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Apple E-Book Price Fixing Fix Would Help Amazon Even More

Aaron Pressman
The Exchange

Now we know why Apple (AAPL) was unwilling to settle with U.S. antitrust regulators over the e-book price fixing case, despite the fact that the publishers involved in the case settled -- and even Apple did so in Europe. It turns out that the government wanted much broader and lengthier restrictions imposed on Apple than it sought from the publishing firms.

In proposed guidelines filed on Friday, the U.S. government asked a judge to impose conditions that would reach across all of Apple's future content deals and lift a key app store restriction for e-book competitors Amazon (AMZN) and Barnes & Noble (BKS). Last month, U.S. District Judge Denise Cote found Apple guilty of helping major book publishers conspire to raise e-book prices in the 2010 agreements that helped create the iTunes bookstore.

"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 Justice Department explained in a press release.

Another part of the proposal targets Apple's policy of forbidding apps in its iTunes store from selling content without giving Apple a 30% cut. That meant that competing e-book apps, Amazon's Kindle and B&N's Nook, could not sell e-books directly in their apps, because they weren't making enough money to pay Apple's 30% cut. Instead, they had to limit users to downloading and reading e-books already purchased. Users have to go to the companies' own e-book stores to make new purchases.

The proposed remedy seeks to force Apple to lift the ban on ebook apps for the next two years to "reset competition to the conditions that existed before the conspiracy," the Justice Department said.

The company would also have to appoint an antitrust monitor to review all manner of future deals. And most of the conditions would last for five years, more than the two-year restrictions publishers received.

Apple's opposition to such broad and long-lasting conditions likely stems from the damage wrought at other successful technology companies which agreed to somewhat similar resolutions in the past. In particular, IBM (IBM) and Microsoft (MSFT) appeared to take fewer risks and act more slowly attacking new markets after they agreed to antitrust settlements.

After antitrust regulators in the U.S. and Europe sued Apple in 2012 and charged the company with helping to boost e-book prices through an illegal conspiracy, the iPhone maker had an almost bipolar response. The lawsuits alleged that Apple helped publishers change the way e-books were sold and raise prices of most bestsellers from Amazon's common $9.99 price to $12.99 and $14.99.

In Europe, Apple quickly settled in return for making modest changes to its sales practices. But at home -- even after the five big book publishers settled -- Apple continued fighting and maintaining it had done nothing wrong.

“The e-book case to me is bizarre,” Cook said at the AllThingsD conference in June. “We’ve done nothing wrong there, and so we’re taking a very principled position. … We’re not going to sign something that says we did something we didn’t do. … So we’re going to fight.”

Cook's response itself was a little bizarre since Apple settled virtually identical charges with European regulators right away, in December 2012. But Apple is finding U.S. regulators much harder to please.