Apple E-Book Practices Prompt Proposal From The DOJ
August 3, 2013

DoJ: Apple Should End Book Deals, Link To Rivals

redOrbit Staff & Wire Reports - Your Universe Online

Following a federal court ruling last month that found Apple illegally conspired to fix e-book prices, the Department of Justice and 33 state attorneys-general have submitted a proposal they say will restore competition to the market.

The proposed solution, filed Friday with a federal court in New York, would require Apple to terminate existing agreements with the five major publishers with which it conspired - Hachette Book Group (USA), HarperCollins Publishers L.L.C., Holtzbrinck Publishers LLC, which does business as Macmillan, Penguin Group (USA) Inc. and Simon & Schuster Inc. - and refrain from entering into any new e-book distribution contracts that would restrain Apple from competing on price.

The DoJ's proposal also calls for Apple to provide links from its e-book apps to rivals Amazon and Barnes & Noble, and to refrain from brokering pricing deals for e-books, music, movies, TV shows and other content found via its iTunes Store, for two years.

Amazon and Barnes & Noble currently have iOS apps that allow users to read purchased books on iPads or iPhones. However, when Apple began demanding a 30 percent cut of all in-app purchases, the book retailers discontinued the ability to buy e-books from within their apps, and directed customers to make purchases via a browser, and then re-open the app to access their content. Under the DoJ's proposal, the apps would include a link to those browser-based e-book stores.

The DoJ and state AGs also asked the Court to appoint an external monitor to ensure Apple is not engaging in any behavior that violates U.S. antitrust laws.

The Justice Department's move comes several weeks after a New York district judge found Apple guilty of e-book price fixing. In the ruling, Judge Denise Cote wrote that the DoJ had showed that publishers "conspired with each other to eliminate retail price competition in order to raise e-book prices, and that Apple played a central role in facilitating and executing that conspiracy," according to's Chloe Albanesius.

Apple "changed the face of the e-book industry," but not for the better, Judge Cote concluded.

"Without Apple's orchestration of this conspiracy, it would not have succeeded as it did in the Spring of 2010."

Bill Baer, Assistant Attorney General in charge of the DoJ's Antitrust Division, said the remedy the agency proposed on Friday would effectively stop Apple's anti-competitive practices.

"The court found that Apple's illegal conduct deprived consumers of the benefits of e-book price competition and forced them to pay substantially higher prices," Baer said according to Albanesius.

"Under the department's proposed order, Apple's illegal conduct will cease and Apple and its senior executives will be prevented from conspiring to thwart competition in the future."

Apple filed a formal response with the court on Friday, calling the DoJ's proposal "a draconian and punitive intrusion into Apple's business, wildly out of proportion to any adjudicated wrongdoing or potential harm."

The government's "overreaching proposal would establish a vague new compliance regime applicable only to Apple with intrusive oversight lasting for ten years, going far beyond the legal issues in this case, injuring competition and consumers, and violating basic principles of fairness and due process," the Cupertino, CA-based company said.

"The resulting cost of this relief not only in dollars but also lost opportunities for American businesses and consumers would be vast."

Rather than accept the DoJ's proposal, Apple proposed that the court take no further action on the matter.

"Apple does not believe it violated the antitrust laws, and, in any event, the conduct for which the court found it liable has ended and cannot recur as a result of the publishers' consent decrees. In light of these facts, no further injunction is warranted," the company said in its filing.

However, should the court decide to issue an injunction, it should be "narrowly tailored to redress the specific conduct this court found anticompetitive."

"The court should reject plaintiffs' proposed injunction outright, or in the alternative enter a narrower and more modest injunction that is carefully tailored to the court's findings, the legal theories and issues in the case, and the evidence admitted at trial," the company concluded.

The court is set to hold a hearing on remedies on August 9.