Total Pageviews

Friday, August 2, 2013

U.S. Proposes Solutions for Apple’s E-Book Price-Fixing

In July, the Justice Department won its antitrust lawsuit that accused Apple of conspiring with publishers to raise the prices of e-books. Now, the government wants to use its victory to discipline Apple in other markets where it does business, like movies, music and TV shows.

The Justice Department proposed guidelines to the United States District Court in Manhattan on Friday on how to enforce the July ruling. The guidelines suggest that Apple should be be forced to terminate its existing agreements with five major publishers and also avoid entering similar agreements in the future with providers of music, movies and TV shows and games.

The guidelines would also put rules in place to prevent Apple from facilitating price-fixing among publishers, or from retaliating against publishers that refuse to bend to its terms.

“The court found that Apple’s illegal conduct deprived consumers of the benefits of e-book price competition and forced them to pay substantially higher prices,” Bill Baer, assistant attorney general for the Department of Justice’s Antitrust Division, said in a statement. “Under the department’s proposed order, Apple’s illegal conduct will cease and Apple and its senior executives will be prevented from conspiring to thwart competition in the future.”

The Justice Department declined to comment. Apple did not immediately respond to a request for comment.

In the case, brought last year, the Justice Department accused Apple and five book publishers of conspiring to raise e-book prices. It cast Apple as the “ringmaster” of the conspiracy, colluding with the publishers to collectively help them defeat Amazon’s uniform pricing of $9.99 for new e-books.

As part of its pitch, Apple asked the publishers to switch to a different model of selling books, called agency pricing, where the publishers set the price of the books instead of the retailers. The publishers’ contracts with Apple included a so-called most-favored nation clause, requiring that no other retailer sell e-books for a lower price; if they did, the publisher would have to match the price of the e-book in Apple’s store. That, the Justice Department said, defeated price competition and resulted in higher prices across the industry.

The Justice Department’s proposed remedy would presumably prohibit Apple from using contracts with a most-favored nation clause to help providers of music, TV shows and movies raise their prices.

In July, the judge, Denise L. Cote of United States District Court in Manhattan, ruled against Apple. Next week, Judge Cote will hold a hearing to discuss the Justice Department’s proposed remedy.