Apple Claims DOJ’s iBooks Remedy Draconian and Overreaching

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Apple in CourtApple Inc. has responded to the U.S. Department of Justice's proposed antitrust remedy, calling it draconian, unprecedented, punitive, and overreaching. The DOJ proposed on Friday morning a sweeping series of remedies to correct price fixing behavior Apple was convicted of engaging in.

That proposed remedy would prohibit Apple from entering into deals with book publishers that allow Apple to not compete on price; force Apple to let Amazon, Barnes & Noble, and other book retailers sell books through App Store apps without paying Apple a cut; give the DOJ broad oversight over the rest of Apple's iTunes business.

In a court filing covered by AllThingsD, Apple said:

Plaintiffs’ proposed injunction is a draconian and punitive intrusion into Apple’s business, wildly out of proportion to any adjudicated wrongdoing or potential harm. Plaintiffs propose a sweeping and unprecedented injunction as a tool to empower the Government to regulate Apple’s businesses and potentially affect Apple’s business relationships with thousands of partners across several markets.

Plaintiffs’ overreaching proposal would establish a vague new compliance regime—applicable only to Apple—with intrusive oversight lasting for ten years, going far beyond the legal issues in this case, injuring competition and consumers, and violating basic principles of fairness and due process. The resulting cost of this relief—not only in dollars but also lost opportunities for American businesses and consumers—would be vast.

Apple argued that no additional remedy is necessary because the business agreements the DOJ found so appalling were ended when the publishers settled with the DOJ in their part of this same legal battle. That settlement ended the agency model and the most favored nation clause (MFN) that Apple used to keep it from having to compete on price.

Apple said that this solved whatever problem there may or may not have been—the company denies it broke the law and is appealing its conviction—making all of the DOJ's proposed remedies beyond the pale. Apple also said that if the judge feels the need to issue an injunction anyway, that the most the situation calls for is:

(1) reasonable limitations on Apple’s ability to share information (akin to the publishers’ consent decrees) [...];

(2) a prohibition, tracking the publishers’ consent decrees, on retail price MFNs in agreements with the publisher defendants;

(3) reasonable antitrust training obligations for Apple, lasting a reasonable term. No further relief can be justified under the legal standard governing antitrust injunctions or the Constitution.

Judge Cote has not reacted to either Apple's or the DOJ's filings, of course, and isn't expected to before an August 9th hearing.

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What’s amazing in all this is when the DOJ imposed penalties on Microsoft’s monopolistic practices, it didn’t seem to do much at all.

It seems to me that Apple’s biggest mistake was to actually quote a price at which they suggested books were to be sold at.  If Apple had simply said over and over that they don’t care what price the books are sold at, only that Apple wanted to sell at the same or lower than Amazon, this wouldn’t be collusion. 

Apple may decide to end the iBookStore, rather than assist Amazon in selling their books for free.

Lee Dronick

  Apple may decide to end the iBookStore, rather than assist Amazon in selling their books for free.

I hope not, I am a regular customer there. Anyway, if I understand this ruling Apple may be required to put a link in the Amazon and Barnes&Noble; apps to their respective book stores. If you don’t have the apps installed, or you don’t use them, then you will never see the links.

Also these are just proposed “remedies.” Of course that won’t stop chuckleheads from reporting them as final. There will probably be legal negotiations and compromises.

Suppose for a period of time Apple uses its cash reserves and offers all books for free. Apple will pay for the books.


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