest publishing houses to fix prices on electronic books, according to people close to the case.

Unlike the five publishers, all of which have settled the case, filed in April 2012, Apple is aggressively disputing the government’s assertions that Apple and the publishers wanted to force Amazon, which controlled 90 percent of the e-book market before Apple entered it, to raise its prices, according to court papers filed this week. A trial is scheduled to begin June 3 in Federal District Court in New York.

Among other defenses, Apple says that both Amazon and the publishing companies were already contemplating a move to a different pricing model in 2009, before Apple entered the e-book business. Apple cites one Amazon executive who referred in an e-mail to the idea that Amazon got publishers to accept what it wanted all along as “Jedi mind tricks.”

Apple, whose 2010 introduction of the iPad corresponded with its opening of a digital bookstore, denies that it tried to convince publishers to enforce a regime that would allow them to set their own retail prices for books, above the $9.99 price that Amazon was then charging.

In addition, Apple says that the Justice Department has selectively edited and distorted e-mails between executives of Apple and the publishers.

“Apple injected much-needed competition and innovation into the e-book business,” said Orin Snyder, a lawyer at Gibson, Dunn & Crutcher who represents Apple. “The DOJ’s case is based on fictions and incomplete quotations. The actual evidence proves that Apple did not conspire to fix prices in the e-book business. We look forward to trial.”

The Justice Department accuses Apple of its own selective quotation. And, it said, the evidence shows that the publishing companies threatened to withhold books unless Amazon allowed them to set higher prices and that Apple “encouraged them to do so.”

Apple seems particularly peeved about the government invoking e-mails of its former chief executive, Steven P. Jobs, to assert its case, saying the government’s selective editing of those e-mails deliberately distorts Mr. Jobs’s intentions.

The government’s court papers quote from an e-mail that Mr. Jobs sent on Jan. 24, 2010, to James Murdoch, who as head of News Corporation oversaw its publishing company, HarperCollins. That was three days before the introduction of the iPad, as Apple was furiously negotiating deals with publishers that would allow it to introduce its bookstore on the same day.

Apple says the government left out of its papers the fact that Mr. Jobs said Amazon might have the right price for e-books already, at $9.99. “Maybe they are right and we will fail,” Mr. Jobs wrote.

Taken in total, Apple said, the e-mail “shows a new entrant with no market power proposing an alternative business model to HarperCollins, and candidly recognizing that Apple has no power to predict or influence other retailers,” Apple said in pretrial papers.

Sarah Rotman Epps, an analyst at Forrester who follows the publishing industry, said Apple still has a relatively small share of the e-book market.

“Even though they have a big brand, their actions have had relatively little impact on the overall industry,” Ms. Rotman Epps said.

Since Apple’s entry, e-book prices have gone down, the company said, with the average retail price of an electronic book falling 63 cents since April 2010, from $7.97 to $7.34.

Michael Cader, the creator of Publishers Lunch, an industry publication, said there were multiple ways of interpreting what had happened to e-book prices since the start of Apple’s iBookstore. He said at least part of the decline might reflect the exponential growth in older books, self-published books and books from an array of small and digital-only publishers, many of which are often sold for as little as 99 cents to $3.

Edward Wyatt reported from Washington, and Brian X. Chen from San Francisco.

This article has been revised to reflect the following correction:

Correction: May 18, 2013

An article on Friday about Apple’s battle with the Justice Department over charges of price-fixing on e-books characterized incorrectly a comment by Michael Cader, of the industry publication Publishers Lunch, on the decline in e-book prices. He speculated that the growth in older books, self-published books and books from small and digital publishers might account for part of the decline; he did not state that as a fact.

E-Book Price War Has Yet to Arrive

Last spring, the Justice Department sued five major publishers and Apple on e-book price-fixing charges. The case was a major victory for Amazon, and afterward there were widespread expectations — fueled by Amazon — that the price of e-books would plunge.

The most extreme outcome went like this: Digital versions of big books selling for $9.99 or less would give Amazon complete domination over the e-book market. As sales zoomed upward, even greater numbers of consumers would abandon physical books. The major publishers and traditional bookstores were contemplating a future that would pass them by.

