The federal government on Friday filed a revised proposed remedy for Apple in the ebook case, following a hearing earlier this month with a judge and Apple counsel. In July, Apple was found guilty of conspiring with publishers to set ebook prices. (Apple has vowed to appeal.)
The new proposed punishment (embedded below) isn’t actually that different from the original proposed punishment, in which the DOJ wanted Apple to drop in-app purchasing restrictions for competitors like Amazon and also aimed to restrict publishers from using agency pricing for five years instead of two. But it contains a lot more investigation of in-app purchases.
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Perhaps most interestingly, in its revised remedy, the DOJ delves more deeply into its criticism of Apple’s in-app purchasing policy, which it claims Apple changed in 2011 “to retaliate against Amazon for competitive conduct that Apple disapproved of.” As background, in 2011, Apple changed in-app purchase rules to require that any content sold through apps must also be sold through the iTunes Store, and forbid publishers and retailers from sending users to websites outside their apps to make purchases. As a result, Amazon removed the Kindle Store from its app, as did retailers like Barnes & Noble and Kobo.
These rules applied to all types of digital content — including magazines and newspapers — not just ebooks. But, the DOJ argues, they were primarily put into place “to make it more difficult for consumers using Apple devices to compare ebook prices among different retailers, and for consumers to purchase ebooks from other retailers on Apple’s devices.”
At the hearing earlier this month, the DOJ argues, “Apple misrepresented the factual circumstances surrounding this matter, including how the App Store operated and operates…It simply is not true that Apple receives a 30 percent commission from all retailers for all goods sold through apps.” It uses the examples of shoes at Zappos and physical books at Amazon — seemingly arguing that Apple should treat physical and digital goods in the same way.
The DOJ includes Apple’s in-app purchase regulations as an exhibit, and also includes a Steve Jobs email from 2010.
For the most part, the DOJ says, its original proposed punishment should stand
The DOJ uses most of the filing to explain why it thinks its original proposed punishment was correct. In one concession, it allows that the injunction could last for five years, instead of the ten it originally proposed, but wants to retain the right to extend the injunction in one-year increments if needed, for up to five additional years, because “five years might not be enough time to restore competition to the e-books market and to ensure that Apple changes its troublesome business practices to prevent a recurrence of the illegal conduct.”
The DOJ also wants to require Apple to negotiate with publishers at staggered times, rather than all at once. That was a plan that Judge Denise Cote, the federal judge overseeing the case, had suggested at the hearing earlier this month.
Finally, the DOJ insists that Apple needs an external monitor, rather than the “vigorous in-house antitrust enforcement program” suggested by Judge Cote, to make sure that it is adhering to the terms of whatever final punishment it ultimately receives. The DOJ argues that “Apple’s in-house enforcement program will be insufficient to change the corporate culture, and that the company cannot be left to solely police itself.”
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