Judge Issues Penalties Against Apple in Ebook Price Fixing Case

Posted on September 8, 2013

Federal judge Denise Cote scaled back the penalties against Apple a bit when she made her final ruling in the ebook price fixing case. The Department of Justice had a long laundry list of penalties it wanted enacted, and it mostly got what it wanted because it won the case against Apple. But the judge declined to poke the court's nose into how Apple runs its app store and its music and bookstores. The government wanted links to other retailers reinstalled in their apps, but the judge declined. That means that you can use the Kindle for iPhone app, but you can't buy a book from Amazon using the Kindle app the phone. You have to use the browser, pull up Amazon.com and buy that way.

But the judge did leave in a host of other penalties. Apple must modify its current agreements with the five major publishers who settled their cases with the government: Hachette Book Group (USA), HarperCollins Publishers L.L.C., Holtzbrinck Publishers LLC/Macmillan, Penguin Group (USA) Inc. and Simon & Schuster Inc. The agreements must eliminate the "most favored nation" pricing clauses that led to higher ebook prices. Apple cannot tell one publisher what deal it cut with another publisher nor can it facilitate meetings to conspire on pricing.

Apple is still stuck with a government monitor to make sure it doesn't violate any antitrust laws and Apple has to pay that person's salary. The monitor will report to an outside audit committee. The monitor must also train Apple's senior execs to comply with antitrust law and make sure they don't step out of line. We're betting that the execs will put up with her, but will purposefully ditch her at lunch time. The judge didn't say they have to be nice to the monitor, only that they have to pay her salary and show up at her seminars about how not to get busted by the government again.

The Justice Department is pretty happy with the penalties and issued a press release about it. Assistant Attorney General Bill Baer of the Department of Justice's Antitrust Division blasted Apple once again for its illegal conduct and pretty much said they got what they deserved:

"We're pleased that the court has issued an order supporting the Department of Justice's efforts to address Apple's illegal price fixing conduct. 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. By appointing an external monitor to ensure future compliance with the antitrust laws, the court has helped protect consumers from further misconduct by Apple. The court's ruling reinforces the victory the department has won for consumers."