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Judge plans to force external e-book monitor on Apple

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.




by MacNN Staff

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  1. pairof9s

    Mac Enthusiast

    Joined: 01-03-08

    To be expected from this "judge"...Apple hopefully will get some justice from the appellate court.

  1. Inkling

    Dedicated MacNNer

    Joined: 07-25-06

    Quote: 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.

    How unfortunate! The only portion of this lawsuit that has ever made sense to me was forcing Apple to end its insistence on taking a hefty 30% slice of in-app purchases. Not other platform does that, not even Macs. So few have signed up, that it can't be earning Apple much money.

    It's also perhaps a hint that this judge is a bit too feeling centered. Resting lightly isn't what courts are all about. They're about punishing misbehavior. Mandating 30% for sales transactions that probably cost Apple about 3% is the high-tech equivalent of loan sharking. Forcing users into what is, for Apple, a quick and risk-free 1000% profit ought to banned. It's a heck of a lot worse that selling an ebook that might sell for $9.95 for $10.95. That's a mere 10% markup.

    There is a bit of lopsided justice in that move though. There's probably nothing Amazon wanted more than for people to be able to buy ebooks from inside their Kindle app. Grasping for too much through their DOJ surrogates, they missed the golden prize.

    I am starting to wonder if this judge missed her calling. An external compliance monitor seems more appropriate for an elementary school than for a giant corporation with a host of lawyers to advise them. It's the sort of silliness today's schools engage in when they 'monitor' kids at play and ban kick ball and Red Rover. When I was a kid, those were two of my favorite games.

    Thanks to this monitor, Apple is supposed to 'play nice' and 'share its toys' with Amazon. Nonsense! I'd rather see them give the retail giant far more aggressive competition. With B&N in trouble, Apple is the only real ebook competitor Amazon has.

  1. BLAZE_MkIV

    Professional Poster

    Joined: 02-23-00

    Originally Posted by InklingView Post


    How unfortunate! The only portion of this lawsuit that has ever made sense to me was forcing Apple to end its insistence on taking a hefty 30% slice of in-app purchases. Not other platform does that, not even Macs. So few have signed up, that it can't be earning Apple much money.



    Sell an app for what its worth instead of tricking children into buying thousands of dollars of smurf berries etc.

  1. pairof9s

    Mac Enthusiast

    Joined: 01-03-08

    Originally Posted by InklingView Post

    Quote: It's also perhaps a hint that this judge is a bit too feeling centered. Resting lightly isn't what courts are all about. They're about punishing misbehavior. Mandating 30% for sales transactions that probably cost Apple about 3% is the high-tech equivalent of loan sharking. Forcing users into what is, for Apple, a quick and risk-free 1000% profit ought to banned. It's a heck of a lot worse that selling an ebook that might sell for $9.95 for $10.95. That's a mere 10% markup.



    With all due respect, I find this to be a naive view of this business arrangement. Apple alleviates a good bit of the costs normally associated with book marketing and distribution. Book publishers avoid print costs, distribution costs, buyback costs, shelving fees, volume discounts, coupons, etc., not to mention the marketing benefits of reviews and promotions via the iBookstore for a particular title, of which a book publisher has made no investment into.

    In theory, there really is only one copy of a book every created, upon which every subsequent sale is simply a replication of that book for the consumer....in essence, there are no books sitting on a shelf collecting dust if they go unsold. Surely it's evident how book publishers benefit well beyond the 30% they pay to Apple to sell each book.

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