Bloomberg News

Apple Duels With U.S. Over E-Book Price-Fixing Remedies (2)

August 23, 2013

Apple Inc. and the U.S. Justice Department filed dueling proposals for a court order that will cover the company’s conduct in e-book sales after a judge found the government’s original recommendations were too harsh.

Under the department’s revised proposal filed today, an injunction against Apple for its role in fixing e-book prices would expire in five years instead of 10 as in the original plan. The U.S. still seeks a court-appointed external antitrust monitor, a measure Apple objects to.

“This is unreasonable and unjustified and exceeds the bounds of even criminal price-fixing cases,” Orin Snyder, a lawyer for Apple, said in a letter today to U.S. District Judge Denise Cote in Manhattan.

Cote ruled after a non-jury trial in July that Apple, the maker of the iPhone and iPad, had conspired with five book publishers to fix e-book prices. At an Aug. 9 hearing on the government’s initial proposal, Cote said she didn’t want to over-regulate Apple’s businesses. She told the parties to discuss new remedies and return for another hearing on Aug. 27.

The judge suggested that Cupertino, California-based Apple be required to hold staggered negotiations with book publishers so it wouldn’t be in talks with more than one publisher at a time. Apple and the U.S. have included staggered-term plans in their revised proposals.

‘Competitive Problems’

“The purpose of the remedy is to fix the competitive problems, restore competition to the marketplace and to prevent the illegal behavior from continuing in the future,” Gina Talamona, a spokeswoman for the Justice Department, said in an e-mail. “We have revised the proposed remedy taking into account the court’s comments and this fast-changing industry.”

Apple also objected to government proposals to regulate how it uses electronic applications for the sale of e-books. The U.S. is seeking to force Apple to allow other e-book retailers to provide hyperlinks on iPads and other devices to their own websites or e-book sites without any compensation to Apple if a book is sold.

The U.S. sued Apple and five publishers in April 2012, claiming that Apple forced them to sign agreements that would allow it to sell digital copies of their books under a model that raised prices.

Conspiracy’s Aim

The conspiracy was designed to force Amazon.com Inc. (AMZN:US), the largest e-book seller, to change its pricing model, the U.S. said. At the time, Amazon was selling electronic versions of best-selling books for $9.99, which was often below cost. Apple reached agreements with the publishers to sell e-books under the agency model, by which the publishers set the prices and Apple takes a 30 percent commission.

The publishers, Verlagsgruppe Georg von Holtzbrinck GmbH’s Macmillan unit, CBS Corp. (CBS:US)’s Simon & Schuster, Lagardere SCA (MMB)’s Hachette Book Group, Pearson Plc (PSON)’s Penguin unit and News Corp.’s HarperCollins, settled with the government before the trial for a total of at least $164 million.

A second trial will be held to determine monetary damages against Apple, which lawyers have said may amount to hundreds of millions of dollars.

The case is U.S. v. Apple Inc. (AAPL:US), 12-cv-02826, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha in San Francisco at ‘ mhytha @bloomberg.net


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