Five-year 'most favoured nation' ban for Apple

A US federal judge has forbidden Apple from enforcing most favoured nation clauses in its contracts with all publishers for five years.

Judge Denise Cote has also ruled that Apple will have to stagger new contract negotiations with the "agency" publishers – Penguin, HarperCollins, Simon & Schuster, Pan Macmillan and Hachette - following the abolition of the agency agreement.

In July, Judge Cote found Apple guilty of conspiring with publishers to set the prices of e-books when it launched the iBookstore.

However, Apple has said it will appeal.

Today’s ruling on Apple stated: “Apple shall not enter into or maintain any agreement with a publisher defendant that restricts, limits or impedes Apple’s ability to set, alter, or reduce the e-book price of any e-book or to offer price discounts or any other form of promotions to encourage consumers to purchase one or more e-books.”

The terms on the order is imposed differs for each publisher accused of price-fixing in the case. The terms will be imposed on Hachette for 24 months, HarperCollins for 30 months, and Simon & Schuster for 36 months. Penguin will be allowed to renegotiate after 42 months and Macmillan, the last to settle with the DoJ, after 48 months.

Cote’s ruling today (6th September) also allows the DoJ to inspect Apple documents and interviews its employees for the next five years.

Cote also said: “Apple shall not retaliate against or punish… any e-book publisher for refusing to enter into an agreement with Apple relating to the sale of e-books or for the terms on which the e-book publisher sells e-books to another e-book retailer.”

She also said that Apple musn’t communicate “directly or indirectly” the terms of any publisher the status of contract negotiations of another. It must also not reveal “sensitive information” about any publisher’s business plans or future pricing and business strategies to another publisher.

In crafting her final order, Judge Cote said she wanted to intrude as lightly as possible on Apple’s business while restoring competition to the e-book business. The ruling does not seek to regulate Apple’s activities in the App store or other areas of Apple’s business such as music and films.

The ruling said: “This provision does not prevent Apple from introducing new categories of apps with different terms and conditions or from changing its App Store terms and conditions and applying them in a reasonable manner so long as Apple does not discriminate e-book apps.”

In addition, an external monitor will be appointed and paid for by Apple to ensure that Apple complies with the ruling to prevent "harm to consumers," the court said.

Assistant Attorney General Bill Baer of the Department of Justice’s Antitrust Division said: “We’re pleased that the court has issued an order supporting the Department of Justice’s efforts to address Apple’s illegal price fixing conduct. Consumers will continue to benefit from lower e-books prices as a result of the department’s enforcement action to restore competition in this important industry. By appointing an external monitor to ensure future compliance with the antitrust laws, the court has helped protect consumers from further misconduct by Apple. The court’s ruling reinforces the victory the department has won for consumers.”

The judgement takes affect in 30 days’ time.