Antitrust Law Daily Wrap Up, ANTITRUST NEWS: U.S. and plaintiff states offer revised five year injunction in Apple e-book case, (Aug 23, 2013)

By Peter Reap, J.D., LL.M.

Today, the United States and the plaintiff states have revised their proposed injunction against Apple in their federal and state antitrust action over e-book pricing by cutting the length of the proposed injunction from ten years to five years. Through the revision, the plaintiffs stated that they seek to limit the possibility that changes within the industry will cause the decree to outlive its usefulness and cause Apple unnecessary harm. The plaintiffs also noted that they are mindful of the court’s concern that the e-books market is rapidly evolving and that an injunction should avoid hindering that process, and require no more than necessary to protect consumers and encourage price competition.

Along with the reduction to five years, the plaintiffs also proposed retaining the ability to seek a limited number of one-year extensions should circumstances make continuation of the decree necessary. In addition to shortening the length of the Final Judgment, the plaintiffs also modified the proposed injunction to require the staggered renegotiation of the Publisher Defendants’ contracts in the manner suggested by the court so as to hopefully minimizing the possibility of future collusion. In addition, the plaintiffs removed other language from the initial proposed injunction that Apple contends affects its ability to effectively run its App Store.

In their filing today, the plaintiffs also highlighted what they believe are the three major points of contention between the parties: “the requirement of an external monitor to ensure full compliance with the Final Judgment; the requirement that Apple allow e-book retailers to provide links to their websites without compensating Apple in order to restore price competition; and the inclusion of provisions prohibiting Apple from engaging in similar anticompetitive conduct in other content markets.” After much discussion with Apple, the plaintiffs continue to believe that these provisions are appropriate and necessary, they stated.

In April 2012, the Department of Justice Antitrust Division and the state attorneys general brought actions against Apple and leading publishers for conspiring to fix the sales prices of e-books. The suits named as defendants Apple and publishers Hachette Book Group (USA), HarperCollins Publishers L.L.C., Simon & Schuster Inc., Holtzbrinck Publishers LLC, which does business as Macmillan, and Penguin Group (USA).

The case went to trial against Apple only, as all five of the publishers settled the federal and state charges. The bench trial lasted for nearly three weeks. The court concluded that Apple, as it prepared for the 2010 launch of its new iPad tablet device and its iBookstore, undertook to orchestrate the price fixing conspiracy to force market leader Amazon Inc. to relinquish retail pricing authority and to raise e-book prices. According to the court, the conduct did in fact raise e-book prices. In the current phase of the litigation, the court is attempting to determine the appropriate remedy for the anticompetitive conduct.

On August 2 the Justice Department and 33 states and territories filed a proposed injunction remedy. In July, the court found Apple liable for facilitating and executing a conspiracy among publishers to fix retail prices for electronic books, or e-books. The issue of damages will be considered at a later date, probably in early 2014.

Companies: Hachette Book Group Inc.; HarperCollins Publishers L.L.C.; Simon & Schuster Inc.; Penguin Group (USA) Inc.; Holtzbrinck Publishers, LLC; Apple Inc.

News: Antitrust