Apple’s long-awaited e-book price-fixing trial got underway yesterday, with Apple’s associate general counsel Kevin Saul the first witness called to testify. Saul was one of the Apple representatives to meet with publishers in December 2009, when Apple was first “exploring” a potential e-book venture. As counsel, he eventually drafted contract terms including the Most Favored Nation (MFN) clause, which is central to the government’s price-fixing claims.

In his testimony, Saul recalled that publishers expressed their displeasure with Amazon’s $9.99 pricing in their initial meetings with Apple employees. He also confirmed that Apple came to the table initially planning to discuss entering the e-book business on wholesale terms. It was HarperCollins officials who first raised the idea of an agency model.

Under questioning from U.S. Attorney Mark Ryan, Saul insisted that Apple’s consideration and eventual embrace of the agency model came only in response to publisher suggestions, as a way to get deals done, after Apple insisted that it would not pay publishers wholesale prices that did not allow them to compete with other retailers, and would not enable them to make a profit on e-book sales.

Saul’s testimony was deliberate, careful, and strained at times, exactly as one would expect from a lawyer, with Judge Denise Cote twice having to remind him to answer the questions put to him as directly as possible. Saul also frequently invoked a phrase commonly embraced by reluctant witnesses: "can you repeat the question.” His testimony was due to continue this morning.

Saul took the stand late in the afternoon, around 4:15, after opening arguments ran long. That bumped Penguin CEO David Shanks, who was due to testify yesterday as a government witness, but will now testify today, barring any unforeseen delays.

In opening arguments, both sides stuck largely to the scripts they laid out in their filings.

In his opening salvo, U.S. Attorney Lawrence E. Buterman described the “conspiracy” as a “deliberate scheme orchestrated by Apple to fix e-book prices and end retail price competition.” He later called it a "quid pro quo” in which Apple would be guaranteed the lowest prices and 30% sales margins for its e-books, while publishers would use Apple’s entry in the market as an opportunity to blunt market-leading Amazon’s pricing power.

The crux of the conspiracy was that each publisher would shift their entire digital business to an agency model, allowing them to present a united front to Amazon and avoid retribution. Although the all agency idea was eventually replaced by the MFN, a mechansim that enabled Apple to match any lower e-book prices from any other retailer, the “demand” that publishers shift their model to agency was “never rescinded” Buterman argued, and, despite what Apple might argue, just because the all agency idea does not appear in a contract does not mean the conspiracy did not exist.

Throughout his opening argument, Buterman showed 81 slides detailing the pattern of communication between Apple and between the individual publisher CEOs, often with Apple serving as a willing “go-between.”

The agency switch “arrested competition” in the e-book market, Buterman said, adding that any innovations or growth that occurred after the switch simply followed market trends that already existed, and had nothing to do with the iPad. After all, Buterman said, Apple did not need an e-bookstore to enable e-books for the iPad. But the only way Apple would agree to enter the e-book market, which publishers desperately wanted, was if it was guaranteed not to have to compete on price.

Apple attorney Orin Snyder then presented his 3-hour, rambling opening argument. The government had simply “gotten it wrong,” Snyder argued, saying that U.S. attorneys had “reverse-engineered” a conspiracy from completely legal behavior. There was no “conspiracy,” he stressed. Apple was acting only in its own interests at all times. And publishers’ anger over Amazon’s $9.99 price did not present Apple “with an opportunity to conspire, but with bargaining power” Snyder said.

He called out the government for selectively quoting from records to insert a “sinister” motive, and called its timeline of events “a fiction." Negotiations were hard-fought with individual publishers, with each publisher fighting every term—including the MFN—the term that was supposed to be the “glue” of the conspiracy. As for Amazon, Snyder contends the market leading e-book reseller had in fact begun agency model negotiations of its own volition before Apple struck any deals with publishers—because they knew the iPad was coming, and they feared losing a competitive advantage.

And for an anti-competitive conspiracy, there were remarkably pro-competitive results, Snyder said. Apple expert witnesses would testify that e-book output had increased, innovation had grown, with more competitors, and that prices had actually fallen. He called the government’s case “bizarre,” and said the government “did not come close” to meeting its burden of proof.

Most, if not all of the big six publishers, along with Apple and Amazon officials are expected to testify in the trial, which is scheduled to wrap up on June 20.