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Federal judge rejects Apple's requests to police itself

Apple, Inc. (AAPL) recently had the distinction of joining the ranks of convicted antitrust abusers such as Microsoft Corp. (MSFT), AT&T Inc. (T), and Intel Corp. (INTC).  The company -- which has long cast itself as cool, rebellious hipster "cred" -- looked a lot more like "PC Guy" than the stereotypical "Mac Guy" in court earlier this year.

I. Judge to Apple: Police Yourself? Get Outta Here!

Things looked bad for Apple from the start -- all of its publisher partners effectively admitted guilt and agreed to antitrust restrictions.  Apple alone denied the charges, but it struggled to defend itself against U.S. Department of Justice (DOJ) prosecutors claims that it cost customers "millions of dollars" by entering into secret deals with eBook publishers and offering to reward them for blacklisting Apple's competitor Amazon.com, Inc. (AMZN). While none of the publishers blacklisted Amazon, the threat reportedly helped the publisher to force Amazon to adopt (higher) prices similar to Apple's.

Internet software and services chief, Eddy Cue, who masterminded the e-book deals, basically admitted that his company was responsible for driving up e-book prices from the former de facto rate of $10 to $15.  Asked if Apple (or Amazon) customers complained about the higher prices, he commented, "They may or may not have, I can't recall."

Judge Cote
Federal Judge Denise Cote told Apple this week it would have to submit to external monitoring.
[Image Source: The Illustrated Courtroom]

Not surprisingly, U.S. District Judge Denise Cote of the U.S. District Court for the Southern District of New York found Apple guilty.  Now that same judge has delivered a final ruling about what Apple must do to avoid fines and other penalties of noncompliance.  Reuters and The Verge had reporters in the courtroom detailing the ruling.

Ankle tether
Apple vigorously fought the idea of having an antitrust "tether". [Image Source: Google Plus]

In a ruling this week Judge Cote rejected Apple's request to "police itself" and ordered the appointment of an external antitrust monitor -- a key measure sought by federal prosecutors.  That monitor will be tasked with enforcing Judge Cote's order that bars Apple from entering into deals with publishers that raise e-book prices for the next four years.  Apple must also sever any current deals it has that artificially inflate the price of e-books.


Apple's iBooks store will be monitored for antitrust compliance for several years.
 
Apple did score one win over federal prosecutors, though, as Judge Cote rejected the prosecution's request to force Apple to make a major change to its App Store terms of service, which ban app makers from putting advertisements/links to outside e-book marketplaces.

II. Apple Remains a Key E-Book Player, Despite Losing Tablet Lead

Apple's devices -- particularly its iPad -- remain among the world's most used portable e-book readers.  Apple's e-book store -- iBooks (not to be confused with the old Apple laptops) -- launched with the release of iOS 4.0 in June 2010 -- not long after the original iPad went on sale.

iBooks Store
Apple's iBooks market launched in 2010. [Image Source: Engadget]

Apple owned roughly three-quarters of the emerging tablet market throughout much 2010 and 2011, but its share eventually slid as Android tablets picked up in sales.  A report by Interactive Data Corp. (IDC) showed that as of Q2 2013 Apple is still the largest single tablet seller, accounting for 32.4 percent of sales, but that its sales are actually contracting, while Android tablet sales are growing explosively, cumulatively accounting for 62.6 percent of the market.

Ebook market
Apple owns about a tenth of the total ebook market, market research shows.
[Image Source: Reuters]

Reuters' analysis indicates that in 2012 Apple accounted for a minority stake of the e-book market, but a significant one, with 10 percent of total sales (~$300M USD).  Amazon remains the dominant power with 60 percent of sales in 2012.

III. Fearing Fines, Apple Meekly Settles in Europe

Apple plans to appeal the order that forces it to submit to third party monitoring.  Tom Neumayr defiantly remarked:

Apple did not conspire to fix e-book pricing.  The iBookstore gave customers more choice and injected much-needed innovation and competition into the market.

But even as Apple winds up for its appeal of the federal court ruling worse punishments may await it.  A coalition of 33 state attorney generals have filed a class action lawsuit against Apple, looking to force the company to pay customers damages for the price fixing.  Given the conviction in federal court, it seems that Apple will have a difficult time fighting this second civil suit.

Consumers will also get a refund of $0.73 USD on non-bestseller eBooks and ~$3.06 (on average) from bestseller eBooks (which saw the biggest price bump) -- if all the publishers who have agreed to settle with the DOJ submit to its proposed terms.

