Apple got some good news Tuesday afternoon, as Judge Denise Cote significantly lightened the proposed injunctive relief the company will face after being found liable in its e-book price fixing trial.
At the Tuesday hearing, the judge revealed that her final order would spare Apple on what she considered the two most contentious issues proposed by the DoJ: First, the final injunction will not seek to regulate Apple's activities in the App Store, or intrude into other content markets, pending an assurance by Apple that it will not use the App Store to make an end run around any sanctions on the iBookstore. Second, Cote said she would employ only a scaled-back version of an external monitor (that would focus mainly on antitrust policy and training) for a just a two-year period, with a potential yearlong extension if cause exists.The Government's last proposal asked for five years, plus five possible extensions.
In addition, the judge killed a provision that for two years would have allowed e-book retailers to directly link to their own bookstores for in-app purchases without paying a commission to Apple. Cote said the provision would do little to encourage price-shopping for e-books, as DoJ lawyers had insisted, and that it was not likely to be effective in changing the competitive landscape of the e-book market since it would expire in two years.
Working off the DoJ’s proposal with Apple’s red-lined version incorporated, the judge said her injunction was meant to address competition in the e-book market, not to be punitive, and said that she wanted to tread as lightly as possible on Apple’s business.
Toward that end, she struck many of the DoJ's more expansive proposals, and instead focused the injunction on compliance measures, and on ensuring relevant Apple employees across all its content markets received proper training. She reiterated that she did not want to have to employ an external monitor at all, but said she was disappointed by Apple's refusal to craft more vigorous internal antitrust education and monitoring on its own. The good news for Apple is that the external monitor Cote proposed will largely oversee Apple's internal antitrust monitoring, rather than its business affairs.
There was little discussion during the 90-minute hearing of the revised proposal to end the publishers’ current agency deals and to stagger their renegotiations six months apart, after a two year period in which Apple must retain the right to discount. In their filings on the revised injunction both Apple and DoJ attorneys accepted the suggestion to stagger renrgotiations, which was made by Judge Cote at an August 9 hearing.
In one minor concession, however, Apple attorneys asked that the language be changed to state that the company needed only to “modify” their current publisher deals to comply with the injunction, rather than terminate contracts that had already been regnegotiated following the publisher settlements. DoJ attorneys did not object to that change, nor did the judge.
In its filing last week, Apple had also asked that it be allowed to decide the order of publisher renegotiations, but that did not come up at the hearing, meaning that the order selected by the DoJ would likely remain in the final injunction: Hachette, after two years; HarperCollins at 30 months; S&S at 36 months; Penguin at 42 months; and Macmillan, the last to settle the DoJ charges, at 48 months.
After Cote detailed her changes, the attorneys had no substantial objections, and raised only minor questions of language. The final language will now be worked out and submitted by Wednesday of next week, with the judge saying she hopes to sign the order then. She also ordered Apple and the states/consumer class to schedule another round of settlement talks, under the supervision of Judge Kimba Wood.
