Apple 2.0

Covering the business that Steve Jobs built

Did Steve Jobs give the DOJ an antitrust smoking gun? - updated

June 12, 2013: 7:15 AM ET

The old joke among Apple insiders was that the ship leaked from the top.

Jobs introducing the iBookstore in 2010.

Jobs introducing the iBookstore in 2010.

FORTUNE -- Dan McCuaig, one of the Department of Justice attorneys in U.S.A. v. Apple, waited until the last hour of the sixth day of the e-book antitrust trial to pull out his smoking gun.

The witness, Keith Moerer, head of Apple's (AAPL) iBookstore, had been on the stand for four hours. He had testified repeatedly that Apple never asked or pressured any book publisher to change their contracts with Amazon (AMZN) from the "wholesale" model, where Amazon set the prices for e-books, often below cost, to Apple's "agency" model, where the publishers set their own, higher prices.

Apple, he said, was "indifferent" to what business model the publishers used in their dealings with Amazon.

"Indifferent" was the same word Kevin Saul, the attorney who drafted Apple's e-book contracts, had used the week before. (See The man who created the 'linchpin' of Apple's e-book strategy.)

Moreover, the Apple executives' testimony had been corroborated by the CEOs of several publishing houses -- including John Sargent of Macmillan. He's the straight-talking book man who flew to Seattle the day after the iBookstore was unveiled to "get his ass kicked," as he put it, when he presented Amazon with an ultimatum: Either switch to the agency model or Macmillan would hold back e-book versions of its top-selling books for seven months. (Amazon responded by removing the "buy" buttons from all of Macmillan's titles, digital and physical. See Enter Amazon.)

No one from Apple ever asked him to present Amazon with that choice, Sargent testified. Nothing in the contract he signed with Apple said anything about Amazon one way or the other.

PX 55. Click to enlarge.

Steve Jobs' e-mail to Eddy Cue. Click to enlarge.

So it was a surprise -- at least to the reporters in the courtroom -- when the DOJ's McCuaig introduced Plaintiff's Exhibit 55, an e-mail from Steve Jobs to Eddy Cue, his point man in the e-book negotiations, responding to a request from the publishers that the price caps in the contract be raised.

"I can live with this," Jobs wrote on Jan. 14, 2010, less than two weeks before the iPad was unveiled, "as long as they move Amazon to the agent model too for new releases for the first year. If not, I'm not sure we can be competitive..."

Does that, McCuaig asked Apple's Moerer, reflect "indifference"?

"No," Moerer reluctantly admitted.

The admission was particularly painful because U.S. District Judge Denise Cote -- who will decide the non-jury case -- seemed to be coming around to Apple's point of view. (See Is the e-book judge starting to see things Apple's way?)

Orin Snyder, Apple's chief counsel, wasted no time trying to disarm the new evidence.

"Are you aware," he asked Moerer, "that the e-mail was never sent?"

The government immediately objected, and Judge Cote ordered the question stricken from the record.

We'll have to wait until Thursday, when Eddy Cue takes the stand, to find out what that was all about.

UPDATE: I've just learned that there's a twist to the story of Jobs' Jan. 14 e-mail that's going to make for some fireworks in the courtroom when Cue takes the stand. Tune in tomorrow to see how it all turns out. See Steve Jobs' e-book 'smoking gun': Did the DOJ pull a fast one?

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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