Legal ruling

DOJ proposes contract terminations, App Store rule changes, in Apple ebook case

The Department of Justice on Friday, which last month won its case against Apple over ebook price-fixing, issued its proposed remedy to address Apple’s guilt, in conjunction with 33 state attorneys-general. That remedy, the DOJ says, “is intended to halt Apple’s anticompetitive conduct, restore lost competition, and prevent a recurrence of the illegal activities.” The proposal is not binding, but instead a recommendation to the judge on how the government thinks the court should proceed.

The DOJ proposes that the court require that Apple terminate its existing agreements with the five major publishers—the ones with whom Apple was found guilty of colluding: Hachette Book Group, HarperCollins, Macmillan, Penguin, and Simon & Schuster. It further proposes that Apple be barred “for five years from entering new ebook distribution contracts which would restrain Apple from competing on price.”

Apple would also be prohibited from “again serving as a conduit of information among the conspiring publishers,” or from punishing those publishers who decline to sell their ebooks on Apple’s preferred terms. The DOJ’s proposal further suggests that Apple be “prohibited from entering into agreements with suppliers of ebooks, music, movies, television shows or other content that are likely to increase the prices at which Apple’s competitor retailers may sell that content.”

And that’s not all. The DOJ also wants to fiddle with Apple’s App Store rules. Currently, Apple disallows third-party ebook vendors like Amazon and Barnes and Noble from linking to their online bookstores from within their iOS apps. The DOJ’s proposal suggests eliminating that rule for two years, “allowing consumers who purchase and read ebooks on their iPads and iPhones easily to compare Apple’s prices with those of its competitors.”

Terminated contracts, lockouts from new agreements, App Store rule loosening—that must be enough to sate DOJ’s desire to punish Apple and restore what it calls fairer price competition, right? Nope!

The DOJ’s proposal asks the court to appoint an external monitor to observe Apple’s behavior, “to ensure that Apple’s internal antitrust policies are sufficient to catch anticompetitive activities before they result in harm to consumers.” The DOJ wants Apple to pay that monitor’s salary and expenses, and proposes that said monitor “work with an internal antitrust compliance officer who will be hired by and report exclusively to the outside directors comprising Apple’s audit committee.”

Apple didn’t immediately respond to Macworld’s request for comment on the DOJ’s proposal. After the July ruling, Apple spokesperson Tom Neumayr told Macworld, “Apple did not conspire to fix ebook pricing and we will continue to fight against these false accusations. When we introduced the iBookstore in 2010, we gave customers more choice, injecting much needed innovation and competition into the market, breaking Amazon’s monopolistic grip on the publishing industry. We’ve done nothing wrong and we will appeal the judge’s decision.”

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