U.S. Justice Department Seeks Oversight of Apple's iTunes Store Following Anti-Trust Ruling (Updated)

Editor's note: The following story was updated with Apple's response to the Department of Justice's remedies after it was originally published.

Following a victory against Apple in an anti-trust lawsuit on July 10, the Department of Justice has put forth a list of punitive measures against Apple which among other things prohibits Apple from "entering into agreements with suppliers of e-books, music, movies, television shows or other content that are likely to increase the prices at which Apple’s competitor retailers may sell that content" and requires the tech company to hire an external monitor to oversee that Apple complies with anti-trust rulings.

A release on the Department of Justice website explained that the proposed measures are intended to "halt Apple’s anticompetitive conduct, restore lost competition and prevent a recurrence of the illegal activities." All the remedies must first be approved by the court which will hold a hearing on the proposed measures on Aug. 9, 2013.

Apple Found Guilty of Conspiring with Publishers to Raise E-Book Prices

“The court found that Apple’s illegal conduct deprived consumers of the benefits of e-book price competition and forced them to pay substantially higher prices,” Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division, said in the DOJ statement. “Under the department’s proposed order, Apple’s illegal conduct will cease and Apple and its senior executives will be prevented from conspiring to thwart competition in the future.”

On April 11, 2012, the DOJ filed a civil antitrust lawsuit in the U.S. District Court for the Southern District of New York against Apple, Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster, for conspiring to end e-book retailers' freedom to compete on price by taking control of pricing from e-book retailers and substantially increasing the prices that consumers paid for e-books. Last month the court issued its opinion that Apple Inc. violated Section 1 of the Sherman Act.

Other punitive measure put forth by the DOJ and 33 State Attorneys Generals, include: the demand that Apple terminate existing agreements with the five major book publishers with which it conspired --  Hachette Book Group (USA), HarperCollins Publishers L.L.C., Holtzbrinck Publishers LLC, which does business as Macmillan, Penguin Group (USA) Inc. and Simon & Schuster Inc.;  that Apple refrain for five years from entering new e-book distribution contracts;  and that for two years Apple allows "other e-book retailers like Amazon and Barnes & Noble to provide links from their e-book apps to their e-bookstores, allowing consumers who purchase and read e-books on their iPads and iPhones easily to compare Apple’s prices with those of its competitors."

Perhaps most onerous to Apple is hiring a court-appointed external monitor who would "ensure that Apple’s internal antitrust compliance policies are sufficient to catch anticompetitive activities before they result in harm to consumers."  The monitor, whose salary and expenses will be paid by Apple, will "work with an internal antitrust compliance officer who will be hired by and report exclusively to the outside directors comprising Apple’s audit committee. The antitrust compliance officer will be responsible for training Apple’s senior executives and other employees about the antitrust laws and ensuring that Apple abides by the relief ordered by the court."

Apple supplied to Billboard a 26-page legal document with its response to the DOJ's remedies rejecting much of the proposal. The documented stated in its introduction that, "Plaintiffs’ proposed injunction is a draconian and punitive intrusion into Apple’s business, wildly out of proportion to any adjudicated wrongdoing or potential harm. Plaintiffs propose a sweeping and unprecedented injunction as a tool to empower the Government to regulate Apple’s businesses and potentially affect Apple’s business relationships with thousands of partners across several markets. Plaintiffs’ overreaching proposal would establish a vague new compliance regime—applicable only to Apple—with intrusive oversight lasting for ten years, going far beyond the legal issues in this case, injuring competition and consumers, and violating basic principles of fairness and due process. The resulting cost of this relief—not only in dollars but also lost opportunities for American businesses and consumers—would be vast."

In the document's conclusion, Apple encouraged the court to "reject plaintiffs’ proposed injunction outright, or in the alternative enter a narrower and more modest injunction that is carefully tailored to the Court’s findings, the legal theories and issues in the case, and the evidence admitted at trial."