Apple Slams Proposed Price Fixing Penalties as Draconian

Posted on August 5, 2013

Reeling from the depth and breadth of sanctions that the U.S. Department of Justice is asking federal Judge Denise Cote to impose on it after being found guilty of ebook price fixing, Apple has filed a brief asking the judge not to impose the sanctions as requested. In the brief, which Fortune magazine uploaded, Apple says the sanctions asked for by the DOJ are "draconian."

The DOJ wants Apple to not enter into any more agency book contracts for five years, pay huge fines and submit to having an on site compliance officer who will make sure Apple toes the line on antitrust matters. This on site monitor will stick around for ten years and tattle on Apple to an outside audit committee. In addition, the DOJ wants Apple to put back the buy links inside the iPhone apps for Kindle and Nook so customers can choose where they want to buy ebooks -- from Apple or from Amazon or Barnes and Noble.

Needless to say, Apple is very upset. But Apple could have gotten the same deal the book publishers got if it had only settled like they did. It rolled the dice and lost at trial. Now Apple is going to pay for not listening to Judge Cotes when she warned company executives that it was clear they were the ringleaders in the conspiracy to fix prices and that they probably weren't going to win at trial. Apple didn't listen and is now fighting another losing battle on sanctions.

Apple writes in its brief, "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's anyone's guess what Judge Cotes will do. She may modify the penalties a bit. But Apple could end up with a monitor poking around iTunes making sure Apple doesn't commit any antitrust violations when it accepts or rejects apps.