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Apple Ordered to Stagger E-Book Contract Negotiations, Refrain From 'Most Favored Nation' Clauses

iBooks.pngJudge Denise Cote today issued her penalty ruling in the e-book pricing suit against Apple, ruling that Apple must stagger its contract negotiations with major publishers to prevent collusion and avoid entering into "most favored nation" (MFN) agreements with any publisher for five years, according to GigaOM. The MFN clauses in Apple's contracts with publishers prevented any other e-book retailer from undercutting Apple, giving Apple the right to at least match the best pricing offered by other retailers.
Judge Cote’s injunction forbids Apple from enforcing most-favored-nation clauses in any ebook publishing contracts for five years, and also forbids the company from entering into any book publishing contracts that contain them for five years. Apple had wanted this provision to be less broad, relating only to MFN clauses with the five publishers in the case who have already settled. Instead, it applies to all publishers.
Judge Cote defined the order in which Apple will be permitted to renegotiate contracts with publishers, beginning with Hachette 24 months after the judgment's effective date and staggering negotiations every six months thereafter for the five publishers involved in the case.

Apple is also required to hire an external compliance monitor to ensure that the company is complying with antitrust requirements.

In a win for Apple, Cote's ruling does not require the company to allow the return of direct store links from competing e-book distributors in their App Store apps, something the U.S. Department of Justice had requested in its proposed penalties.

Apple continues to deny that it engaged in price fixing, and is pursuing an appeal of the guilty verdict.

Top Rated Comments

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14 months ago
Actually these punishments are not too bad. I think Apple should just accept these and move on.
Rating: 15 Votes
14 months ago
In one sense, they got the book thrown at them
Rating: 13 Votes
14 months ago
DOJ sure seems to have a lot of free time on their hands... worrying about ebook sales and pricing...
Rating: 12 Votes
14 months ago
Government is overreaching here, by telling a corporation what they can and cannot do.

If the law is clear, Apple has to abide by it and if they don't they should get fined every time they break it until they do.

Anything else is not the DOJ's or a judges business.
Rating: 8 Votes
14 months ago
Win for the most dominant eBook retailer Amazon?
Rating: 7 Votes
14 months ago

DOJ sure seems to have a lot of free time on their hands... worrying about ebook sales and pricing...


I know. When you consider the tons of other significantly worse behavior that goes on in American corporations completely unchecked, its actually pretty pathetic they go full-blast on a stupid little e-book case but don't give that same treatment to the scum oligopolists like big oil companies, or the telephone carriers who almost certainly engage in price fixing as well AND have an oligopoly. However, allow publishers to raise ebook prices 3 dollars, and you'll get swarmed by Uncle Sam.

America the Beautiful.
Rating: 6 Votes
14 months ago

Government is overreaching here, by telling a corporation what they can and cannot do.

If the law is clear, Apple has to abide by it and if they don't they should get fined every time they break it until they do.

Anything else is not the DOJ's or a judges business.


Government needs to make sure corporations do not engaging illegal behaviour. They don't care weather if it is Apple or Microsoft. Heck, government tried to split Microsoft into two part before, I think it is worse than this ebook case.

Government achieving this goal by monitoring corporations' action and give then recommendation and/or force corporation doing their orders.
Rating: 5 Votes
14 months ago

Incoming fecal storm of comments on corrupt DOJ, under the table money and general conspiracies!


Meh, not a corrupt DOJ per-se, but it's more about DOJ "rising stars" that want to make a name for themselves by taking down a high-profile name.
Rating: 5 Votes
14 months ago
I'm sure Amazon was hoping for better than this!

This sounds like a pretty fair and direct response to the two worrying issues: the timing (dealing with all the publishers around the same time) and the MFN.

Now there's nothing illegal about MFNs, and nothing illegal about dealing with multiple companies at the same time in the same way... that's only natural (why wouldn't you?)... but all together it crossed a line. A line Amazon did not want crossed :) (I can see why Apple disagrees--their actions made total sense at the time.)

I'm not sure why so many people see "Amazon = cheap stuff = always good in the long run" and can't see any further subtleties to the situation. Is devaluing of authors' work good? Does that bring us more and better ebooks? Is an Amazon monopoly good? Will Amazon skate by on low profits forever, or will they turn on the money hose one day? Is "race to the bottom" pricing always good? Is selling at a loss (sometimes known as "dumping") always good? Is letting Amazon control book pricing instead of the creators OF books doing so necessarily the best thing?
Rating: 4 Votes
14 months ago

It may be a matter of debate among MacRumors posters, but wouldn't you say that the DOJ settlements imply pretty strongly that it's no long a matter of debate among the principals?


Settlement does not always imply guilt. How often do parties settle just to avoid costly litigation? The fact that publishers did settle and Apple did not tells me that Apple has the deep pockets to fight where they believe they're right. The publishers don't have Apple's balance sheet.

Look, I've read extensively about the case, read the briefs, studied the law(s) in question and read opinions of many people and I'm just not convinced that Apple or the publishers were in the wrong. I believe Apple has a good shot at winning on appeal.
Rating: 4 Votes

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