Apple Calls DOJ Proposal Invasive, Punitive and a Gift to Amazon, Asks for ‘Reasonable’ Limitations

On Friday, Judge Denise Cote will consider whether to grant the Justice Department’s request that Apple be forced to accept long-term monitoring and sweeping changes to how it operates or impose the much more limited consequences Apple wants.

In a proposed remedy submitted to the court, The DOJ contends that Apple must be compelled to take steps to “ameliorate the harm its conspiracy caused to competition and consumers.” Among the remedies proposed is a five-year restriction on engaging in agency pricing agreements for any content. That means Apple would be required to throw out its contracts with the five publisher defendants in the price-fixing case, agreements that were set as part of the publishers’ settlements with the DOJ.

In its reply, the company calls the proposal “a draconian and punitive intrusion into Apple’s business.” It asks for “reasonable limitations on Apple’s ability to share information,” similar to what is contained in the publisher’s settlement agreements, a prohibition on retail price MFNs that also echo the publishers’ settlements, and “reasonable antitrust training obligations.”

Apple points out that the publishers’ settlement agreements already prohibit publishers from entering into agency agreements without discounting for a two-year period, which the court has endorsed as long enough to “restore retail price competition to the market for trade e-books, to return prices to their competitive level.”

In addition, Apple argues that any injunction should only apply to the publishers involved in the conspiracy, not the thousands of independent publishers who also sell books through Apple.

Objecting to the proposal to dictate terms for non-book content such as music, movies and apps, the company contends, “There is no justification for this invasion into Apple’s businesses that were not directly at issue in this lawsuit, for which no conspiracy allegations were made.”

The DOJ also wants Apple to operate under the oversight of an outside compliance officer for 10 years, necessary, says the DOJ, since the conspiracy was orchestrated by people at the highest levels of the company.  Apple responds that, “This unduly burdensome remedy is plainly punitive, not to mention out of proportion to the circumstances of this case.”

Comments: more
  • http://who-will-kiss-the-pig.blogspot.com/ Richard Grayson

    Typically, this post is framed from the Apple point of view.

    I don’t know why the Authors Guild continues to defend and even support the egregious and illegal behavior of the Apple corporation. While I understand the need to curtail the outrageous dominance of Amazon in the book market, the AG has chosen the wrong means to do that. I feel you have implicated those of us who are members in Apple’s wrongdoing by being the biggest cheerleader for unlawful price-fixing.

    Here’s today’s editorial in The New York Times, which I think says exactly why the AG has been wrong on this issue:

    Apple’s wrongdoing dates back to 2010, when it introduced an “agency model” in which publishers set retail prices and Apple took a commission. The company also specified in its contracts that if a rival set lower prices than those in the iBookstore, the publishers would have to match them. After these deals, e-book prices went up. The Justice Department charged Apple with illegally conspiring to fix prices.

    As reparation, the Justice Department wants Apple to terminate its contracts with the five publishers. The government also wants to ban Apple from signing agreements with suppliers of e-books, music, movies and television shows that are likely to increase the prices at which rivals sell that content. It wants the company to pay for a court-appointed monitor to ensure compliance with antitrust law, and allow other retailers (like Amazon and Barnes & Noble) to sell
    e-books from their iPad and iPhone apps for a two-year period, without paying Apple a commission on those sales.

    What’s in this for consumers? E-book prices, which spiked in 2010, dropped back down in 2012, after publishers started settling with the government. The proposed remedies should prevent future price-fixing and make it easier for readers to make purchases through apps.

    Mainly, the Justice Department’s plan will keep Apple from getting back to its old tricks. It does not address the need for a counterweight to Amazon’s dominance. Amazon controls an estimated 65 percent of the market, with Apple at 10 percent and other retailers splitting the rest. (Before Apple started selling e-books, Amazon had 90 percent.) The case against Apple has done nothing to solve that problem.

    ***

    Apple’s “agency model” price-fixing and the necessary antitrust action it spawned has only let the Amazon dominance problem get worse while we’ve wasted time trying to solve a difficulty for book publishers and authors by doing something that was deleterious to consumers, lucrative for one technology/media company at the expense of another, and from a moral point of view, just plain wrong.

    • http://www.rowenachery.com rowenacherry

      The Authors’ Guild advocates for authors. Many authors who do not write for the 5 “Settling” publishers are now subject to interference from the DOJ with their (authors’) right under the Copyright Laws to set the prices of their works.

      The Authors’ Guild is right to draw attention to the collateral damage in, “Apple argues that any injunction should only apply to the publishers involved in the conspiracy, not the thousands of independent publishers who also sell books through Apple.”