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Judge Signs Final Orders in Apple E-Book Price-Fixing Case

posted on 2013-09-07 17:24 EDT

On Thursday, Federal Judge Denise Cote signed the final orders in the Apple e-book price-fixing case with several provisions that were lighter than originally planned. The final orders decree that Apple must regulate sales in its e-book app the same way as other apps in its App store. However, Apple can change App Store terms “in a reasonable manner that does not discriminate against E-book Apps for competitive reasons.” These provisions were to prevent a potential loophole in sale price-fixing.

Apple will also be subject to an external supervisor to oversee the company's internal antitrust policy and hiring practices for two years. The timetable may be extended if the supervisor finds cause to do so. This provision is lighter than previously planned. The Government previously asked for a five-year oversight with up to five extensions. The Department of Justice also reserves the right to review Apple's documents and interview employees.

Judge Cote also nixed Apple's obligation to provide commision-free links to e-book retailers' own bookstores for in-app purchases. The five publishers involved in the suit, Macmillan, Penguin (now Penguin Random House), Hachette Book Group, Simon & Schuster, and HarperCollins will not have to terminate their contracts like previously stated, but "modify" them to comply with the judicial orders.

If the decision is not extended due to just cause, the provisions will expire in five years time. Judge Cote said she wanted to interfere as little as possible on Apple's business while seeking to restore some measure of competition to the e-book business.

The final orders are not the end of the price-fixing case. Apple is preparing to appeal Judge Cote's ruling. The judge ruled that Apple was guilty of colluding with publishers to fix e-book prices and effectively drive up consumer cost in an attempt to undermine Amazon's lower price offerings. Apple is also scheduled to appear in court in a state and class-action lawsuit in May 2014 to find damages from the collusion case.

Publishers Macmillan and Penguin will settle their end of the case in court on December 6.

History

The U.S. Department of Justice filed a civil antitrust lawsuit last year against Apple and the publishers. The suit charged the companies with colluding to raise e-book prices through the use of the "agency model," where publishers, not booksellers, set book prices.

The contracts forced retailers like Amazon to market their e-books at a US$12.99-14.99 price point. Publishers Penguin and Macmillan's opposition cited that Amazon.com, a competitor to Apple in the digital publishing front, was a "monopoly" before Apple introduced its iBookstore platform. Authors Guild president Scott Turow added that Amazon is lowering its prices "only as long as it takes Amazon to re-establish its monopoly." Amazon held 90% of the e-book market prior to the publisher's contract negotiations.

Simon & Schuster, Hachette Book Group, HarperCollins, and later Macmillan and Penguin agreed to settle with the Department of Justice. The original settlement required the publishers to end their contractual relationship with Apple in a week, as well as any other contracts with e-book retailers that do not allow retailers to set their own e-book prices or contain a “most-favored nation” clause, which says that no other retailer is allowed to sell e-books for a lower price. The publishers were not enter into any new contracts that limit a retailer's ability to set prices for the next two years or enter into any new contracts with a "most-favored nation" clause for the next five years. These aspects of the settlement were changed in final orders signed on September 5.

Source: Publishers Weekly


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