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Summary:

The Justice Department has set out proposals of what Apple should do to fix the harm from its efforts to fix prices in ebook market. The proposals are likely to be very unpopular with Apple.

apple-legal-justice

The Justice Department is calling on a federal judge to force Apple to allow competitors in the ebook market to provide prices and links to their e-bookstores within apps on Apple’s devices, a move that is likely to anger the iPhone maker and increase the stakes in an anti-trust investigation that has already produced a damning judgment against Apple in early July.

In a press release and court filing on Friday, the government set out a series of proposals to fix what it says are Apple’s “brazen” efforts to orchestrate price-fixing among major publishers.

The remedies would come in the form of a final judgment to be entered in a high-profile trial between Apple and the Justice Department that concluded in July when U.S. District Judge Denise Cote ruled that Apple had been the ringleader in a conspiracy with five publishers to increase prices and wrest control of the ebook market from Amazon.

As expected, the proposed final judgment would limit Apple’s ability to use pricing tactics like “most favored nation” clauses but, in a new development, the Justice Department wants Apple to make it easier for its users to compare prices at other stores. Here is the proposed language:

Apple must also for two years allow other ebook retailers like Amazon and Barnes & Noble to provide links from their ebook apps to their e-bookstores, allowing consumers who purchase and read ebooks on their iPads and iPhones easily to compare Apple’s prices with those of its competitors.

The government elaborates:

“This section thus requires Apple, for a relatively brief period of time, to return to its own pre-iBookstore policy of allowing Amazon, Barnes & Noble, and other ebook app providers to offer a simple, costless means for readers to purchase e-books directly from the third party.”

While it’s slightly unclear from this language, it sounds as if the government wants to force Apple to allow in-app purchasing, at least on ebook apps, without taking its customary 30 percent commission. (We’ve checked with the DOJ for clarification.) The proposal is likely to rile Apple because the company does not currently allow app makers to direct customers to external “shops.”

The Justice Department’s recommendations will not necessarily be adopted by Judge Cote, and Apple will surely oppose them. The company has also vowed to appeal the Second Circuit Court of Appeals, which will probably result in Cote’s final decision being stayed for months.

For consumers, not much will change in the short term, though they are likely in line for a payment from Apple similar to the ones they are receiving from publishers to compensate for the price-fixing. The cash payments are coming by way of state governments and class action firms; the Justice Department’s case is concerned instead with Apple’s pricing and retailing practices.

If Apple’s appeal fails, its payout could reach nearly $500 million, according to legal filings.

Here’s the proposed final judgment (once again, Judge Cote can modify it as she sees fit):

US v Apple Proposed Remedy Brief

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    1. Tetracycloide don Friday, August 2, 2013

      How so? Using their market position as a device maker to wall off part of the market for e-books seems anti-competitive. Frankly all of the Apple restrictions that funnel all commercial activity that touches the device through their 30% cut gates should be stopped.

      1. Amazon charges 30% too. Should they “be stopped”.
        Apple built the platform,the data centers and the content storage for most of this.
        Also I assume this means Amazon and B&N will not have to open their content stores for Apple too right?
        I’ved used Amazon longer than most but they could easily be accused of dumping prices.

  1. Actually, I think its a good thing.

    Its a real PITA to have to separately open the system browser on iOS and search for the book I was reading a sample of.

    Apple disallowing Amazon from having a simple link in their iOS app is the absurd thing!

    1. Apple did not “disallow” it. Amazon took it out so they wouldn’t have to pay the same 30% fee that Amazon charges to others. So much ignorance in the comments.

      1. Just an interesting footnote,

        From the ruling. “Sections IV.B and IV.C address Apple’s treatment of rival e-book app providers. SectionIV.B requires Apple to permit these rivals to continue to offer their apps through Apple’s AppStore, and to update those apps, on terms and conditions no worse than Apple offers to any other app developer.”

        Apple doesn’t offer these terms at all to other developers – unless everything is an inApp purchase. “no worse” would equal -using inApp purchase, and paying 30% on the additional sold content. Hmmmm, did the Feds not understand the app store terms and developer contract terms?

        This seemingly poses a question mark over the God-given terms of the other hundreds of thousands of developers who have no control over their contract terms, and who currently operate with fewer rights than this government document assumes.

