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Apple Punished For Its Role In An E-Book Conspiracy

This article is more than 10 years old.

Federal District Court Judge Denise Cote issued a ruling yesterday punishing Apple for its role in a price-fixing conspiracy involving the e-book market. Coming nearly two months after Cote ruled against the technology icon, the proscriptions laid out by the judge did not come as a surprise.

Image via CrunchBase

The ruling prohibits Apple from entering into agreements with publishers employing the Most Favored Nation (MFN) clause that was at the heart of the federal government's case against Apple. The clause came about as a way to counter Amazon's pricing power in the e-book market. Publishers feared that Amazon's low prices would cut into their lucrative hard-cover sales. They also worried that the lower prices would undermine their business models.

According to Cote's ruling in July, Apple led a conspiracy with five publishers (all of them settled with the Department of Justice) to raise prices in the e-book market. The MFN clause placed in the contracts between Apple and the publishers served as a key element in their plan by forcing Amazon to raise its e-book prices as well.

Cote's ruling also blocks Apple from sharing details of its negotiations or contractual terms with publishers among their competitors. In essence, this provision prevents Apple from partaking in a similar conspiracy.

The judge also installed an independent monitor to oversee Apple's compliance with the ruling and review Apple's broader antitrust compliance program. Though Apple contested many of the restrictions imposed by the judge, the prohibitions she laid out along with the requirement of a monitor were typical for antitrust cases.