130814 2596 DetailedNotice NonMN FINAL (1)


Currently, three of the five publishers in the suit -- News Corp.'s  (NWS) HarperCollins; CBS Corp.'s (CBS) Simon & Schuster; and The Hatchett Group, a subsidiary of French publisher Hatchette Livre, which in turn is a child of French conglomerate Lagardère (EPA:MMB) -- have finalized their settlements with the DOJ, which they agreed to in April 2012.

Pearson plc's (LON:PSON) Penguin -- who agreed to settle in Dec. 2012 -- and MacMillan (another Pearson subsidiary) -- who agreed to settle in Feb. 2013 -- have yet to finalize their agreements with the DOJ.  Once those final two agreements are in place, customers will begin receiving emails about applying for refunds on their purchases.

Overseas in the EU, Apple meekly settled with antitrust regulators.  The European antitrust regulators perhaps put the fear of God in Apple after they nailed Microsoft Corp. (MSFTwith multiple fines totaling around $2.8B USD over Windows antitrust abuses, plus pounded Intel with a $1.45B USD fine for allegations of CPU price fixing.  The EU settlements are similar to the U.S. ones; in the EU only Penguin fought the antitrust case at first, before eventually settling.

Sources: Reuters, The Verge



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Who is paying?
By techyguy on 9/8/2013 1:06:05 PM , Rating: 3
So who is paying for this external monitoring, is Apple?

Who is paying for this court case, when Apple keeps on rejecting and denying the court, after they admitted their guilt?

Apple and publishers did cost consumers millions of dollars because of price fixing. How many millions of dollars will the American government spend at the end of those 4 years of monitoring? I believe it will cost the American tax payer more than what they are reimbursed.

Why do these companies not pay court and external monitoring fees?




RE: Who is paying?
By The0ne on 9/8/2013 2:01:43 PM , Rating: 5
That is why you stop supporting Apple :)


RE: Who is paying?
By retrospooty on 9/8/2013 2:25:34 PM , Rating: 2
Reason # 1001 to boycott Apple, Samsung too.


RE: Who is paying?
By Reclaimer77 on 9/8/2013 2:28:19 PM , Rating: 3
Samsung conspired to raise prices?


RE: Who is paying?
By retrospooty on 9/8/13, Rating: -1
RE: Who is paying?
By Reclaimer77 on 9/8/2013 6:55:32 PM , Rating: 2
Whatever, Samsung was forced to defend itself through litigation. Apple and Microsoft are making everyone play their game.

The courts slammed Samsung with an outrageous billion dollar plus judgement. How do you expect them to react?


RE: Who is paying?
By Reflex on 9/8/13, Rating: -1
RE: Who is paying?
By tamalero on 9/10/2013 11:58:37 AM , Rating: 2
you mean something that Apple should have done eons ago?
gotcha!


RE: Who is paying?
By Reflex on 9/10/2013 1:16:02 PM , Rating: 2
Absolutely, which is why Nokia was able to secure patent licenses from them last year. Totally agree. License other's tech rather than copy.

Agreeing with the Samsung decision in no way means I feel Apple is blameless. They are being sued by others for their own infringement, and in cases where the court rules they infringed they deserve to pay as well, or desist using copied technology.

It really is that simple.


RE: Who is paying?
By Samus on 9/8/2013 9:07:00 PM , Rating: 2
Samsung has been trying to license Apple's FRAND patents since 2009. 2009


RE: Who is paying?
By retrospooty on 9/8/2013 10:06:56 PM , Rating: 2
That is one case, there are many and Samsung is far from innocent in all of it. Apple is worse though, I think that is the thing you are looking for.


RE: Who is paying?
By Cheesew1z69 on 9/8/2013 3:20:52 PM , Rating: 2
quote:
Who is paying for this court case, when Apple keeps on rejecting and denying the court, after they admitted their guilt?
Not sure I understand this comment, who admitted their guilt? Surely you aren't talking about Apple?


RE: Who is paying?
By ReloadAO on 9/9/2013 7:27:32 AM , Rating: 2
Hey Jason
By Reflex on 9/8/2013 4:17:48 PM , Rating: 2
I'm pretty certain this story is incorrect. After all you recently informed us of Apple's close ties to the Obama administration, and how they were actively protecting Apple from competitors. Several commentators made up stories about money spent by Apple to re-elect Obama, and claimed that Jobs personally directed Obama's re-election campaign.

