DOJ claims Apple's changes to in-app purchase rules were aimed at Amazon
The Department of Justice on Friday revised their proposal to punish Apple for iBook antitrust violations, alleging that the Cupertino company lied to the government about the manner in which the App Store operates and that changes to rules governing in-app purchases were designed to cripple Amazon's competitive Kindle app.
Notably, the updated proposal slices the injunction period from ten years to five years, while granting the government the ability to extend the injunction up to five times in one year increments, terms similar to the agreement the DOJ reached with Microsoft in their famous antitrust battle.
The DOJ has argued that while it wants to avoid a situation in which "changes in industry circumstances will cause the decree to outlive its usefulness and unnecessarily harm Apple," the government believes that "five years might not be enough time to restore competition to the e-books market and to ensure that Apple changes its troublesome business practices to prevent a recurrence of the illegal conduct."
Agreeing with a suggestion by Judge Denise Cote, the federal judge in charge of the case, the government also proposed forcing Apple to renegotiate its deals with publishers on a staggered basis, rather than all at once. The DOJ said this requirement will not allow the publishers to "'negotiate collectively' with Apple in order to effectuate contracts that will result in higher e-book prices."
Additionally, the injunction would require Apple to allow other e-book retailers in the App Store to sell e-books on the device through their own online stores for a period of two years, bypassing Apple's in-app purchase program. At a hearing earlier in August, Apple's counsel argued for the validity of forcing competitors' e-book apps to use the system by saying that the company receives 30 percent of the sale for any products purchased from within an iOS app, even physical goods like shoes.
The government seized on this statement as evidence that Apple "misrepresented the factual circumstances" surround in-app purchases, saying that it "simply is not true that Apple receives a 30 percent commission from all retailers for all goods." The DOJ has pointed to Amazon's existing Amazon.com iPad app as well as Amazon subsidiary Zappos.com's iPad app as examples of apps where purchases "do not go through Apple?s payment system, and Apple does not receive a 30 percent commission on these physical goods."
Citing an email from Steve Jobs in which the former Apple CEO suggested that Apple should "force them [Amazon] to use our far-superior payment system", the government has argued that changes to the App Store's policies in this area were "specifically to retaliate against Amazon for competitive conduct that Apple disapproved of."
The DOJ has also rebuked Apple for colluding with publishers and organizing "a blatant price-fixing conspiracy to raise e-book prices and end retail e-book price competition." The department has also accused the company's leadership of "willful and blatant violations of the law." Eddy Cue, Apple's senior vice president of Internet Software and Services, is specifically taken to task as the "ringmaster" behind the conspiracy.
Notably, the updated proposal slices the injunction period from ten years to five years, while granting the government the ability to extend the injunction up to five times in one year increments, terms similar to the agreement the DOJ reached with Microsoft in their famous antitrust battle.
The DOJ has argued that while it wants to avoid a situation in which "changes in industry circumstances will cause the decree to outlive its usefulness and unnecessarily harm Apple," the government believes that "five years might not be enough time to restore competition to the e-books market and to ensure that Apple changes its troublesome business practices to prevent a recurrence of the illegal conduct."
Agreeing with a suggestion by Judge Denise Cote, the federal judge in charge of the case, the government also proposed forcing Apple to renegotiate its deals with publishers on a staggered basis, rather than all at once. The DOJ said this requirement will not allow the publishers to "'negotiate collectively' with Apple in order to effectuate contracts that will result in higher e-book prices."
Additionally, the injunction would require Apple to allow other e-book retailers in the App Store to sell e-books on the device through their own online stores for a period of two years, bypassing Apple's in-app purchase program. At a hearing earlier in August, Apple's counsel argued for the validity of forcing competitors' e-book apps to use the system by saying that the company receives 30 percent of the sale for any products purchased from within an iOS app, even physical goods like shoes.
