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):