But doomsday has not arrived, at least not yet. As four of the publishers have entered into settlements with regulators and revised the way they sell e-books, prices have selectively fallen but not as broadly or drastically as anticipated.

The $10 floor that publishers fought so hard to maintain for popular new novels is largely intact. Amazon, for instance, is selling Michael Connelly’s new mystery, “The Black Box,” for $12.74. New best sellers by David Baldacci and James Patterson cost just over $11.

One big reason for the lack of fireworks is that the triumph of e-books over their physical brethren is not happening quite as fast as forecast.

“The e-book market isn’t growing at the caffeinated level it was,” said Michael Norris, a Simba Information analyst who follows the publishing industry. “Even retailers like Amazon have to be wondering, how far can we go — or should we go — to make our prices lower than the other guys if it’s not helping us with market share?”

Adult e-book sales through August were up 34 percent from 2011, an impressive rate of growth if you forget that sales have doubled every year for the last four years. And there have been more recent signs of a market pausing for breath.

Macmillan, the only publisher that has not settled with the Justice Department, said last week as part of a statement from John Sargent, its chief executive, that “our e-book business has been softer of late, particularly for the last few weeks, even as the number of reading devices continues to grow.” His laconic conclusion: “Interesting.”

Mr. Norris said Simba, which regularly surveys e-book buyers, has been noticing what it calls “commitment to content” issues.

“A lot of these e-book consumers aren’t behaving like lab rats at a feeder bar,” the analyst said. “We have found that at any given time about a third of e-book users haven’t bought a single title in the last 12 months. I have a feeling it is the digital equivalent of the ‘overloaded night stand’ effect; someone isn’t going to buy any more books until they make a dent in reading the ones they have already acquired.”

Another, more counterintuitive possibility is that the 2011 demise of Borders, the second-biggest chain, dealt a surprising blow to the e-book industry. Readers could no longer see what they wanted to go home and order. “The print industry has been aiding and assisting the e-book industry since the beginning,” Mr. Norris said.

It is possible that Amazon, which controls about 60 percent of the e-book market, is merely holding back with price cuts for the right moment.

The next few weeks are when e-book sales traditionally take a big jump, as all those newly received devices are loaded up with content.

Amazon declined to comment beyond saying, “We have lowered prices for customers from the prices publishers set on a broad assortment of Kindle books.” Barnes & Noble declined to comment on its pricing strategy.

The question of the proper price for e-books has shadowed the industry ever since Amazon introduced the Kindle in late 2007 and created the first truly popular portable reading device. Amazon had a natural impulse to build a market and was an aggressive retailer in any case, so it took best sellers that cost $25 in independent bookstores and sold them for $9.99 as e-books. Consumers liked that. E-book adoption soared.

In Europe, Publishers Dealt a Setback Over e-Book Pricing

BERLIN — The European Commission settled its antitrust case against Apple and four book publishing groups over e-book price fixing on Thursday, in what was described as a victory for the leading online seller, Amazon, and a setback for publishers fighting for the ability to set prices for electronic literature in the digital marketplace.

The European Union’s competition commissioner, Joaquín Almunia, said he was ending his office’s investigation after Apple and the publishers — Simon & Schuster, HarperCollins, Hachette, and Holtzbrinck, the owner of Macmillan — agreed to end their attempt to set prices for e-books through a series of preferred selling agreements.

Under those agreements, made in 2010, publishers could set their own prices on e-books, with the retailer acting as an agent taking a commission. Apple championed this agency model.

For print books, by contrast, publishers act as wholesalers, charging retailers about half the cover price for a book and then allowing retailers to set their own price to consumers. Amazon built a huge business by offering consumers discounts under this wholesale model.

Publishers fear that under the wholesale model, Amazon can sell e-books for less than it pays, taking a loss in the short term to drive smaller competitors out of business, thus gaining a monopoly, to the detriment of the publishers.

European Union officials, however, see things differently: that collusion by publishers would lead to higher prices for consumers.

