Federal judge upholds Apple's 30% take on in-app e-book sales

After antitrust conviction, Apple App Store rules remain in place

A federal judge on Thursday rejected government regulators' demand that Apple waive its 30% commission on all in-app e-book sales by third-party retailers, including Amazon, for two years.

Instead, Judge Denise Cote ruled that Apple could continue to bar e-book apps from its iOS App Store if the programs included links to external websites where customers could buy books or subscriptions.

Cote, who has presided over the e-book price-fixing case against Apple, issued her final injunction Thursday. Under that injunction, Apple is prohibited from disclosing deals it strikes with one e-book publisher to others -- a way to prevent it from again conspiring to set industry-wide prices -- and its behavior will be monitored for two years by a court-appointed antitrust compliance officer.

Her rejection of the Department of Justice's (DOJ) proposal that Apple be required to change its App Store policies, however, was a victory of sorts for Apple.

"Apple shall apply the same terms and conditions to the sale or distribution of an E-book App through Apple's App Store as Apple applies to all other apps sold or distributed through Apple's App Store," Cote ruled.

"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 as long as Apple does not discriminate against E-book Apps," she wrote in the final injunction.

In early August, after Cote had found Apple guilty of violating antitrust laws, the DOJ and 33 state attorneys general had proposed a suite of remedies to ensure Apple could not become a repeat offender. Among them was a demand that e-book retailers be allowed to include links to external sales websites in their iPhone and iPad apps, a move that would have let the retailers sidestep Apple's 30% commission on all in-app revenue.

The DOJ and state attorneys general said that the commission exemption would "reset competition to the conditions that existed before the conspiracy" and "let consumers ...easily compare Apple's prices with those of its competitors."

Apple opposed the change, arguing last month that the government's App Store dictates had no connection to the e-book pricing conspiracy case, and that such interference in its business practice was "outrageous."

"Plaintiffs' proposed injunction would require Apple to carve out an exception to its blanket rule -- applicable to the more than 850,000 apps in the App Store -- that a commission applies to in-app sales of digital goods, and it would allow e-book retailers to make such sales commission-free," Apple's lawyers said in an August filing with the court.

Apple also made an implied threat, saying it was "under no duty to allow other retailers to offer apps on the iPad in the first place, much less on terms that subsidize their operations." That threat was effectively hollow, however, since an earlier order by Cote had blocked Apple from dumping e-book apps from the App Store.

Cote will decide on what damages Apple must pay in early 2014. Some e-book retailers, including Amazon, have told customers that they can expect between 73 cents and $3.06 for every eligible e-book purchased between April 1, 2010, and May 21, 2012, based on already-struck settlements with the book publishers.

Apple has said it will appeal Cote's July antitrust ruling.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

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