Given all that, I'm fairly certain this story is not possible. There is no way the executive branch controlled Department of Justice could possibly go after Apple. And especially not win their case. Its totally unpossible.

You know, its almost as if all those conspiracy theories being implied and stated are a bunch of crap. But I can't imagine a trustworthy news source like DailyTech ever promoting bullshit for page clicks. They'd never do that. Way too much integrity.




RE: Hey Jason
By retrospooty on 9/8/2013 4:38:53 PM , Rating: 2
Is it really that hard to grasp? The US govt. inst one single unified mind that acts in unison at all times. It's a GIANT out of control mess with many different bureaus and divisions with their own agenda's and directives.


RE: Hey Jason
By Reflex on 9/8/2013 5:36:23 PM , Rating: 2
Except, you know, the DoJ is under the direct purview of the executive branch and the president of the United States. It is silly to act like the executive came to Apple's assistance with the ITC, but then ignored the massive anti-trust case hanging over Apple's head that has gutted their position in that market. Apple stands to lose far more in the DoJ case than they ever did having some old iPhone/iPad models banned from sale here.


RE: Hey Jason
By Monkey's Uncle on 9/9/2013 6:02:08 AM , Rating: 2
Do you think this case is over?

This is a ruling from a district judge. Apple will appeal this case over and over until their pal steps in and bails them out yet again.

The U.S. president won't step in until Apple actually complains to him. For now this case is small potatoes to Apple and they are basically going to go into stall mode until everyone gets bored and walks away. No need to distract Barack from his oil (aka Syria) problems to deal with it.


RE: Hey Jason
By Reflex on 9/9/2013 8:45:07 AM , Rating: 2
Wait, what? So the president steps in right away for the ITC case, but ignores the massive, all over the press, anti-trust action by his own DoJ, the one he specifically gave the direction to pursue anti-trust more vigorously after the 'too big to fail' fiasco.

Right.

Lets try this: How about the ITC decision was wrong because it runs counter to multiple court rulings internationally and as such the administration stepped in to halt it, and the DoJ action was right due to multiple settlements and a court ruling and so the administration left it alone. I know that does not fulfill the "CONSPIRACY BY DICTATOR OBAMA" quota for the day, but it seems to be more in touch with reality.


Possibly a first...
By Farfignewton on 9/9/2013 9:05:45 AM , Rating: 2
quote:
The iBookstore gave customers more choice and injected much-needed innovation and competition into the market.


Using "competition" to drive prices UP. Now that is innovation! /s




RE: Possibly a first...
By Reflex on 9/9/2013 10:22:54 AM , Rating: 2
Supply side man, supply side!


All together now...
By ritualm on 9/8/2013 3:00:08 PM , Rating: 2
AWWWWWWWWWWWWWWWWWWWWWWW

Love,
DT non-Apple readers




Ebooks prices ARE too damn high
By Perry Tanko on 9/12/2013 1:12:42 AM , Rating: 2
An ebook should be no more than 85% the price of a softcover or hardcover. The paper and warehouse costs alone still give the ebook publisher a tidy profit over the cost of a physical book.




More Big Government Nonsense
By EricMartello on 9/15/2013 9:36:17 PM , Rating: 2
The ONLY problem here is that Apple (in league with the publishers) refused to allow competitors to the same or similar ebooks for lower prices, but even that isn't quite as bad as it's being made out to be because people are not FORCED to buy these ebooks if they feel that $10 or $15 is too high, nor do they need these books.

Also, it was not clear if Apple was refusing similar ebooks from other publishers that were willing to sell for less...but it's their store and they're really under no obligation to "sell for less" just because someone, somewhere decided that ebooks should always be south of $10.

As for the "blacklisting amazon" thing - that's one way to spin it. The other way would be to say that Apple sought exclusive deals with the publishers, much like they had an exclusive deal with AT&T for their iphone.

I'm really not seeing any justification for government meddling here. Ebooks? LOL This is really not an issue that matters to the country right now.

People have the option to refuse to buy the ebooks for $15 or whatever price they feel is too high. If people buy ebooks for $15 then the price is good and could possibly be raised even further.




A storm in a teacup
By Tony Swash on 9/9/13, Rating: -1
RE: A storm in a teacup
By Reclaimer77 on 9/9/2013 1:49:58 PM , Rating: 2
Just because Apple has the lobbying power to get away with a slap on the wrist, doesn't mean they weren't in collusion to do great harm.

What does Samsung even have to do with this anyway?


