At issue is how to ensure that Apple does not violate antitrust law, following a July 10 ruling by U.S. District Judge Denise Cote in Manhattan that it had conspired with five major publishers to undermine pricing by rivals including Amazon.com Inc, which dominates the market for electronic books.
Apple says the government is overreaching by insisting that it hire an external monitor, let ebook retailers add hyperlinks to their own websites in their ebook apps without charge, and face limits on how it negotiates for other content including movies, music and TV shows.Cote must approved any injunction.
In a court filing, the U.S. Department of Justice, joined by 33 U.S. states and territories, suggested halving the length of its previously proposed injunction to five years from 10, with leave to seek as many as five one-year extensions if needed.
At Cote's suggestion, they also recommended that Apple hold staggered negotiations with the publishers starting in two years, hopefully minimizing the chance of future collusion, and removed previously proposed language that they said Apple had claimed would hurt its ability to run its popular App Store.
But in rejecting other changes that the company wanted, and while expressing a desire not to "unnecessarily harm Apple," the governments said the Cupertino, California-based company's continuing refusal to admit it did anything wrong warranted tough medicine.
"Quite simply, Apple wants to continue business as usual, regardless of the antitrust laws," the filing said. "This court should have no confidence that Apple on its own effectively can ensure that its illegal conduct will not be repeated. There must be significant oversight by someone not entrenched in Apple's culture of insensitivity to basic tenets of antitrust law."
Letter and spirit of law
In a separate court filing, Apple said the proposal for an external monitor "exceeds the bounds of even criminal price-fixing cases," and reflects an effort "to use this civil injunction to inflict punishment, which is impermissible."
The company said its own proposed remedies are stringent enough, and enable it to remain "one of the world's most innovative companies, while acting consistently with both the letter and spirit of the antitrust laws."
Apple has said it is appealing from Cote's July 10 ruling.
The five publishers, all of which have settled with regulators, include Lagardere SCA's Hachette Book Group Inc, News Corp's HarperCollins Publishers LLC, Penguin Random House LLC, CBS Corp's Simon & Schuster Inc, and Verlagsgruppe Georg von Holtzbrinck GmbH's Macmillan.
Cote has scheduled a May 2014 trial to determine damages, which could total hundreds of millions of dollars.
She had ordered both sides to hold talks to resolve their differences over an injunction, but the talks failed. The governments said some of Apple's proposals were even less restrictive than what the publishers had accepted.
Gina Talamona, a Justice Department spokeswoman, was not immediately available for comment. Tom Neumayr, an Apple spokesman, was not immediately available for comment.
The case is U.S. v. Apple Inc et al, U.S. District Court, Southern District of New York, No. 12-02826.
© Thomson Reuters 2013