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Apple spanked by judge in price-fixing injunction – but not too hard

Cook & Co. dodge a couple of bullets in ebook case Final Judgement

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The federal judge overseeing the ebook price-fixing case between Apple and the US Department of Justice has issued her remedy, and although it slaps Cook & Co. upside the head, the DoJ didn't get all it wanted.

After winning the case in Judge Denise Cote's court this July, the DoJ proposed a sweeping set of suggested remedies, including extending the remedies beyond ebooks to include "music, movies, television shows or other content," and forcing Apple to allow Amazon, Barnes & Noble, and others to sell content through links to their own stores in their iOS apps, thereby avoiding Apple's 30 per cent tariff.

Last week, Cote said that she wasn't going to mess with Apple's iTunes Store, so those two DoJ suggestions were non-starters. "I want this injunction to rest as lightly as possible on how Apple runs its business," she said at the time – and with her Final Judgment filed Thursday and released Friday, that statement was made official.

However, although Apple dodged those two bullets, Cote sided with the DoJ on the core remedy that it sought: Apple cannot enforce any existing "most-favored nation" (MFN) contract with ebook publishers, or make any such new contracts, for five years.

As defined by Cotes in her injunction, an MFN is "a term in an agreement between an E-book Retailer" – Apple, in this case – and an "E-Book Publisher" – specifically Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster, but also any other publisher with which Apple might enter into contracts in the future – "under which the Retail Price ... depends in any way" on the price, or discounts from the price, charged for ebooks by any other retailer or publisher.

Those five publishers were named in the original suit by the DoJ and several state Attorneys General, but settled rather than face trial; Apple denied the charges, went to trial, but lost.

As part of their settlements, the publishers agreed to renegotiate contracts with Apple and other retailers to allow discounting of their ebooks. Apple had agreed to that part of the settlement, and to the staggering of the time that discounting would be required for each publisher, but had argued that it be allowed to determine the order of the new contract negotiations.

Cote refused Apple's request, and in her injunction set the following periods of time for the discounting to continue after the Final Judgment goes into effect in 30 days: Hachette, 24 months; HarperCollins, 30 months; Simon & Schuster, 36 months; Penguin, 42 months; and Macmillan, 48 months. Presumably Penguin and Macmillan, having been the last of the five to reach a settlement, are being spanked especially hard for their tardiness.

Finally – and as expected – in addition to an "External Compliance Monitor" appointed by the court to keep an eye on Apple for two years, Cote ordered Apple to employ an "Antitrust Compliance Officer ... on a full-time basis until the expiration of this Final Judgment" in five years, who will receive "comprehensive and effective training annually on the meaning and requirements of this Final Judgment and the antitrust laws," and who will report to Apple's board on anything fishy they might uncover.

And just to add a bit of icing to the compliance cake, Cote ordered Apple to annually inform its employees that if they come across any violation of either her Final Judgment or antitrust laws, they may bring such violations to the attention of the Antitrust Compliance Officer "without reprisal."

Apple – no surprise – says it will appeal the injunction. ®

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