DOJ Wants to Slam Apple with Antritrust Limits After Trial Verdict

By Wayne Rash  |  Posted 2013-08-03 Print this article Print

The salary and expenses of the monitor would be paid for by Apple and the company would be required to hire an internal compliance officer who would report to Apple’s outside directors. The compliance officer would work with the court appointed monitor to ensure that Apple followed the law, and that Apple’s executives were properly trained in compliance.

While the proposed DOJ settlement doesn’t prohibit Apple from selling ebooks or other forms of digital information, it does place significant restrictions on how it can conduct those sales. If the court approves the DOJ remedies, Apple would not be allowed to set prices in a way that artificially raises ebook prices above prevailing rates. Because of the proposal to also monitor music and videos, it’s likely that Apple wouldn’t be able to act anti-competitive in any way when it comes to music and video pricing.

It’s also possible that Apple could be found liable for monetary damages on top of the restrictions being proposed by the DOJ. Such damages could be fines or even a requirement that Apple be required to refund money collected illegally from customers on overpriced ebooks. The hearing to determine the type, extent and any amount of damages is still pending. Apple could decide to settle with the government as the book publishers involved in the case did.

If implemented, the remedies will have some far-reaching effects. For example, Apple can no longer insist on its previously mandated profit margin of 30 percent, which could hurt stock prices even more than Apple’s recent performance has. Apple may be forced to allow in-app purchases of ebook, music and video content by sellers such as Amazon and Barnes & Noble—something that Apple had forced those sellers to stop.

Perhaps more serious over the next five year, Apple will have a government watchdog at its heels, monitoring all of its activities including how it sells products. While it’s not clear that this might limit Apple’s ability to demand specific retail prices on its products, it’s likely that close government scrutiny may limit that behavior.

On the other hand, the government’s proposed punishments would open ebook sales to greater competition again and anti-competitive agreements, such as Apple’s agency model, clearly wouldn’t be permitted. This might annoy book publishers who would rather keep prices up, but consumers overall would probably benefit. The same thing is likely to happen to other media sales including music and video, and if those prices go down that will be another bonus for consumers


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