Apple may be forced to direct users of ebook applications to rival ebookstores, and accept restrictions on future deals with other media companies, as part of a package of penalties following last month’s court ruling that it conspired to raise ebook prices.
Remedies proposed by the US Department of Justice and 33 state attorneys-general three weeks after their victory in the New York court case included one forcing Apple to provide links from its apps to ebookstores operated by Amazon, Barnes & Noble and other rivals for two years. A court hearing to approve the remedies is scheduled for August 9.
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“The court found that Apple’s illegal conduct deprived consumers of the benefits of ebook price competition and forced them to pay substantially higher prices,” said Bill Baer, assistant attorney-general in charge of the DoJ’s antitrust division. “Under the department’s proposed order, Apple’s illegal conduct will cease and Apple and its senior executives will be prevented from conspiring to thwart competition in the future.”
At present, Apple does not allow such links, and takes a 30 per cent cut of any purchases made within the app. Forcing the company to change its rules could cut its income from ebooks and improve the profitability of the digital book market for its rivals.
Apple will also be prohibited from striking deals with suppliers of ebooks, music, films, television shows or other content “that are likely to increase the prices at which Apple’s competitor retailers may sell that content”, the DoJ said, threatening to affect pricing more widely across iTunes and its App Store.
The DoJ proposal requires approval from the district court in the Southern District of New York, where Judge Denise Cote found against Apple on July 10.
The price-fixing case initially included five of the world’s six largest publishers: Hachette, HarperCollins, Macmillan parent company Holtzbrinck, Simon & Schuster and Penguin, which is part-owned by Pearson, owner of the Financial Times.
Some of the DoJ’s proposed remedies are harsher than the terms imposed on the publishers when they settled the case between April 2012 and February 2013.
Several publishers agreed to terminate their “agency” agreements with Apple and sign no such deals with Apple or other retailers for two years. The DoJ proposal would impose a five-year ban on entering new ebook distribution contracts “which would restrain Apple from competing on price”.
Under the “agency” model, publishers could set ebooks’ retail prices, as opposed to the alternative model in which retailers can discount from a wholesale price. The effect of the agency model, the DoJ argued in court, had been to increase the retail price of bestselling titles by about $3 to $5 each.
The DoJ also asked the court to appoint an external monitor to police Apple’s internal antitrust compliance and train senior executives and other employees. Apple must pay the monitor’s salary and expenses.
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