Apple Ordered to Stagger E-Book Contract Negotiations, Refrain From 'Most Favored Nation' Clauses

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Judge Denise Cote today issued her penalty ruling in the e-book pricing suit against Apple, ruling that Apple must stagger its contract negotiations with major publishers to prevent collusion and avoid entering into "most favored nation" (MFN) agreements with any publisher for five years, according to GigaOM. The MFN clauses in Apple's contracts with publishers prevented any other e-book retailer from undercutting Apple, giving Apple the right to at least match the best pricing offered by other retailers.
Judge Cote's injunction forbids Apple from enforcing most-favored-nation clauses in any ebook publishing contracts for five years, and also forbids the company from entering into any book publishing contracts that contain them for five years. Apple had wanted this provision to be less broad, relating only to MFN clauses with the five publishers in the case who have already settled. Instead, it applies to all publishers.
Judge Cote defined the order in which Apple will be permitted to renegotiate contracts with publishers, beginning with Hachette 24 months after the judgment's effective date and staggering negotiations every six months thereafter for the five publishers involved in the case.

Apple is also required to hire an external compliance monitor to ensure that the company is complying with antitrust requirements.

In a win for Apple, Cote's ruling does not require the company to allow the return of direct store links from competing e-book distributors in their App Store apps, something the U.S. Department of Justice had requested in its proposed penalties.

Apple continues to deny that it engaged in price fixing, and is pursuing an appeal of the guilty verdict.

Article Link: Apple Ordered to Stagger E-Book Contract Negotiations, Refrain From 'Most Favored Nation' Clauses
 

Rafagon

macrumors regular
Jun 19, 2011
225
172
Miami, FL
DOJ you have bigger problems than Apple

DOJ sure seems to have a lot of free time on their hands... worrying about ebook sales and pricing...
 

Thunderhawks

Suspended
Feb 17, 2009
4,064
2,087
Government is overreaching here, by telling a corporation what they can and cannot do.

If the law is clear, Apple has to abide by it and if they don't they should get fined every time they break it until they do.

Anything else is not the DOJ's or a judges business.
 

TheHateMachine

macrumors 6502a
Sep 18, 2012
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Incoming fecal storm of comments on corrupt DOJ, under the table money and general conspiracies!
 

DipDog3

macrumors 65816
Sep 20, 2002
1,178
648
Actually these punishments are not too bad. I think Apple should just accept these and move on.
 

SakuraSuki

macrumors 6502
Jul 18, 2013
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0
Government is overreaching here, by telling a corporation what they can and cannot do.

If the law is clear, Apple has to abide by it and if they don't they should get fined every time they break it until they do.

Anything else is not the DOJ's or a judges business.
Government needs to make sure corporations do not engaging illegal behaviour. They don't care weather if it is Apple or Microsoft. Heck, government tried to split Microsoft into two part before, I think it is worse than this ebook case.

Government achieving this goal by monitoring corporations' action and give then recommendation and/or force corporation doing their orders.
 

Oletros

macrumors 603
Jul 27, 2009
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Government is overreaching here, by telling a corporation what they can and cannot do.

If the law is clear, Apple has to abide by it and if they don't they should get fined every time they break it until they do.

Anything else is not the DOJ's or a judges business.
You have not read a lot about the case, don't you?

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Actually these punishments are not too bad. I think Apple should just accept these and move on.
Yap, they are pretty in line with what the publishers got in their settlements
 

GadgetDon

macrumors 6502
May 11, 2002
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Actually these punishments are not too bad. I think Apple should just accept these and move on.
I see three reasons for continuing the appeal:

(1) There are separate lawsuits for money, potentially big money. A guilty verdict really helps those cases.

(2) It does not want a precedent that MFN + Agency Model = Anti-Trust.

(3) The concern that, as much as the judge was clear that the verdict is about the iBooks store and only the iBooks store, the external monitor will try to assert authority into the rest of the business (like the DoJ wanted to control). If the external monitor is enforcing the injunction and only the injunction, it's going to be a pretty boring job: When are you entering negotiations with the publishers for renewal? Is there an MFN clause in these new contracts?
 

wildmac

macrumors 65816
Jun 13, 2003
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Incoming fecal storm of comments on corrupt DOJ, under the table money and general conspiracies!
Meh, not a corrupt DOJ per-se, but it's more about DOJ "rising stars" that want to make a name for themselves by taking down a high-profile name.
 

mbarriault

macrumors regular
Dec 3, 2008
109
0
Judge Cote defined the order in which Apple will be permitted to renegotiate contracts with publishers, beginning with Hachette 24 months after the judgment's effective date and staggering negotiations every six months thereafter for the five publishers involved in the case.
Wait, since all current contracts had to be broken, if they won't be able to renegotiate for another 2 years at least, does that mean the iBookstore will be completely void of big-publisher books until then? That seems like more of a win for Amazon than anything else so far (and the whole case screamed win for Amazon to begin with).
 

IJ Reilly

macrumors P6
Jul 16, 2002
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Palookaville
Actually these punishments are not too bad. I think Apple should just accept these and move on.
Agreed, absolutely. Apple should have settled this ages ago, before it went to trial. They now have a graceful exit opportunity, and the ability to say they won some of their points with the judge. Get on with business, Apple. Get rid of the distractions.
 

Oletros

macrumors 603
Jul 27, 2009
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Wait, since all current contracts had to be broken, if they won't be able to renegotiate for another 2 years at least, does that mean the iBookstore will be completely void of big-publisher books until then?
No, from The Verge:

The judge also required Apple to sever any agreements with the top five book publishers that restrict retail ebook prices in any way, and prohibited Apple from entering into any similar agreements for up to four years.
 

