Technology

Apple Faces Harsh Punishment for E-book Price Fixing

Apple_store_sign
Source: JoeInQueens, via Wikimedia Commons
The Department of Justice today submitted a proposed remedy to the federal court that will issue penalties on Apple Inc. (NASDAQ: AAPL) next week following the court’s finding in early July that Apple conspired with publishers to fix the prices of e-books in the U.S. Thirty-three state attorneys-general joined with the DoJ to propose the penalties.

The DoJ proposes, among other things, to terminate Apple’s existing contracts with five publishers and to refrain for five years from entering new e-books contracts which would prevent Apple from competing on price. The company’s agency model, where the publishers set the price for an e-book and Apple took a 30% cut of the sale, would no longer be allowed.

To “reset competition to the conditions that existed before the conspiracy,” Apple would be required to allow other book retailers such as Amazon.com Inc. (NASDAQ: AMZN) and Barnes & Noble Inc. (NYSE: BKS) to offer links from their own retail apps so that users may compare prices. That requirement would remain in force for two year.

Apple is getting slapped hard because, as the court noted in its verdict, “Without Apple’s orchestration of this conspiracy, it would not have succeeded as it did in the Spring of 2010.”

Apple’s shares are up 1% ast $461.28 in the late afternoon today, in a 52-week range of $385.10 to $705.07.

Sponsored: Find a Qualified Financial Advisor:

Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.