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August 2, 2013

Apple's proposed punishment: Amazon gets its iPad bookstore back

After a federal court ruled last month that Apple conspired to raise the prices of e-books, the U.S. Department of Justice came up with an interesting punishment: Apple should let Amazon and Barnes & Noble sell e-books on the iPad again.

The DOJ proposed on Friday that Apple's competitors be allowed to provide links to their own e-bookstores within their e-reader apps. Apple has banned competitors from including those links since 2011. The Justice Department said letting Apple device users easily compare Apple's prices with those of Amazon, Barnes & Noble and others would "reset competition to the conditions that existed before the conspiracy."

Two years ago, Apple controversially mandated that it get a 30% cut of all in-app sales. For that to happen, apps were barred from displaying "shop" links that routed users to separate stores on the Web that Apple had no control over, such as Amazon's Kindle store. If the court agrees to the DOJ's proposal, booksellers, such as Amazon and Barnes & Noble, could bring back those shop links.

Apple could not immediately be reached for comment.

The proposal is just one of several submitted by the DOJ and 33 State Attorneys General to the court to "prevent a recurrence of the illegal activities." They also proposed that Apple terminate its existing agreements with the five major publishers with which it conspired. Those five publishers — CBS's Simon & Schuster, Hachette Book Group, Pearson's Penguin Group, Macmillan and News Corp.'s HarperCollins — decided to settle rather than go to trial.

If the court upholds the DOJ's proposals, Apple would also be ordered to refrain from entering certain new e-book distribution contracts for five years, from negotiating contracts with content providers that are likely to increase competitors' prices, and from retaliating against publishers for refusing to sell e-books on the so-called agency model. That model, in which the publishers set their own prices and Apple takes a 30% cut off the top, was at the heart of the conspiracy to raise e-book prices.

The DOJ additionally asked that an external monitor, whose salary would be paid by Apple, be appointed to ensure the company complies with the new mandates.

The court will hold a hearing on the proposed remedies on August 9, but Apple has already said it will appeal the decision.

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