MUST READ..E-Books Judge Questions Credibility of Apple’s Eddy Cue
July 10, 2013, 3:52 PM
By Ian Sherr
blogs.wsj.com
Eddy Cue, Apple’s senior vice president of Internet software and services, is the company’s Mr. Fix-It. He rebuilt the company’s Internet technologies, pushed teams to remake products like MobileMe into iCloud, and has proven an experienced negotiator
 ReutersEddy Cue, right, arriving with a member of his legal team to testify in the Apple trial in June.
The latter talent did not escape the notice of Denise Cote, the District Judge overseeing the antitrust case over e-books that Apple just lost. But there’s another description she attached to him: not credible.
Cue was the central figure in negotiations between Apple and publishers involved in the case, and Cote mentions several times the reasons she believed Cue negotiated so hard to get the iBookstore up and running.
“Cue knew that (Apple co-founder Steve) Jobs was seriously ill and that this would be one of his last opportunities to bring to life one of Jobs’s visions and to demonstrate his devotion to the man who had given him the opportunity to help transform American culture.”
But nestled in pages 43 and 44 of the decision, Cote said aspects of Cue’s testimony weren’t credible. In particular, she said one discussion between Cue and Jobs, in which Cue discussed moving to an agency-pricing business model, was well received by publishers and “solves the Amazon issue.”
At trial, Cue said that phrase referred to pricing of e-books in the iBookstore above $9.99, not in reference to raising prices across the industry or eliminating Amazon’s pricing power.
“Indeed, Cue protested at trial that, throughout its negotiations with the Publisher Defendants, Apple was concerned only with the pricing that would prevail in the iBookstore and sought only to ‘fix’ Amazon’s pricing or ‘solve the Amazon issue’ in its own e-bookstore,” she wrote.
She added: “In this and several other aspects of Cue’s testimony, regrettably, he was not credible.”
Apple’s pitch to the publishers “was–from beginning to end– a vision for a new industry-wide price schedule,” she wrote. And any other option would have forced publishers, and the iBookstore in particular, to compete with on price.
“Cue’s repeated assertion at trial that his sole ‘focus’ was on thinking about the agency deals and their effects ‘from an Apple point of view,’ cannot be taken at face value,” she added.
Cue and his colleagues could not change Amazon’s pricing structure if the industry remained selling books under a wholesale pricing scheme, she added. “Thus, Cue and his team found a way to solve the ‘Amazon problem’ for the Publishers; not just ‘as to Apple,’ but industry-wide.”
The judge also pointed to Cue’s admittance to colleagues later (and relayed to the court through a memo) that a most-favored-nation clause Apple was seeking, ensuring that Apple would always charge whatever the best price a competitor could, would force an agency model on the industry, and as a result break Amazon’s wholesale pricing power.
“At trial, Cue denied that he had actually spoken in those terms,” Cote wrote.
In addition, there were emails drafted from Jobs that Cue claimed he never received. And there was a conversation with a publisher over dinner, which his notes from the time indicated covered different issues than what he said they discussed during his deposition.
Cue also denied at trial that Apple knew publishers would force Amazon to an agency model, though Apple “expected” they would.
Again, Cote wrote that Cue’s testimony was not credible, both due to knowledge of one another’s travel plans and even comments in Jobs’ own biography in which he said publishers “went to Amazon and said, ‘You’re going to sign an agency contract or we’re not going to give you the books.’” There were also statements in emails that questioned the veracity of Cue’s testimony, Cote wrote.
Cue was not the only witness whose credibility the judge questioned. She also questioned testimony of Keith Moerer, the director of iTunes, Kevin Saul, Apple’s general counsel, Carolyn Reidy, the head of Simon & Schuster, and John Sargent, the chief executive of Macmillan. The judge noted that the demeanor of Moerer, Saul and Reidy changed dramatically depending on who was questioning them and they adamantly denied various facts until confronted with documents or their prior testimony.
“Instead of answering questions in a straightforward manner, they would pick apart the question and answer it narrowly or avoid answering it altogether,” she wrote.
“Thus, the findings in this Opinion are informed by the documentary record, the circumstantial evidence, including an understanding of the competitive landscape in which these events were unfolding, and that portion of each witness’ testimony that appeared reliable and credible.”
Cue did not immediately respond to a request for comment while an Apple spokesman reiterated the company’s earlier comment that it did nothing wrong and plans to appeal the decision.
Sargent did not immediately respond to a request for comment and a spokesman for Simon & Schuster didn’t have immediate comment.
–Jeffrey A. Trachtenberg contributed to this article. |
