DOJ claims Apple's changes to in-app purchase rules were aimed at Amazon

Posted:
in General Discussion edited January 2014
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.

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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."

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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.
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Comments

  • Reply 1 of 161


    Citizens claim DOJ wholly lawless.

  • Reply 2 of 161
    I disagree completely with the DOJ's take on Steve Jobs' e-mail. Apple was clearly going ahead with its in-app purchase with its new payment system. Steve was saying that forcing Amazon to adopt it in their Kindle app would be a good thing for consumers since Apple's payment system is "far superior". Steve's other e-mail was interesting as well. It was in response to an angry e-mail from the developer of the iFlow reader app over the changes to the in-app purchase rules:

    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
  • Reply 3 of 161
    Am I the only person here who realizes that Amazon's old pricing model single handedly destroyed the market for big box bookstores in the US? If anything Apple's pricing would have saved that entire industry by setting ebook pricing more in line with their physical counterparts. Amazon's old strategy has worked to destroy something that I believe was essential to our culture. People don't go to bookstores anymore. Amazon put them all out of business. Only now the DOJ steps in. This is so very wrong. Where we're they then? Amazon's whole strategy has always been to destroy the competition by underpricing them to the point of being uncompetitive. This isn't how I want my tax money spent. I like physical books and physical book stores. What is the DOJ doing about that? I want to see the government forcing booksellers to sell ebook sat the same price as physical books and not a dime less. That is the only way we can get our book stores back. Who's with me?
  • Reply 4 of 161
    Thanks to the DOJ for providing us a legal monopoly (Amazon).
  • Reply 5 of 161
    cpsrocpsro Posts: 2,285member


    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!

  • Reply 6 of 161
    This lunatic Judge is clearly in bed with amazon.... She should be investigated!
    Corruption in the face.. And she is getting away with it!
  • Reply 7 of 161
    jungmarkjungmark Posts: 6,489member
    I guess Amazon's latest "donation" came in. Apple doesn't have the majority of mobile devices so why is the DOJ concerned with in app payments?
  • Reply 8 of 161
    asciiascii Posts: 5,363member
    That's not how I read Steve's email. Phil is saying Kindle offers an identical experience on iPhone and Android, and worried that it enables platform switching.

    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.
  • Reply 9 of 161


    There is no department of the US government focused on Justice.

  • Reply 10 of 161
    Bo ho poor amazon. NOT! First they have their own store which wasn't exactly unknown before iBooks and second NEVER NEVER NEVER sign something without reading the small print. I assume that Amazon had their lawyers do so and so should have been fully aware of the conditions. They obviously concluded that what they were asked to pay Apple was worth it in order for their market share not to have been eroded. It's not as if they got nothing out of the deal. It would not supprised me if they got more money on the 70% of the sale from Apple than from their own store for some titles that they 'discounted' to keep the share of the market. As others have said Amazon slashed the prices of Ebooks, which in the short term may be good for rhe consumer, that is until the authors can't afford to write them for such small returns. Then all you get is the odd success story and its franchises. I'm not sure I would call that good for the consumer, and it will certainly limit choice. At the end of the day if you pay peanuts you get monkeys.
  • Reply 11 of 161


    Since when it is not legal to try to slow down a competitor?  

  • Reply 12 of 161
    mhiklmhikl Posts: 471member
    Am I the only person here who realizes that Amazon's old pricing model single handedly destroyed the market for big box bookstores in the US? If anything Apple's pricing would have saved that entire industry by setting ebook pricing more in line with their physical counterparts. Amazon's old strategy has worked to destroy something that I believe was essential to our culture. People don't go to bookstores anymore. Amazon put them all out of business. Only now the DOJ steps in. This is so very wrong. Where we're they then? Amazon's whole strategy has always been to destroy the competition by underpricing them to the point of being uncompetitive. This isn't how I want my tax money spent. I like physical books and physical book stores. What is the DOJ doing about that? I want to see the government forcing booksellers to sell ebook sat the same price as physical books and not a dime less. That is the only way we can get our book stores back. Who's with me?
    Yup, part of me is with you, PS, but cheap me does not do. Compromise: first six months~one year I aspire; then however the market desire. The loss of bookstores is a shame. Penny pinching is to blame.
  • Reply 13 of 161
    tallest skiltallest skil Posts: 42,714member

    Originally Posted by Rob Bonner View Post


    Since when it is not legal to try to slow down a competitor?  


     


    When it's done illegally, which this wasn't.

  • Reply 14 of 161
    mstonemstone Posts: 11,510member


    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.

  • Reply 15 of 161
    nikiloknikilok Posts: 383member
    Am I the only person here who realizes that Amazon's old pricing model single handedly destroyed the market for big box bookstores in the US? If anything Apple's pricing would have saved that entire industry by setting ebook pricing more in line with their physical counterparts. Amazon's old strategy has worked to destroy something that I believe was essential to our culture. People don't go to bookstores anymore. Amazon put them all out of business. Only now the DOJ steps in. This is so very wrong. Where we're they then? Amazon's whole strategy has always been to destroy the competition by underpricing them to the point of being uncompetitive. This isn't how I want my tax money spent. I like physical books and physical book stores. What is the DOJ doing about that? I want to see the government forcing booksellers to sell ebook sat the same price as physical books and not a dime less. That is the only way we can get our book stores back. Who's with me?

    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 ?
  • Reply 16 of 161
    chabigchabig Posts: 613member


    "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?

  • Reply 17 of 161
    nikiloknikilok Posts: 383member
    I don't get this part. If Amazon can drop prices of digital books, why can't Apple do the same ?
  • Reply 18 of 161

    Quote:

    Originally Posted by mstone View Post


    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.

  • Reply 19 of 161

    Quote:

    Originally Posted by nikilok View Post



    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

  • Reply 20 of 161
    drwamdrwam Posts: 38member
    The DOJ needs a good laxative.
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