Apple’s long-running antitrust case over e-book pricing is finally coming to a conclusion, with the U.S. District Court for the Southern District of New York releasing its final judgment in the case, also embedded below. As expected, Judge Denise Cote is imposing various rules on the company that will curtail its power to influence pricing with publishers, by imposing restrictions on how it can negotiate with publishers. This is an important development in the e-book market overall, given that the iPad and iPhone maker accounts for some 20% of sales of e-books, by its own estimation.
In the lead-up to today, Apple was already expressing its opposition with the ruling, saying the court was out just to “inflict punishment.” And that is before we even know the damages in the case, which will not be named until May 2014 and could extend to the hundreds of millions of dollars.
We have reached out to Apple for a response to today’s ruling, and we’ll update this story as we learn more. In the meantime, here are some of the main requirements as detailed in today’s ruling, listed in the document under “prohibited conduct”"
– To keep Apple from having too strong a hand in how e-books are priced in the future, Apple has been barred from making special retail pricing deals with publishers — called “most favored nation” clauses, or to enforce any existing MFN deals. Along with this, it’s not allowed to make deals with publishers that will impact how those publishers price books with other distributors who by definition would compete against Apple.
– Apple will have to wait between two and four years to make direct deals with publishers in the future. These are being spaced out and will run as follows: Between Apple and Hachette, 24 months after the date of the judgement; Harper Collins, 30 months; Simon & Schuster, 36 months; Penguin, 42 months; and Macmillan, 48 months.
– Bully clause…. Apple is specifically ordered to “not retaliate against or punish, threaten to retaliate against or punish, or urge another person to threaten to retaliate against or punish any e-book publisher for refusing to enter into an agreement with Apple relating to the sale of e-books or for the terms on which the e-book publisher sells e-books through any other e-book retailer.” This is one that specifically aims at how Apple tried to leverage its relationships with publishers specifically to compete against the likes of Amazon and other booksellers who may have offered e-books at discounts.
– Chinese walls: Apple may not communicate with other publishers about the terms of its negotiations.
– E-book/apps parity: Apple is ordered to treat e-books like apps, subject to the same rules for pricing. That also means when Apple changes its T&C’s for apps, they will also apply to e-books.
– Apple as informant: Apple will have 10-day deadlines to turn over information that “reasonably suggests” that e-book publishers are violating any of these rules.
In a section called “Antitrust Compliance,” the court orders Apple to get its audit committee to an Antitrust Compliance Officer, whose full-time job will be to make sure Apple follows the above orders. That will involve, among other things, making sure employees will report violations as well as watching out for and reporting on them himself. There will also be a court-appointed External Compliance Monitor.
One place where Apple has had a bit of leeway here is in the length of how long this injunction will last. Originally it was going to be for a term of 10 years but has now been cut down to five. We’ll see if Apple chooses to appeal it anyway.