“Obviously, the coordination of commercial behavior between competitors — here, with the help of Apple — is forbidden by our competition rules,” Mr. Almunia said in Brussels in a statement. “Whatever the publishers’ initial concerns about retail prices, dealing with this situation through collusion is not acceptable.”

Under terms of the settlement, Apple and the publishers agreed to immediately end their preferred agency agreements, the legal pacts that contained “most favored customer” clauses effectively blocking sales to price discounters. Apple and the publishers, Mr. Almunia said, tried to make the agreements standard in the industry.

Amazon and other online retailers that refused to agree to the group’s pricing terms, Mr. Almunia said, “were told they might not be supplied with e-books if they did not agree to the switch.”

“Retailers had little option but to surrender their discretion in setting retail prices if they wanted to avoid a serious disruption of their business,” he said.

The decision by Mr. Almunia, a Spanish jurist who has set a pattern of compromise since becoming Europe’s top antitrust officer in February 2010, followed a similar resolution in the United States. In September, a federal judge approved the U.S. Justice Department’s settlement with HarperCollins, Simon & Schuster and Hachette.

Mr. Almunia had opened the European investigation in December 2010. He had signaled recently that a compromise was in the works, and the announcement on Thursday was seen as no surprise by European competition lawyers.

Jean-François Bellis, a lawyer in Brussels who represented Microsoft in its own multiyear European antitrust case, said Mr. Almunia’s settlement in the e-book case reflected his preference for fast, inexpensive solutions to corporate attempts to abuse market dominance.

“This is something indeed that was expected,” Mr. Bellis said. “I am seeing more and more that the commission is resorting to settlements. This is a more practical approach than fines and lengthy prosecutions.” Apple benefits from the resolution because it will not have to pay a fine, Mr. Bellis said.

The regulator’s decision will not help the fragile situation of many publishers, said Françoise Dubruille, director of the European and International Booksellers Federation, a Brussels group representing the 27 E.U. national bookselling organizations, which in turn have many small and medium-size publishers, in addition to large groups, as members.

Ms. Dubruille said the settlement would effectively further Amazon’s ability to set the purchase price of e-books in Europe, which would not help a struggling publishing industry.

“We aren’t happy about this,” Ms. Dubruille said of the decision. “We think the big players in this industry have disproportionate power and influence in the digital market. We want to see fair competition. This might look like a victory for consumers, but in the long run, this is bad news, because the pressures on prices will increase.”

Apple and Amazon did not immediately respond to requests for comment.

Gadgetwise Blog: Q&A: Converting Word Files Into an E-book

How can I convert Word documents into an e-book to download and use on my iPad?

You can do it several ways, including buying a word-processing app for the iPad that opens Microsoft Word files. Apple’s Pages or DataViz’s Documents to Go are two of the many options in the App Store. If you want to view the documents and not edit them, uploading them to a free Google Drive or Microsoft SkyDrive account online is another way to go — and both sites have free apps for tapping into your online files if you don’t want to use the iPad’s Web browser.

If you prefer to keep things securely between your iPad and computer, combining the files into one and converting the Word document to a format that works with the iBooks app (or other e-book app) is another method. Most apps can display files in the ePub or PDF formats, and it is not too difficult to convert a Word document to either. Microsoft has instructions for Windows users with Word 2007 and later. Mac OS X users can open each document, press Command-P to summon the Print box and choose “Save as PDF” from the PDF menu.

Saving the documents as ePub files lets them function more like e-books, with the ability to adjust text size and font. An e-book utility program to convert Word documents to ePub files can do the job; Calibre is one such program and has instructions on its site.

Once you convert the files, you need to sync them to iBooks or your e-reader app. Apple’s site has steps for syncing content, as well as specific information for using PDF files with iBooks

Barry Diller and Scott Rudin Form E-Book Publishing Venture

Two powerful entertainment moguls, Scott Rudin, the film and theater producer, and Barry Diller, the chairman of IAC/InterActiveCorp, are joining together to enter the turbulent world of book publishing.

