updated 07:00 pm EDT, Tue August 27, 2013
Will not interfere in Apple deals with movies, TV, music however
Judge Denise Cote, who presided over the e-book price-fixing trial between Apple and the US Department of Justice, has softened or eliminated a number of restrictions recommended by the DOJ since it emerged victorious in the trial; however, she said in a hearing on Tuesday that she does plan to require Apple to hire an external monitor whose job would be to review the company's internal antitrust compliance program.
Apple was found guilty on July 10 of engaging in what the judge calls "blatant" violations of antitrust law in trying to change the e-book industry to "agency" pricing, which would have ensured the profitability of the nascent industry for all parties. Apple and the big five publishing companies said it set the model because it was the only sustainable method of keeping publishers and e-book sellers solvent, ensure diversity and consumer choice.
The Department of Justice, and later Judge Cote however, saw the negotiations between Apple and the publishers as evidence of a conspiracy to break Amazon's monopoly of the e-book market. At the time, Amazon was selling e-books considerably below its own cost in an effort to both build demand and freeze out potential competitors -- but was also making publishers unhappy by allowing what they called an "unsustainable" price level that would eventually cause publishers to sell at lower prices, ruining their own profitability.
Cote has turned back a number of suggestions from the DOJ for restrictions that would be put on Apple, with the DOJ subsequently agreeing to reduce the number of years of potential monitoring from 10 to five years (with an option of up to five one-year extensions if deemed needed). The Justice Department has also backed off demands that Apple be barred from negotiating with publishers for five years, hire an internal antitrust compliance officer, and allow the DOJ to interfere in Apple's existing and future deals with TV, movie and music content providers.
The publishers had already settled with the DOJ (and by proxy some 33 states and territories that had joined the case against Apple), but have strongly protested the DOJ's suggested remedies, saying they would hurt the publishers more than Apple. Apple has also vigorously protested the proposed settlement, calling it "draconian" and unnecessary. Judge Cote has said that Apple can hold "staggered" negotiations with publishers beginning in two years to avoid the possibility of future collusion.
Cote on Tuesday also removed one of the most unusual of the DOJ's suggestions, a provision that would have required Apple to allow its e-book competitors to provide links to their own websites or e-bookstores on the iBookstore, allowing competitors to avoid Apple's 30 percent cut of sales. The judge said that the restriction was "unnecessary" and added that she wanted the injunction "to rest as lightly as possible on how Apple runs its business." She added that she expected to issue the injunction next week.
Apple is appealing the July 10 ruling, pointing out both numerous errors in Cote's ruling as well as questioning the credibility of testimony from two key witnesses (from Google and Amazon) as grounds for the appeal. Judge Cote refused to delay the implementation of an injunction while the case is being appealed.