Apple is found to collude with publishers to manipulate e-book prices, and may be heavily fined

August 10 news: According to foreign media reports, Denise Cote, a judge of the New York District Court in the United States, proposed on Friday local time to impose restrictions on Apple's e-book transactions and come up with practical measures to prevent the world's largest tech company from further harming fair competition in the e-book market.

Judge Cote has already ruled that Apple conspired to manipulate digital book prices. On Friday, she considered an injunction proposed by the federal government against Apple. She requested discussions on her proposal to form a judgment and indicated that a hearing would be held within two weeks. Cote stated in court, "I hope to implement corrective measures as much as possible to restore competition among e-tailers. We do need an order because blatant price manipulation still exists."

In July, Cote determined that Apple violated U.S. laws by conspiring with several publishers to manipulate prices. According to Apple lawyer Orin Snyder, a subsequent trial will decide on damage compensation, which may amount to 'hundreds of millions of dollars.'

The federal government and 33 state governments submitted a proposal on August 2 asking Cote to order Apple to terminate its e-book agreements with five publishers. This proposal also requests the court to appoint someone to monitor Apple's behavior for ten years. Officials from the U.S. Department of Justice said that this order "will stop Apple's anti-competitive products, restore lost competition, and prevent illegal products from appearing."

Separate Negotiations

Cote proposed on Friday that negotiations between Apple and the five publishers regarding contracts over the next few years must be staggered to ensure that Apple does not negotiate with more than one publisher at a time. She also expressed that instead of appointing a monitor, she would prefer Apple "to activate a strong internal antitrust procedure and convince the court that no external monitor is necessary."

The U.S. government sued Apple and these five publishers in April 2012, claiming that Apple colluded with publishers to sign agreements that raised prices and harmed consumer interests. The U.S. government stated that Apple's conspiracy with the five publishers was aimed at forcing Amazon, the largest e-book retailer, to adjust its pricing model. At the time, Amazon sold e-books of bestsellers for $9.99, often below cost.

Agency Model

To enhance the appeal of its reading device, the iPad, Apple entered the e-book market in 2010. At that time, Apple reached agreements with five publishers to sell their e-books under an agency model, where publishers set the prices and Apple took a 30% commission on sales. A so-called most-favored-nation clause in their contracts meant that Apple could offer prices lower than those of Amazon and other e-book retailers.

Five publishers — Macmillan (under Verlagsgruppe Georg von Holtzbrinck GmbH), Simon & Schuster (under CBS Corp), Hachette Book Group (under Lagardere SCA), Penguin (under Pearson plc), and HarperCollins (under News Corp) — settled with the government for a total of $164 million before the trial. Random House, the largest publisher under Bertelsmann, did not sign an agency agreement with Apple and therefore was not part of the U.S. government's lawsuit. This year, Penguin merged with Random House.

On August 7, these publishers who had settled with the U.S. government opposed the government's proposal to force Apple to terminate its contracts with them, stating they would be penalized by the proposed judgment suggested by the government. (Yunhe)