RE: A storm in a teacup
By Cheesew1z69 on 9/9/2013 1:58:44 PM , Rating: 3
quote:
What does Samsung even have to do with this anyway?
Deflection man, deflection. Nothing more.


RE: A storm in a teacup
By Tony Swash on 9/9/13, Rating: -1
RE: A storm in a teacup
By retrospooty on 9/9/2013 2:44:23 PM , Rating: 4
by Tony Swash " ... "Deflect, Evade, Divert, Spin"

FTFY


RE: A storm in a teacup
By Reclaimer77 on 9/9/2013 3:27:37 PM , Rating: 4
This is the single worst thing you've ever posted. This takes the cake my man.

Apple is NOT a Government anti-trust monitor. They aren't a Government agency. You cannot justify their actions because they perceived a monopoly, that's ridiculous. They broke the law, end of story. For nothing more benevolent than their own profits.

So how did Apple "fix" this "monopoly" situation by the way? They permanently increased e-book prices across the board! WOW thanks Apple! Way to go. The consumer is saved once again by consumer-advocate, Apple lol.

quote:
It's for perspective.


No it actually didn't provide ANY perspective on the topic at hand. None at all.

And you think you have the right to call others "iPhonbic" and nitwits? Where is your brain man.


RE: A storm in a teacup
By retrospooty on 9/9/2013 3:46:56 PM , Rating: 3
"This is the single worst thing you've ever posted. "

I am sure if you click on his name and spend some time looking you would find alot worse than that. LOL

"So how did Apple "fix" this "monopoly" situation by the way? They permanently increased e-book prices across the board! WOW thanks Apple! Way to go."

This one cracks me up with TS... He said that before, how Apple was saving us from an Amazon monopoly. It's perfectly fine for Apple to have a monopoly and overcharge people for goods and services, but Amazon having a monopoly where they give us cheaper stuff, often at cost is bad?

Then again, look who you are talking to. Like he ever said anything fair or truthful regarding Apple or ever will.


RE: A storm in a teacup
By Tony Swash on 9/9/13, Rating: -1
RE: A storm in a teacup
By retrospooty on 9/9/2013 7:47:32 PM , Rating: 2
Yes what a meltdown. I think Apple is full of s*** and I think you are full of s*** . Wait, both of those were always obvious.

Back to the current topic, I'm sure not sure if you're admitting, denying or just avoiding it all together. I would ask your actual opinion on it, but we already know it's that Apple is right and everyone else is wrong unless you have something amazingly different to say for once.

What the hell, let's give it a shot. Are you honestly going to say that Apple didn't completely break the law here? I realize you say the descision is only a slap on the wrist and you're probably correct there, but are you honestly saying they didn't knowingly and illegally conspire to raise prices? are you seriously defending this action?


RE: A storm in a teacup
By Reflex on 9/9/2013 9:11:10 PM , Rating: 2
I don't see it as a slap on the wrist. their contracts were all nullified, and their competitors have dramatically lowered prices and refunded customers. Buying from iBooks at this point is willful stupidity for a customer given that virtually all the books are available from others for less. A third party monitor will review all Apple's behavior in the market going forward, for years, and Apple is not permitted to reinstate any of their previous contracts for years.

It was a pretty heavy blow to their business model and a pretty high price to pay. People think its a 'slap' because the DoJ asked for the sun and only got the moon, but the truth is that its way beyond what Apple was willing to accept.

Even worse, Apple is appealing, which stands a chance of making their penalties even worse if an appeals court feels this was too lenient. It is pretty unlikely that they find the penalties too harsh, and many of the judge's decisions appear designed to avoid any appeals court smackdown.


RE: A storm in a teacup
By retrospooty on 9/9/2013 10:52:59 PM , Rating: 2
Slap on the wrist in the sense that it's such a small amount of money to Apple with it's 100+ billion in the bank. It was serious, and important in the sense that it shows Apple it cant just act illegally and fix prices in various markets just because it cant compete.

I am just looking for Tony's take on the illegal activity Apple got caught perpetrating.


RE: A storm in a teacup
By Fleeb on 9/9/2013 10:20:44 PM , Rating: 2
Still a deflection, eh?

Samsung is the most evil money making corporation out there.

Now that is out of the way, let us go back to the topic at hand. Did Apple broke the law? Yes.


"A politician stumbles over himself... Then they pick it out. They edit it. He runs the clip, and then he makes a funny face, and the whole audience has a Pavlovian response." -- Joe Scarborough on John Stewart over Jim Cramer














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