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Judgment in ebook case limits Apple's deals, appoints external monitor

Dan Moren | Sept. 9, 2013
The injunction, which takes effect 30 days from its issuance on Thursday, imposes several restrictions on the way Apple can conduct its ebook business over the next several years.

The watchers and who watches them
In order to ensure Apple's compliance with these terms, the judgment empowers two separate monitors. The first is a full-time antitrust compliance officer who is selected by Apple's external directors (i.e. those not directly employed by Apple, which is basically anybody but CEO Tim Cook) and who is not employed by Apple.

That officer, who reports to the external directors, is responsible for informing and training Apple's board, executive team, and other relevant employees in matters relating to the judgment itself. In addition, the compliance officer conducts annual audits, provides logs of communications between Apple and ebook retailers and publishers, and is required to correct any actual or potential violation of the terms of the judgment and report it to federal and state governments.

In addition to that monitor, the court will also appoint an external compliance monitor with consultation from Apple and the involved state governments. That monitor essentially reviews Apple's internal antitrust compliance system to make sure that it meets with the letter of the law, recommending changes where necessary.

As with the antitrust compliance officer, it's the external monitor's job to report violations to the U.S. and state governments, though the monitor has no authority to investigate or pursue such matters directly. And though the external monitor is not an employee of Apple, the position's expenses and salary will be paid by the company with oversight from the U.S. and state governments.

Lasting impacts
While the injunction is less strenuous than the terms pursued by the DOJ—which wanted, among other remedies, to apply antitrust regulations to Apple's App Store and iTunes Store, as well—the company did object to the imposition of an external monitor. However, the final judgment makes it clear that an external monitor is an integral part of the compliance process.

Should the case not go to appeal, how badly would this injunction this affect Apple's ebook business? It's unclear at present, but it would certainly seem to put the company at a disadvantage when stacked up against its major competitor in the market, Amazon. Unlike Apple, Amazon continues to rely on the retailer model, where it buys books wholesale from publishers then sets the price wherever it wants to; Apple, on the other hand, was working on an agency model that gave the publishers a percentage of the selling price.

Amazon, for its part, doesn't appear to be wasting any time solidifying its place in the market. Earlier this week it announced MatchBook, a new service that provides—for no or low cost—an ebook copy of any physical book that customers have purchased from Amazon.


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