GadgetDon

macrumors 6502
May 11, 2002
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Agreed, absolutely. Apple should have settled this ages ago, before it went to trial. They now have a graceful exit opportunity, and the ability to say they won some of their points with the judge. Get on with business, Apple. Get rid of the distractions.
You're assuming Apple could have gotten this in the settlement, as opposed to DoJ control on the other digital stores as they were requesting from the judge.

One thing, the timing is odd. The external monitor will be in place for two years to make sure Apple follows the injunction on the contracts. But the next contract action won't happen for two years. Seems like the monitor won't have much to do.
 

IJ Reilly

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Jul 16, 2002
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I see three reasons for continuing the appeal:

(1) There are separate lawsuits for money, potentially big money. A guilty verdict really helps those cases.

(2) It does not want a precedent that MFN + Agency Model = Anti-Trust.

(3) The concern that, as much as the judge was clear that the verdict is about the iBooks store and only the iBooks store, the external monitor will try to assert authority into the rest of the business (like the DoJ wanted to control). If the external monitor is enforcing the injunction and only the injunction, it's going to be a pretty boring job: When are you entering negotiations with the publishers for renewal? Is there an MFN clause in these new contracts?
(1) Too late. They got the verdict when they took this hopeless case to court, instead of settling like their publishing partners did.

(2) Doesn't matter, since they have no partners for an agency model now anyway.

(3) The monitor reports to the court, and it isn't the judge's job to make this task interesting. If the DoJ wants to litigate some other aspect of Apple's business under the antitrust laws, they will have to file another suit. The longer Apple stays in court the easier it becomes to make factual findings that could prove damaging. This is why they should have stayed out of court in the first place, and why they should not go back now.
 

ChrisA

macrumors G4
Jan 5, 2006
11,598
380
Redondo Beach, California
DOJ sure seems to have a lot of free time on their hands... worrying about ebook sales and pricing...
ebooks are new, it is good they went after this price fixing thing now rather then waiting.

Apple was smart to try and fix the prices. The free market, if left alone would have prices moving downward to just above the actual cost of the books.

Apple sem to LIKE the free market in their app stores and sees what happens, prices fall when there is direct head to head competition. They did not want that in their book store.

If Apple were smarter they would sell books dirt cheap so that people would buy more iPads, Apple's model is to sell hardware so they should break even on the content.
 

Rocketman

macrumors 603
If the MFN provision was ruled legal and is prohibited in the "punishment", the order itself may be illegal.

I agree this is a relatively good outcome considering DoJ's positioin going in. I also agree DoJ was not allowing Apple to settle on terms anywhere close to what they got, so on that basis alone the trial was a win for Apple.

Avoiding trial is a good general rule, but with the plaintiff being a Federal Regulator with unlimited unilateral power, extreme leverage for extortionate settlement offers, and a history of unilateral fines, the Trial Judge was the only player in this game where there is any chance of equity or sense of preponderance of the evidence AT ALL.
 
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Berserker-UK

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Jan 4, 2012
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Berkshire, UK
So then, 'don't engage in anti-competitive behaviour, don't negotiate in ways that might look like anti-competitive behaviour, hire someone to ensure they're not engaging in anti-competitive behaviour'. Sounds fair to me.

The DOJ request that Apple effectively invite Amazon into their marketplace would only have been reasonable if Amazon had been required to do the same for Apple, so that getting struck down also sounds fair.
 

Oletros

macrumors 603
Jul 27, 2009
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If the MFN provision was ruled legal and is prohibited in the "punishment", the order itself may be illegal.
And exactly why will it be illegal? Agency model is also legal and they have to break all the contracts. Perhaps it has to do with losing a case, but ey, I'm not a law expert, perhaps you can enlighten us
 

IJ Reilly

macrumors P6
Jul 16, 2002
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Palookaville
You're assuming Apple could have gotten this in the settlement, as opposed to DoJ control on the other digital stores as they were requesting from the judge.

One thing, the timing is odd. The external monitor will be in place for two years to make sure Apple follows the injunction on the contracts. But the next contract action won't happen for two years. Seems like the monitor won't have much to do.
Yes, I assume they'd have gotten a better offer from the DoJ before they lost at trial. The winner gets the upper hand. That's the usual way these things go. Even after the matter entered the courtroom Apple had opportunities to present settlements pretrial. Then it's up to the judge to negotiate a consent decree between Apple and the government. That did not happen apparently because Apple decided that their best strategy was to fight. And yes, the settlement appears to be weak. Apple should take it and run.
 

GadgetDon

macrumors 6502
May 11, 2002
319
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(1) Too late. They got the verdict when they took this hopeless case to court, instead of settling like their publishing partners did.
We don't know what the DoJ was demanding to settle. Based on their requests for what to be included, it's a fair assumption that they wanted to put limits on all of Apple's digital stores. Remember, while the verdict went in favor of the DoJ, they got almost none of what they were asking in the injunction.

(2) Doesn't matter, since they have no partners for an agency model now anyway.
If there are future stores, say turning iTunes University into real online education system with digital classes, they may want to do MFN + Agency.

And the Agency agreements stand. It's only MFN that the judge struck down.
 

ThisIsNotMe

Suspended
Aug 11, 2008
1,843
1,052
Government is overreaching here, by telling a corporation what they can and cannot do.

If the law is clear, Apple has to abide by it and if they don't they should get fined every time they break it until they do.

Anything else is not the DOJ's or a judges business.
Progressives being progressives.
This is what happens when you have progressive interpretation of the constitution most specifically the commerce clause - the ability to pick winners and loser in the marketplace.

People bitching and moan all the time about the government/lobbying but if it wasn't for the progressive they wouldn't be an issue.