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US DoJ drags Apple over coals for illegal e-book price fixing

Apple has been told what it will have to do to put right its illegal fixing of e-book prices in the US.

The Department of Justice and 33 state attorney generals submitted to a court a proposed remedy to address Apple's illegal conduct, following a court ruling against Cupertino in July.

The "proposed relief is intended to halt Apple’s anticompetitive conduct, restore lost competition and prevent a recurrence of the illegal activities", said the Department of Justice (DoJ).

“The court found that Apple’s illegal conduct deprived consumers of the benefits of e-book price competition and forced them to pay substantially higher prices,” said Bill Baer, assistant attorney general in charge of the DoJ's anti-trust division. “Under the department’s proposed order, Apple’s illegal conduct will cease and Apple and its senior executives will be prevented from conspiring to thwart competition in the future.”

The department’s proposal, if approved by the court, will require Apple to terminate its existing agreements with the five major publishers with which it conspired - Hachette Book Group (USA); HarperCollins Publishers; Holtzbrinck Publishers, which does business as Macmillan; Penguin Group (USA) and Simon & Schuster - and to refrain for five years from entering new e-book distribution contracts which would restrain Apple from competing on price.

Under the department’s proposed remedy, Apple will be prohibited from again serving as a conduit of information among the conspiring publishers or from retaliating against publishers for refusing to sell e-books on agency terms.

Apple will also be prohibited from entering into agreements with suppliers of e-books, music, movies, television shows or other content that is likely to increase the prices at which Apple’s competitor retailers may sell at.

To "reset competition" to the conditions that existed before the conspiracy, Apple must also allow other e-book retailers like Amazon and Barnes & Noble to provide links from their e-book apps to their e-bookstores for two years, allowing consumers who purchase and read e-books on their iPads and iPhones to easily compare Apple’s prices with those of its competitors.

Additionally, the DoJ is asking the court to appoint an external monitor to ensure that Apple’s internal anti-trust compliance policies are sufficient to "catch anti-competitive activities before they result in harm to consumers." The monitor, whose salary and expenses will be paid by Apple, will work with an internal anti-trust compliance officer who will be hired by and report exclusively to the outside directors comprising Apple’s audit committee.

The anti-trust compliance officer will be responsible for training Apple’s senior executives and other employees about anti-trust laws and ensuring that Apple abides by the relief ordered by the court.

In April 2012, the DoJ filed a civil anti-trust lawsuit in the US District Court for the Southern District of New York against Apple, Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster, for conspiring to end e-book retailers' freedom to compete on price, by taking control of pricing from e-book retailers and substantially increasing the prices that consumers paid for e-books.

The DoJ has already settled with the publishers, who were required to terminate agreements that prevented e-book retailers from lowering the prices at which they sell e-books to consumers, and to allow for retail price competition in renegotiated e-book distribution agreements.

Apple said it would resist the proposed remedies and that it intended to appeal the July court ruling.