April 24, 2014

Judge Eases Proposed Restrictions in Apple Price-Fixing Case

It’s been a long, hot summer for Apple, as the case against the tech company for allegedly conspiring with big-name publishers to fix the price of ebooks in the iBooks Store drew to its conclusion. In July, Apple was found liable. Then, its request to put the case on hold as it prepared its appeal was denied earlier this month.  The company finally got a bit of good news, though, as federal Judge Denise Cote mitigated the sanctions originally proposed for the company.

The final terms of the injunction, signed yesterday by Judge Cote, take much of the sting out of a series of penalties suggested by the Department of Justice (DOJ), which Apple’s lawyers complained were excessively harsh.

Among the most stringent of the proposed remedies would have been the five-year appointment of an external monitor who would be responsible for ensuring Apple’s compliance with antitrust laws, with the possibility of the monitor being required for up to five more years at the court’s discretion. Another requirement that raised the hackles of Apple’s lawyers would have forced Apple to allow other ebook retailers—such as Amazon and Barnes & Noble—to link their iOS apps directly to their own online book stores, bypassing the iBooks Store and allowing consumers to easily compare prices.

In the final agreement, Apple lawyers and DOJ representatives compromised on some of the remedies while jettisoning others altogether. While a monitor will still be required, the position will only be in place for two years, with the possibility of a one year extension, and will primarily advise on training procedures for antitrust compliance, rather than reporting on Apple’s day-to-day business. The plan to let other retailers link out to their ebook stores, meanwhile, was entirely scrapped.

A provision that would have forced Apple to end its existing deals with publishers has been softened as well. Rather than terminate the deals the company had with publishers, Apple will now be obliged only to “modify” them. The new agreement also narrows its focus to Apple’s iBooks Store, ensuring that DOJ won’t try to regulate Apple’s App Store more generally.

Some see the final terms as an acknowledgment that the terms initially proposed by the DOJ earlier this summer were unnecessarily harsh to the company, and weren’t surprised to see the proposal defanged to an extent. “The judge does seem to have an appreciation of Apple as a creative force in the world,” said Alexander R. Cohen, managing editor for the Business Rights Center. “If you actually read her decision, I’ve never seen a losing defendant described by the judge in such glowing terms.”

Indeed, the measures outlined aren’t meant to punish Apple, but to help restore balance in the ebook market. From a legal standpoint, the DOJ’s initial recommendation was something of a wish list from the plaintiffs, outlining the sternest measures the agency thought appropriate. According to antitrust lawyer William White, who has been following the case, judges commonly “split the baby” when rendering judgment in cases like these, meaning the final agreement was always likely to be a compromise between the two sides.

Next steps

That’s not to say there won’t be punitive damages, but those are likely still to come. While the DOJ is concerned mostly with ensuring that Apple plays fair in the future, a class action suit is still aiming to recover money for consumers who feel they overpaid for ebooks thanks to Apple’s pricing practices. Hearings over what sort of compensation Apple may be liable to consumers for are scheduled to begin in May 2014.

While damages against Apple remain an open question, the publishers named alongside the computer giant in the initial suit have already closed the book on the affair. Hachette, HarperCollins, and Simon & Schuster all reached settlement agreements in short order last year, while Penguin and Macmillan settled this spring. The final settlements will see Penguin and Macmillan pay a combined $95 million, bringing the total of the settlements paid by all five publishers to just over $164 million, damages those who brought the case hope will make publishers think twice before trying to game markets in the future.

“We believe that the injunctive relief agreed to in settlements with the publisher defendants, and the injunction imposed on Apple by the Court yesterday, will ensure that competition is restored to the ebooks market and consumers can once again benefit from that competition,” said a spokesperson for the office of Texas Attorney General Greg Abbott, one of 33 attorneys general involved in the case. “The injunctions provide mechanisms for monitoring the market activities of Apple and the publishers to prevent them from engaging in similar illegal conduct harmful to e-book purchasers in the future.”

As for when readers can expect refunds, it could be pretty soon. Money from the settlement will be issued to ebook buyers across the country in the form of credits to their account or checks, depending on where they bought their ebooks. To find out more about the settlement, readers can visit ebooksagsettlements.com.

Ian Chant About Ian Chant

Ian Chant is the Associate News Editor of LJ.

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