  2. Really? I don’t feel it’s terribly onerous as it works at the moment. I always use the Amazon website to buy books. And whilst my primary reader is my Kindle, I do use it on may Mac and iPad but it makes no difference to me whether I buy from within the app or not.

    However, if they are insisting on this I wish they would insist on it for all apps of whatever kind. I’ve now had to ditch my favourite mind mapping tool because the (third party) app I used to use to edit maps on the move was eventually called out for having a mechanism that linked to XMind which charges for premium users.

    This isn’t even the app developer linking to their own web based store, but to a completely separate developer whose products happen to talk to each other.

  3. A fascinating development. One has to wonder if the Justice Department would rule against Amazon if it were the other way round.

  4. It would be interesting to know why Apple would be required to have Kindle and Nook apps with direct purchasing ability but Amazon is not required to have a functioning Nook app with direct purchasing abilities on it’s Kindles (and the similar situation for Barnes & Noble Nooks). It seems like the DOJ proposal is a a very unfair treatment among the three biggest ebook sellers. As a consumer, I would prefer that all ebooks be non-proprietary and could be purchased easily from a large number of competing sellers and read on any device whether it be an iPad, Kindle, Nook or Android tablet. However, until our government can muster the courage to pass a consumer-friendly law like that, it seems very unfair to force Apple to make competing reading apps available on their devices but not do the same to Kindles (who has, by far, the biggest market share) and Nooks.

    1. This is (possibly) being required of Apple to remedy their misbehavior in price fixing.
      When Amazon breaks the law, then remedial actions might be required of them. Amazon’s policies could be seen as predatory pricing, but they haven’t been convicted of anything.

      I agee that non-proprietary ebooks would be great, but it’s all about the law, not subjective decisions about what people would find convenient.

    2. If amazon looses an anti-trust case they probably would be. Apple let the DOJ’s foot in the door when they chose to price fix.

    3. You can download the Nook app to a Kindle Fire and you can also download the Kindle app to a Nook HD.

      I agree that a non-proprietary format would be a good thing, no DRM would be even better.

  5. monty billy johnson Friday, August 2, 2013

    Honestly – as much as I like some of Apple’s products their policy where they get to secretly police any software that lands on their devices is horrible. They can tke the money hit no problem and I really don’t care directly one way or another about the eBook shenanigans…

    But I hope this might be a first step towards Apple being forced to open it’s eco-system to allow end Users to install and use whatever software they want on their devices without Apple’s approval.

    I am an adult and acan make my own decisions – I don’t need Apple to babysit me.

    1. I voted with my wallet, I went from iDevice to Android, I got tired of the Apple tax. What amazes me is the DOJ didn’t go after Apple for more of their monopolistic policies. Why should Apple be entitled to 30% of in app sales, they don’t provide any facilities to support it other than the original app distribution.

      1. So, according to Android users, Android has more marketshare than iOS, yet Apple has a monopoly… Just making sure I understand.

        (Disclaimer: I own both types of devices.)

      2. Apple does not get 30% if you use iTunes gift cards. Gift cards are discounted 20% at times.

      3. If Apple didn’t collect 30% of in-app purchases publishers would make all apps free and rely solely on in-app purchases to make money. Apple would collect no money for operating their app store.

  6. Seriously Jeff? Why Apple?

    Well lets see, bc Apple and NOT Amazon or Barns & Noble (are they even a significant player anymore?) was found guilty of conspiracy to price fix.

  7. Absolutely ridiculous thing of the DoJ to ask of Apple.

  8. PhiloFarnsworth Friday, August 2, 2013

    I guess I’m amazed that there already is an Amazon App and a B&N App on my phone, and I can order anything from either of them already… books included. DOJ didn’t already know there was an app or two for that?

    So, this is starting to get real stupid…

    Sounds to me like Apple could easily let those apps go to the dust-bin to hell, and only allow the book-only ordering apps the DOJ’s requires if Apple eventually looses the appeal. I kinda hope that next week’s headline is that the current Amazon app is disallowed, because legally they would only be obliged to allow them an app to sell books…

    You can lead a horse to water, but he might not actually drink the Cool-Aid.

  9. For once the DOJ is doing something right.

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