DOJ, AGs propose remedies for Apple in e-book price fixing

Remedies would allow Apple to continue to sell e-books but prohibit it from retaliating against publishers for refusing to sell e-books under Apple's terms

Apple should end its existing e-book agreements with five major publishers and sign no new price-setting distribution contracts for five years under remedies for e-book price fixing proposed by the U.S. Department of Justice and 33 state attorneys general.

The proposed remedies, released Friday, would allow Apple to continue to sell e-books but prohibit the company from retaliating against publishers for refusing to sell e-books under terms approved by the company. The remedies would also require Apple to allow other e-book sellers, such as Amazon.com and Barnes & Noble, to give more prominent play to their e-book stores on Apple devices, by allowing them to provide links from their e-book apps to their e-book stores

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Apple would 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 proposed remedies would also require Apple to hire an internal antitrust compliance officer and allow the U.S. District Court for the Southern District of New York to appoint an external compliance monitor.

Apple, in its own brief filed Friday, called the DOJ proposal "a draconian and punitive intrusion into Apple's business, wildly out of proportion to any adjudicated wrongdoing or potential harm."

The proposed remedies would be a "sweeping and unprecedented injunction" that the government can use to regulate Apple's business relationships with "thousands of partners," the company said in its court brief.

Judge Denise Cote found in July that Apple violated antitrust laws by colluding with publishers to set prices of e-books. Apple has vowed to appeal the case.

"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."

In April 2012, the DOJ filed an antitrust lawsuit against Apple and publishers Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster. The DOJ accused the defendants of substantially increasing the prices that consumers paid for e-books.

When it filed the lawsuit, the DOJ reached settlements Hachette, HarperCollins and Simon & Schuster, and those settlements were approved by the court in September. The DOJ settled with Penguin in December and Macmillan in February, but Apple refused to settle.

Under the settlements, each publisher was required to terminate agreements that prevented e-book retailers from lowering the prices at which they sell e-books to consumers.

A hearing on remedies for Apple is scheduled for Aug. 9.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's email address is grant_gross@idg.com.

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