Several years ago Apple began preventing third party book sellers on Apple devices to link from their apps to their online stores. Apple did this in order to prevent publishers from using the massive reach of the iOS powered devices in order to make sales through competitor markets such as Amazon.com. While customers could still get to these third party sites to make purchases through the mobile web, preventing these links from within the app helped to ensure many customers wouldn’t be using the Apple platform to attempt to bring customers to another service.
Just last year, Apple was sued by the US Department of Justice for conspiring to fix e-book prices. Apple was working with five of the largest book publishers to fix e-book prices. The five publishers were: Hachette, Macmillian, Penguin, HarperCollins and Simon & Schuster. Under the Sherman Act, the DOJ was claiming that this was an illegal and anticompetitive agreement between Apple and the book sellers.
The five publishers have reached a settlement with the DOJ, but Apple lost the case and was found guilty, which has now moved the case into the damages & remedies phase of the trial. This is where the case takes a turn which many believe has the DOJ asking for far too much in terms of punishment against the tech giant.
In the DOJ proposal, they ask the court for the following provisions, which they claim will “halt Apple’s anticompetitive conduct, restore lost competition and prevent a recurrence of the illegal activities.” The specific requests from the DOJ are:
- Apple would be required “to terminate its existing agreements with the five major publishers with which it conspired…and to refrain for five years from entering new e-book distribution contracts which would restrain Apple from competing on price.”
- Apple could not enter “into agreements with suppliers of e-books, music, movies, television shows or other content that are likely to increase the prices at which Apple’s competitor retailers may sell that content.”
- For two years apple would be compelled to restore in-app links to “e-book retailers like Amazon and Barnes & Nobel…allowing consumers who purchase and read e-books on their iPads and iPhones to compare Apple’s prices with those of its competitors.”
In addition to these restrictions, the DOJ is asking to have an external monitor put in place to ensure compliance with the above restrictions. Apple has already filed a response to the DOJ’s proposed remedy. They strongly oppose the fact that the DOJ wants to have long-term oversight into the company, and also the fact that they are attempting to add restrictions into several lines of business which had nothing to do with the legal case.
Apple’s response can be read here:
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.
It will be interesting to follow this case and see where the courts take it. Having such an extensive and far reaching punishment for a case which should have been limited in focus to only the e-book portion of the Apple Empire. In addition, with the case supposedly being about Apple’s attempt to suppress competition, the DOJ now seems to be attempting to make Apple less competitive for the next 5-10 years.
Perhaps most importantly will be the precedent this may set for future cases. There are so many complex and even conflicting laws, rules and guidelines surrounding the marketing industry that it is almost impossible to remain entirely in line with every regulation. If the courts side with the DOJ, it could open the doors for additional monitoring and restrictions on other companies in the future.
What do you think about this case? While I’m certainly no Apple ‘fan-boy’ I find it hard to see how the restrictions the DOJ is hoping to put on them will benefit the consumers.
You can see the full DOJ proposal HERE.