Mr. Rudin and Frances Coady, a longtime publishing executive, have formed a partnership with Mr. Diller in a new venture called Brightline. It will publish e-books and eventually physical books in a partnership with Atavist, a publisher based in Brooklyn with expertise in producing electronic books and articles.

The alliance creates a new competitor in the rapidly changing digital book market, one that is dominated by Amazon, the online retailer, which has roughly 65 percent of e-book sales. Though fledgling, the new venture will enjoy the support of two influential executives who control a wide array of resources in media and entertainment.

Atavist and Brightline will exchange an undetermined amount of minority equity interests in each other’s ventures, and IAC will provide $20 million in capital to build out Brightline as a publisher in addition to making investments in Atavist.

Atavist, a start-up conceived by three friends in Brooklyn — Evan Ratliff, Jefferson Rabb and Nicholas Thompson — received attention for its content management system, which the group used to produce multimedia storytelling for various electronic devices. In May, Eric E. Schmidt, executive chairman of Google, was among a group of high-level technology executives who invested in an early round of financing for Atavist.

There were informal discussions this summer in which Mr. Diller and Mr. Rudin discussed paying as much as $10 million for a controlling interest in Atavist. A partnership grew out of those discussions.

“The book business has a concentrated number of players and is unquestionably in transition,” said Mr. Diller, sitting at a conference table at IAC’s Manhattan headquarters on Monday with Ms. Coady, Mr. Rudin and Mr. Ratliff. “There is a possibility here that if we start with a blank piece of paper that you could hit the opportunity that exists in the book business now.”

Mr. Rudin, who frequently works with authors like Michael Chabon, Jonathan Safran Foer and Jonathan Franzen to turn their books into films, said he had heard a steady stream of complaints about the opaqueness and resistance to change in the publishing business.

While traditional publishers are now releasing books in both paper and digital formats, e-book sales have surged in the last several years. E-books now account for more than 15 percent of publishers’ revenue, posing a challenge to the dominance of print in the long run and leaving the future of brick-and-mortar bookstores in doubt. Fiction has been an especially rich market for digital books: major publishers say new novels often sell more e-book copies than print copies in their initial weeks of sale.

Mr. Rudin worked for Mr. Diller as head of production at 20th Century Fox during the 1980s, and the two men have remained friends. For this venture, they decided to work with Ms. Coady because she was an early innovator in trade paperbacks at Random House and went on to work with authors like Augusten Burroughs at Macmillan’s Picador imprint.

They are hoping that a brand new enterprise, without the legacy costs and practices of traditional publishing, can find traction.

“Evan and the Atavist started this with nothing,” Mr. Diller said. “We are going to lead this with a lot of marketing money and investment. They want to do bigger things without losing control.”

It has been a remarkable run for Atavist, which was conceived over a series of beers in Brooklyn and began publishing in 2011 with articles built for tablet reading.

Mr. Ratliff said the offer from Mr. Diller and Mr. Rudin got Atavist’s attention because it was not just about the software.

“Other people came to us with various ideas, but this allows us to do what we did before, except bigger,” he said. “We have a partner with the same vision that we have.”

Brightline and Atavist will remain separate for the time being and the books will be published under the Atavist name. No author has yet been signed by Brightline, and Mr. Rudin asserted that the new enterprise was not an attempt to get an early look at books he might make into films.

“I already have access to all the books I need,” he said. “I am doing this for the same reason I do theater, which is that I love the work and this seemed like a good way to get involved.”

Instead of beginning from scratch, Ms. Coady said, the partnership will give Brightline access to the software, a place to market books in all forms and the design expertise of Mr. Rabb and others at Atavist. And Atavist will have access to big-name authors whom Ms. Coady and Mr. Rudin could bring to the table.

“The Atavist has put together a beautiful reading experience,” Ms. Coady said. “They’ve done so much so quickly.”

Unlike Atavist, Brightline will pay big advances to compete for big-name authors, but many questions remain, including how the new company will share revenue with its authors and how it will get printed books into stores.

Julie Bosman contributed reporting.