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Friday, August 23, 2013, 10:45 am PT (01:45 pm ET)

DOJ claims Apple's changes to in-app purchase rules were aimed at Amazon

The Department of Justice on Friday revised their proposal to punish Apple for iBook antitrust violations, alleging that the Cupertino company lied to the government about the manner in which the App Store operates and that changes to rules governing in-app purchases were designed to cripple Amazon's competitive Kindle app.



Notably, the updated proposal slices the injunction period from ten years to five years, while granting the government the ability to extend the injunction up to five times in one year increments, terms similar to the agreement the DOJ reached with Microsoft in their famous antitrust battle.

The DOJ has argued that while it wants to avoid a situation in which "changes in industry circumstances will cause the decree to outlive its usefulness and unnecessarily harm Apple," the government believes that "five years might not be enough time to restore competition to the e-books market and to ensure that Apple changes its troublesome business practices to prevent a recurrence of the illegal conduct."

Agreeing with a suggestion by Judge Denise Cote, the federal judge in charge of the case, the government also proposed forcing Apple to renegotiate its deals with publishers on a staggered basis, rather than all at once. The DOJ said this requirement will not allow the publishers to "'negotiate collectively' with Apple in order to effectuate contracts that will result in higher e-book prices."

Additionally, the injunction would require Apple to allow other e-book retailers in the App Store to sell e-books on the device through their own online stores for a period of two years, bypassing Apple's in-app purchase program. At a hearing earlier in August, Apple's counsel argued for the validity of forcing competitors' e-book apps to use the system by saying that the company receives 30 percent of the sale for any products purchased from within an iOS app, even physical goods like shoes.

The government seized on this statement as evidence that Apple "misrepresented the factual circumstances" surround in-app purchases, saying that it "simply is not true that Apple receives a 30 percent commission from all retailers for all goods." The DOJ has pointed to Amazon's existing Amazon.com iPad app as well as Amazon subsidiary Zappos.com's iPad app as examples of apps where purchases "do not go through Apple’s payment system, and Apple does not receive a 30 percent commission on these physical goods."



Citing an email from Steve Jobs in which the former Apple CEO suggested that Apple should "force them [Amazon] to use our far-superior payment system", the government has argued that changes to the App Store's policies in this area were "specifically to retaliate against Amazon for competitive conduct that Apple disapproved of."

The DOJ has also rebuked Apple for colluding with publishers and organizing "a blatant price-fixing conspiracy to raise e-book prices and end retail e-book price competition." The department has also accused the company's leadership of "willful and blatant violations of the law." Eddy Cue, Apple's senior vice president of Internet Software and Services, is specifically taken to task as the "ringmaster" behind the conspiracy.