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Apple Calls the Proposed eBook Settlement Punitive, Draconian, and Unnecessary

applelogo_oldApple has filed their response to the anti-trust settlement offered by the US Dept of Justice earlier today, and it looks like Apple apparently still believes that they can get away with their anti-trust violations.

The full 31 page filing is available over at Scribd, and it’s truly a baffling document. If this document is to be believed then Apple doesn’t think they deserve to be punished at all (seriously, they argue that they didn’t violate anti-trust law).

Instead Apple describes the proposed settlement as draconian:

Plaintiffs’ proposed injunction is a draconian and punitive intrusion into Apple’s business, wildly out of proportion to any adjudicated wrongdoing or potential harm. Plaintiffs propose a sweeping and unprecedented injunction as a tool to empower the Government to regulate Apple’s businesses and potentially affect Apple’s business relationships with thousands of partners across several markets. Plaintiffs’ overreaching proposal would establish a vague new compliance regime—applicable only to Apple—with intrusive oversight lasting for ten years, going far beyond the legal issues in this case, injuring competition and consumers, and violating basic principles of fairness and due process. The resulting cost of this relief—not only in dollars but also lost opportunities for American businesses and consumers—would be vast.

Apparently Apple believes that this is all the punishment that is necessary:

  • (1) reasonable limitations on Apple’s abilityto share information (akin to the publishers’ consent decrees
  • (2) a prohibition, tracking the publishers’ consent decrees, on retail price MFNs in agreements with the publisher defendants
  • (3) reasonable antitrust training obligations for Apple, lasting a reasonable term. No further relief can be justified under the legal standard governing antitrust injunctions or the Constitution.

That is a far cry from the proposed settlement, which includes provisions for an end to all agency deals, a 10 year anti-trust monitor to watch Apple for further shenanigans, and a final clause that would require Apple to let Amazon, Kobo, et al add links from inside their apps that led to their ebookstores.

I do have to wonder whether Apple was watching the same trial I was watching, or if Apple had read the ruling, or even if Apple had bothered to read the original indictment. I mean, even the judge thought Apple was probably guilty based on just the initial filings, and she has a legal duty to be impartial.

It is my estimation that the settlement proposed by the DOJ this morning was probably the best offer Apple was going to get. Judge Cote has the authority to order a much more severe punishment. And given Apple’s intransigence I think she might do just that. The punishments could start with fines significantly higher than the ones paid by the settling publishers, but that’s just the beginning.

Judge Cote could decide to order Apple to sell off iBooks in order to make sure the conspiracy does not recur, but that’s not all she can do. The judge might even order Apple to sell off the entire content division: iBooks, iTunes, and everything.

Splitting up companies is a common anti-trust punishment, one which dates back to Standard Oil. Judge Cote might decide that Apple’s intransigence necessitated hitting Apple with an even bigger stick and the biggest stick would be to make Apple give up control of their music, video, ebook, and periodical division.

This last option is a little crazy, I will admit, but it’s not impossible.

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fjtorres August 2, 2013 um 7:05 pm

There is a trial coming.
If Apple keeps playing to the faithful in the peanut gallery instead of seriously addressing the government’s need to ensure Apple does not collude a third time they are in for a world of hurt.
Sensitivity training for their execs? Seriously?

It sounds like they still aren’t taking the case, much less the verdict, seriously.

Kevin August 2, 2013 um 8:43 pm

"Apple doesn’t think they deserve to be punished at all". Yes, this seems to be the key point. Hachette, HarperCollins and Simon & Schuster: $69 million in restitution. Penguin: $75 million. MacMillan: $26 million. And now Apple is complaining about a settlement that does not require them to pay any fines! I get the feeling that their conviction for a serious crime just didn’t make it through the Apple reality distortion field. In their eyes, they are still innocent.

Nate Hoffelder August 2, 2013 um 9:05 pm

Even Macmillan decided to cut their losses.

Paul August 2, 2013 um 11:09 pm

I think you’ll find the DoJ proposal was the opening shot and hence it means they expect to get less than what they asked for. Apple did the same.

Both don’t expect their bids to be accepted but to settle somewhere around in the middle of the two proposals.

If the judge does go more draconian on Apple (which I consider extremely unlikely) lets look at what it suggests:

1. Rip off the entire economy to the tune of trillions of dollars and you get a slap on the wrist (even if you’re caught dong fraud, you get $300 million fine and no admittance that you did wrong doing but a reminder of how many bankers are in jail for causing the crash: zero).