The government seized on this statement as evidence that Apple "misrepresented the factual circumstances" surround in-app purchases, saying that it "simply is not true that Apple receives a 30 percent commission from all retailers for all goods." The DOJ has pointed to Amazon's existing Amazon.com iPad app as well as Amazon subsidiary Zappos.com's iPad app as examples of apps where purchases "do not go through Apple?s payment system, and Apple does not receive a 30 percent commission on these physical goods."
Citing an email from Steve Jobs in which the former Apple CEO suggested that Apple should "force them [Amazon] to use our far-superior payment system", the government has argued that changes to the App Store's policies in this area were "specifically to retaliate against Amazon for competitive conduct that Apple disapproved of."
The DOJ has also rebuked Apple for colluding with publishers and organizing "a blatant price-fixing conspiracy to raise e-book prices and end retail e-book price competition." The department has also accused the company's leadership of "willful and blatant violations of the law." Eddy Cue, Apple's senior vice president of Internet Software and Services, is specifically taken to task as the "ringmaster" behind the conspiracy.
Comments
Citizens claim DOJ wholly lawless.
Subject: Re: How Apple Killed the iFlow Reader
From: Steve Jobs
Received(Date): Tue, 15 Feb 2011 17:13:29 -0800
Cc: Eddy Cue , Ron Okamoto , Bruce Sewell
To: Philip Schiller
IS their app any good? Lots better than iBooks? Or is this guy just pissed?
Bottom line %u2013 we didn%u2019t have a policy and now we do, and there will be some roadkill because of it. I don%u2019t feel guilty. They want to use our payment system, which we have invested a TON of money into creating and maintaining, for free and that%u2019s not going to be possible going forward.
Steve
It's not at all clear (and not the preponderance of the evidence) that Steve's intentions were to knock Amazon. The DOJ should get clarification from him before assuming such.
Remember, DOJ, to "assume" makes an ass out of u and me!
Corruption in the face.. And she is getting away with it!
Steve is suggesting "forcing" the iPhone version of the app to be superior, and thus discourage platform switching, by insisting they use Apple's superior payment system. It's nothing to do with price fixing, and it's not retaliating against Amazon. It's making sure they use platform specific APIs instead of make a lowest common denominator app.
There is no department of the US government focused on Justice.
Since when it is not legal to try to slow down a competitor?
Originally Posted by Rob Bonner
Since when it is not legal to try to slow down a competitor?
When it's done illegally, which this wasn't.
If iBooks had been distributed as a core app in iOS then Apple theoretically could have rejected the Kindle app for duplicating core functionality, although they probably wouldn't do that as it would cause some people to buy a Kindle tablet rather than an iPad. I'm surprised that Apple doesn't provide the ability to read Kindle format like they do for MS Office file formats.
They already have the new iBooks Author format that they should try to leverage. It is just the fiction titles that are traditionally paperback and text only that would not be improved by the new iBooks Author format.
The whole 30% is sort of a sticky mess. It is just a bit too high in my opinion. If it was a bit more manageable like 10-15% Amazon would just eat the difference to have access to iOS and we wouldn't be looking at these lawsuits.
Apple needs to enhance the iBooks app and content offerings to simply beat Amazon in quality and user experience instead of having a price war.
I don't support that idea. digital books can be priced lower than physical books causing them to go obsolete, but that's what the tech allowed it to do. Old ways get toppled as time goes on. If your so keen about the physical book u could get a print out and read.
The end user benefits from this , don't u realize that ?
"five years might not be enough time to restore competition to the e-books market..."
Because hamstringing Apple "restores" competition. What dream world is the DOJ living in?
Quote:
Originally Posted by mstone
The whole 30% is sort of a sticky mess. It is just a bit too high in my opinion. If it was a bit more manageable like 10-15% Amazon would just eat the difference to have access to iOS and we wouldn't be looking at these lawsuits.
And yet both Google and Amazon take 30% of app sales and in-app purchases as well. I'm not sure Amazon does but Google specifically forces you to use their in-app purchase system as well if you use Google Play to distribute your app.
Quote:
Originally Posted by nikilok
I don't get this part. If Amazon can drop prices of digital books, why can't Apple do the same ?
Apple raised the prices