DOJ: Apple Should Link to E-Book Rivals, Submit to Audits

The Department of Justice today issued its recommendation for what type of punishment Apple should face for an e-book price-fixing scheme.

According to the agency, Apple should be banned from brokering pricing deals for e-books, but also music, movies, TV shows or other content found via its iTunes Store.

Apple would also have to allow rivals like Amazon and Barnes & Noble to link to their e-book stores within their iOS apps, and appoint a monitor who would make sure Apple is not engaging in behavior that runs afoul of U.S. antitrust laws.

This comes several weeks after a New York district judge found that Cupertino is guilty of e-book price fixing. The DOJ 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," Judge Denise Cote wrote in her ruling.

Apple "changed the face of the e-book industry," but not in a good way, Judge Cote concluded. "Without Apple's orchestration of this conspiracy, it would not have succeeded as it did in the Spring of 2010."

Apple has vowed to appeal the decision, so it remains to be seen if the DOJ's recommendations will be put into place.

"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," Bill Baer, Assistant Attorney General in charge of the DOJ's Antitrust Division, said in a statement. "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."

Specifically, the order would ban Apple from entering into new e-book distribution contracts for the next five years. Cupertino would also not be allowed to serve as a "conduit of information" for publishers or retaliate for decisions it dislikes.

Meanwhile, "Apple will also be prohibited from entering into agreements with suppliers of e-books, music, movies, television shows or other content that are likely to increase the prices at which Apple's competitor retailers may sell that content," the DOJ said.

Right now, meanwhile, rivals like Amazon and Barnes & Noble have iOS apps that allow people to read purchased books on iPads or iPhones. But when Apple started demanding a 30 percent cut of all in-app purchases, the book retailers pulled the ability to purchase e-books from within their apps. Instead, customers must do so from the browser and then re-open the app, where their purchases will be available. Under this deal, the apps would include a link to those browser-based e-book stores.

The antitrust auditor, meanwhile, would be a funded by Apple and school Apple execs and other employees "about the antitrust laws and ensuring that Apple abides by the relief ordered by the court."

The case dates back to April 2012, when the DOJ sued Apple and five publishers - Macmillan, Penguin, Hachette, HarperCollins, and Simon & Schuster - over an alleged "illegal conspiracy" involving e-book price fixing. The publishers settled with the government, but Apple fought back and the case went to court in June.

UPDATE: Apple has issued its response, and Cupertino is not exactly on board. The DOJ's proposal "is a draconian and punitive intrusion into Apple's business, wildly out of proportion to any adjudicated wrongdoing or potential harm," Apple argued in a court filing.

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

Apple made a proposal of its own - do nothing. "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," Cupertino argued.

Should something really need to be done, the solution "should be narrowly tailored to redress the specific conduct this court found anticompetitive," Apple said.

Source: http://www.pcmag.com/article2/0,2817,2422658,00.asp?kc=PCRSS05039TX1K0000762

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