It sounds to me like they want to shut the iBookstore down for 5 years. If you terminate Apple's agreements, and don't allow them to make new ones, then Apple can't distribute books.
That bit about 'competing on price' is suspect. Sounds like they are fine with Apple staying open for business but with no MFN or anything else that would give them pricing that would encourage the sales of their offerings. Amazon etc could continue to under cut them and Apple would be powerless to do anything. No free book of the week, no sales, nothing. And the rules might dictate what they can charge. In effect the DOJ applying that whole 'we know what the right price is' that they kept tossing around. Even if it costs Apple huge amounts of money.
Which is worse than simply making them pay a fine and putting restrictions on the application of the MFN etc.
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So, the only problem is when a company gets so big/powerful/dominant that it doesn't even have to compete any more since it is able to just stop its competitors. I don't see that happening here.
Not by Apple. But when Amazon did exactly that to Borders, more or less to big parts of Barnes and Noble etc, no one blinked.
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I'm not 100% sure of this, but I believe all Apple ebooks are hosted as basic, DRM free epub documents. In theory, you could use something like iPad Explorer to grab the files out of the iBooks folder, and upload them to your Kindle account.
iBooks are in general DRMed. Which is why on a few rare occasions publishers will demand it not be used and it is called out as such on the listing.