Apple e-book restrictions imposed by judge

An article of interest.
Apple e-book restrictions imposed by judge
Order comes after Apple found to be price-fixing e-books

The Associated Press, September 7, 2013.

U.S. District Judge Denise Cote said she believed Apple and publishers still
wanted to collude to raise book prices.
(Sony Electronics/ Associated Press)

A U.S. judge has ordered the technology giant to modify contracts with
publishers to prevent electronic book price fixing and said she will appoint
an external compliance monitor to review the
company’s antitrust policies and training, in an effort to force Apple to
obey antitrust laws.

U.S. District Judge Denise Cote’s 17-page order came Friday, nearly two
months after she concluded that Apple Inc. used the popularity of its iTunes
store to
conspire with publishers to raise e-book prices in 2010.
Cote gave the Department of Justice less than it requested but still left it
pleased.

“The court’s ruling reinforces the victory the department has won for
consumers,” Assistant Attorney General Bill Baer said in a statement.
“Consumers
will continue to benefit from lower e-books prices as a result of the
department’s enforcement action to restore competition in this important
industry.”

Apple found guilty of e-book price fixing
Apple spokesman Tom Neumayr said the Cupertino, Calif., company will appeal
the order.
“Apple did not conspire to fix e-book pricing,” he said. “The iBookstore
gave customers more choice and injected much needed innovation and
competition into
the market. Apple will pursue an appeal of the injunction.”

Cote’s order largely followed what she had said she would do at two August
hearings, when she expressed dismay with Apple’s conduct since her ruling
and
said she believed the company and the publishers still wanted to collude to
raise book prices.

Company urged to ‘change its culture’
Just last week, she told lawyers that she had hoped that her finding that
Apple had “demonstrated a blatant and aggressive disregard” for the law in
orchestrating a price-fixing scheme would lead Apple to show it had taken
the lessons of the litigation seriously.
“I am disappointed to say that it has not taken advantage of those
opportunities,” Cote said as she urged the company to “make these reforms
and
change its culture.”

At trial, Apple insisted that its entry into the e-books market widened the
number of customers and was a boost for publishers and authors alike,
increasing
the number of books available and eliminating a monopoly of the market by
Amazon.com.
‘I want Apple to have the flexibility to innovate, but at the same time I
want to try to prevent a repetition of illegal conduct.’
-Judge Denise CoteBut the government argued that Apple joined with
publishers to illegally undermine an Amazon pricing policy that had enabled
consumers to buy
the most popular books for $9.99.

In her order, Cote told Apple to make changes to its contracts with
publishers to ensure price fixing is eliminated. She set rules to prevent
the kind of
cooperation between Apple and the publishers that she said harmed Apple’s
retail competitors in the e-book market.
For instance, she said Apple cannot enter an agreement with a publisher it
had colluded with that restricts Apple’s ability to reduce retail prices or
e-book
discounts. And she said the company cannot put language in its contracts
with publishers that tie e-book prices to those set by other publishers or
retailers.

Cote said she will appoint an external compliance monitor for a period of
two years to assess Apple’s internal antitrust compliance policies,
procedures and
training and to recommend any necessary changes.

Training needed on contract negotiations
Cote said evaluating training procedures was particularly important after a
top Apple executive and his in-house counsel testified that neither could
recall any
training on antitrust issues. She said adequate training was necessary for
those
involved in contract negotiations for all of Apple’s content-providing
businesses, including books, music, , movies, television shows and apps.

“I am hopeful that it will devote its considerable resources and creativity
to construct a training program that will be a model for American business,”
Cote
said at an Aug. 27 hearing. “It is my hope that the terms of this injunction
will protect consumers, encourage lawful competition and avoid a recurrence
so
that taxpayers will never have to pay again for a government enforcement
action.”

The order will remain in place for contracts between Apple and the various
publishers until they begin expiring in two years.
The judge also ordered Apple not to share the status of its contract
negotiations with one publisher among other publishers.
The outside monitor will not generally assess Apple’s compliance with her
order, however. At last week’s hearing, Cote said she will decide ultimately
whether
Apple is in compliance.
“I want this injunction to rest as lightly as possible on the way Apple runs
its business,” she said. “I want Apple to have the flexibility to innovate,
but at
the same time I want to try to prevent a repetition of illegal conduct like
that shown with overwhelming evidence at this trial.”

The Associated Press, 2013

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