2. You invent a device that is incredibly successful and the DoJ comes down on you like a ton of bricks while the company with an already massive advantage (amazon) can consolidate its position.

As its been pointed out before, no one forced these book publishers to take these terms or put their books in the iBookstore.

I think both sets of fan bases need to chill out a bit and wait for the Judge to make her decision.

Nate Hoffelder August 2, 2013 um 11:41 pm

The DOJ offer was essentially the same as the terms the publishers agreed to, only with a couple extra wrinkles. I doubt that they expect to get less, not with the Judge so convinced that Apple was guilty.

fjtorres August 3, 2013 um 10:57 am

Those are the terms they get *if* they settle *before* making the DOJ and the Judge go back to court for the penalty trial and have to do extra work. Which means that is the *lower* limit of what they can expect from the judge. At a minimum, the judge will pile on a couple years to the two-year term.

Quinton August 6, 2013 um 9:53 am

Think about the fact that Apple basically said that these publishers wouldn’t be able to directly sell their books through Apple channels on their upcoming device. iTunes was huge at the time (as it is now). That’s a serious potential revenue stream, and the publishers would’ve been stupid to not try to get in on it.

In short, they were part bullied and part enticed to join this agency pricing scheme. It was terrible for authors and readers alike, and Apple absolutely should be punished for it.

Personally, I don’t think the DOJ will budge. I’m sure they think they’re already compromising by not leveraging a fine.

One thing is for sure: we can’t keep letting companies walk all over the consumer. I don’t give a damn whether or not other companies have been punished or not–we’ve got to start somewhere. I’m sick and tired of watching our enforcement agencies let this crap slide just because the entity in question has tons of cash.

Also, not punishing them just because other corporate (banking) entities haven’t been punished would be like not punishing murderers just because OJ Simpson got away with it.

Chris Meadows August 3, 2013 um 4:28 pm

While I’ll be as happy to see Apple punished for its malfeasance as anyone, I can sort of see Apple’s point about some of its objections. For instance, the app thing, while it would be nice for iOS users, kind of comes out of nowhere given that it wasn’t part of the issues raised at trial.

The settlement kind of reads like the DoJ’s, well, Amazon wish list—things they would like to have but aren’t in any way guaranteed to get.

fjtorres August 3, 2013 um 9:26 pm

Actuall, Apple’s abuse of their appstore market power came up in the trial so targetting it is within scope. But then, with antitrust remedies nothing is out of scope.
Plus, there aren’t all that many ways to roll back the clock on the competitive landscape to make Apple cough up their ill-gotten gains short of divestiture.

Tim Wilhoit August 4, 2013 um 12:40 am

There’s another email Eddy Cue wishes he could have back. You can imagine how excited he was to tell Daddy Steve that he used the App Store as a cudgel to put unruly Random House in their place. 😀

fjtorres August 4, 2013 um 7:26 am

I can just imagine the look on the face of the DOJ staffer that found it.
That email alone guaranteed an antitrust conviction.

Paul August 4, 2013 um 8:27 pm

According to Politico, its a shake down to get some of those billions of dollars into Congress.

"The company spent less than $2 million on lobbying in 2012 — less than in 2011 — despite its being an election year. By contrast, Google spent $18.2 million, Microsoft spent $8.1 million and even Facebook laid out $4 million. After the first quarter of 2013, Apple’s lobbying expenditure was $720,000, a fraction of the $4 million by Google or the $2.45 million by Facebook."

In the first three months of 2013, online retail giant Inc spent $1.2 million on in-house and external lobbyists who lobbied on tax, and usually other topics too, according to federal filings.

I wonder how much they additionally spent on politicians?

Nate Hoffelder August 7, 2013 um 11:24 pm

That’s fricking hilarious. Do they really think a politically motivated prosecution wouldn’t be quickly identified as such?

Tim Wilhoit August 8, 2013 um 12:44 am

Oddly enough, that’s not the first time I’ve seen stuff like this. However, it’s usually posted by the fanbois with tinfoil hats on random news sites and Apple Orchards. Although this also may also fall under conspiracy theories, I wouldn’t be surprised if some of these Apple characters were employing a series of sock puppets to deploy a political story to reveal the "real" reason Apple were being "persecuted" by the Feds. If I were Apple and were caught in a no-win scenario like this one, it would at least cross my mind to pull an insane stunt like that. It certainly fits with their blatant attempts to piss off the Feds with the things they’ve said to the press. It certainly doesn’t help your situation by trying to garner public support while the judge and the prosecutors are gritting their teeth at your latest antics. Then again, they could just self-destructive.

Anyway, there’s my wild tangent.

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