Does the U.S. Department of Justice’s proposed “remedy” for Apple’s (NASDAQ:AAPL) e-book business harm the publishers as much as it punishes Apple? Less than a month after a federal judge ruled that Apple violated antitrust laws in its e-book business dealings, the Department of Justice presented a proposal to the court designed to prevent further anticompetitive conduct.
Not surprisingly, Apple was quick to condemn the antitrust compliance proposal as “draconian and punitive,” reports Bloomberg. However, Apple is not the only company that thinks the Department of Justice is overstepping its boundaries. One stipulation of the proposal requires Apple to “refrain for five years from entering new e-book distribution contracts” with the five major publishers that it conspired with.
However, the publishers are objecting to this provision since it would forbid them from using the agency model contracts that allow them to control the retail price for e-books. In a court filing via the Wall Street Journal, the publishers state that, “The provisions do not impose any limitation on Apple’s pricing behavior at all; rather, under the guise of punishing Apple, they effectively punish the settling defendants by prohibiting agreements with Apple using an agency model.”
The five publishers that were found liable in the same conspiracy include CBS’s (NYSE:CBS) Simon & Schuster, Hachette Book Group, Inc., News Corp.’s (NASDAQ:NWSA) HarperCollins, Pearson Plc’s Penguin Group, and Verlagsgruppe Georg von Holtzbrinck GmbH and Holtzbrinck Publishers, LLC (doing business as Macmillan). Since these publishers have already settled their antitrust cases, they believe that the Department of Justice’s new proposal unfairly changes their previous deals.
Besides putting restrictions on how Apple conducts its e-book business, the proposal will also have serious repercussions for Apple’s other digital content businesses. The Department of Justice is asking the court that Apple “be prohibited from entering into agreements with suppliers of e-books, music, movies, television shows, or other content that are likely to increase the prices at which Apple’s competitor retailers may sell that content.”
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