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District Court Issues Final Judgment in Apple E-Books Antitrust Case

September 6, 2013. The U.S. District Court (SDNY) issued its final judgment and permanent injunction [17 pages in PDF] in U.S. v. Apple, the e-books antitrust case.

On July 10, 2013, the District Court released its Opinion and Order [160 pages in PDF] at the conclusion of the bench trial, finding that Apple conspired to raise e-book prices in violation of Section 1 of the Sherman Act. However, that order did not address remedies. See, story titled "District Court Finds that Apple Conspired to Raise E-Book Prices" in TLJ Daily E-Mail Alert No. 2,583, July 10, 2013.

Prohibitions in the Final Judgment. The just released final judgment bars Apple from engaging in numerous activities related to conspiring to fix prices.

For example, it provides that "Apple shall not enforce any Retail Price MFN in any agreement with an E-book Publisher relating to the sale of E-books", and that "Apple shall not enter into any agreement with an E-book Publisher relating to the sale of E-books that contains a Retail Price MFN."

The July order found that Apple agreements with five e-book publishers -- Hachette, HarperCollins, and Simon & Schuster, Pearson/Penguin and Holtzbrinck/Macmillan -- included "a price parity provision, or Most-Favored-Nation clause (``MFN´´), which not only protected Apple by guaranteeing it could match the lowest retail price listed on any competitor’s e-bookstore, but also imposed a severe financial penalty upon the Publisher Defendants if they did not force Amazon and other retailers similarly to change their business models and cede control over e-book pricing to the Publishers."

The final judgment also provides that "Apple shall not enter into or maintain any agreement with a Publisher Defendant that restricts, limits, or impedes Apple's ability to set, alter, or reduce the Retail Price of any E-book or to offer price discounts or any other form of promotions to encourage consumers to purchase one or more E-books."

It also provides that "Apple shall not (1) retaliate against or punish, (2) threaten to retaliate against or punish, or (3) urge another Person to retaliate against or punish any E-book Publisher for refusing to enter into any agreement with Apple relating to the sale of E-books or for the terms on which the E-book Publisher sells E-books through any other E-book Retailer."

It also provides that "Apple shall not enter into or maintain any agreement with an E-book Publisher where such agreement likely will increase, fix, or set the price at which other E-book Retailers can acquire or sell E-books", and "Apple shall not enter into or maintain any agreement with any other E-book Retailer where such agreement likely will increase, fix, stabilize, or set the prices or establish other terms on which Apple or the other E-book Retailer sells E-books to consumers."

Other Mandates. The final  judgment requires Apple to modify its contracts with publishers to comply with these prohibitions.

It also provides that "Apple shall apply the same terms and conditions to the sale or distribution of an E-book App through Apple's App Store as Apple applies to all other apps sold or distributed through Apple's App Store."

"To ensure its compliance with this Final Judgment and the antitrust laws, Apple shall" distribute copies of this final judgment to directors and key employees, and provide training to key employees regarding this final judgment.

It also requires Apple to deliver to the government "communications ... containing allegations of Apple's noncompliance" with the final judgment.

The final judgment also provides that the Department of Justice's (DOJ) Antitrust Division shall, for the purpose of enforcing the final judgment, have access to Apple's records for both inspection and copying. It shall also have access to Apple personnel for interviews. It shall also have authority to submit written interrogatories, which Apple must answer. The DOJ shall not disclosure such information to the public, except in legal proceedings.

The final judgment also provides that the Court retains jurisdiction.

Compliance Monitor. The final judgment also provides for a court appointed "External Compliance Monitor", for "a period of two years", who "shall have the power and authority to review and evaluate Apple's existing internal antitrust compliance policies and procedures", and the above referenced training program.

The Monitor has authority to make recommendations to Apple, which if rejected by Apple, must be referred to the Court. The Monitor also has authority to report violations to the Court. The Monitor also has authority to hire staff.

William BaerWilliam Baer (at right), Assistant Attorney General in charge of the DOJ's Antitrust Division, stated in a release that "We're pleased that the court has issued an order supporting the Department of Justice’s efforts to address Apple's illegal price fixing conduct. Consumers will continue to benefit from lower e-books prices as a result of the department's enforcement action to restore competition in this important industry. By appointing an external monitor to ensure future compliance with the antitrust laws, the court has helped protect consumers from further misconduct by Apple. The court's ruling reinforces the victory the department has won for consumers."

For more information on the original complaint, see TLJ stories titled "DOJ Sues Apple and Book Publishers Alleging E-Book Price Collusion", "Analysis of DOJ's Sherman Act Claim Against Apple and E-Book Publishers", and "Outside Reaction to DOJ E-Books Antitrust Action" in TLJ Daily E-Mail Alert No. 2,368, April 11, 2012.

The DOJ sued Apple and publishers. However, all of the publishers settled with the DOJ. Only Apple proceeded to trial. See, TLJ stories regarding settlements with the publisher defendants:

This case is U.S. v. Apple, et al., U.S. District Court for the Southern District of New York, D.C. 1:12-cv-02826-DLC, Judge Denise Cote presiding.

See also, the DOJ's web page with hyperlinks to pleading and other documents in this action.

(Published in TLJ Daily E-Mail Alert No. 2,597, September 9, 2013.)