US regulators press Apple on e-books

Apple Inc. is headed for a showdown with the U.S. government and 33 states, which Friday urged that tough new restrictions be imposed on the company for illegally conspiring to raise e-book prices.

The U.S. Justice Department asked the court that Apple end its contracts with the five publishers and be banned for five years from entering contracts that would effectively raise prices of e-books sold by rivals.

Apple would also be unable to cut deals with providers of films, music and TV programs for its iPad tablets and iPhones that are likely to increase the prices at which rivals might sell such content.

The plan comes out of an antitrust suit against the technology company and five e-book publishers and is designed to stop Apple from committing further antitrust violations. U.S. District Judge Denise Cote ruled last month that Apple had colluded with the publishers to raise e-book prices.

In a court filing, Apple called the proposed injunction a “draconian and punitive intrusion” into its business that would hurt consumers and competition, and was “wildly out of proportion” to the harm it was meant to address.

"The resulting cost of this relief - not only in dollars but also lost opportunities for American businesses and consumers - would be vast," it said.

Federal and state regulators disagreed.

"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," said Bill Baer, head of the Justice Department's antitrust division.

Industry experts said the proposal, if adopted, could solidify Amazon's dominance in the e-books market

Mark Coker, founder of Smashwords, an e-book publisher and distributor that works with Apple, Barnes & Noble and other companies, asked why the DOJ isn’t forcing Amazon to play fairly.  

"Apple brought much-needed competition to the e-book market and now the government is trying to undermine them," he said.

Apple is accused of encouraging publishers to set the price of their e-books to undercut Amazon.com's e-book dominance.

As a result of its actions some e-book prices rose to $12.99 or $14.99 from the $9.99 that the online retailer had been charging.

Amazon.com Inc commands about 65 percent of the U.S. e-books market, while Apple's share has been estimated in the single digits.

Judge Cote will weigh the arguments at an August 9 hearing in her Manhattan courtroom. A damages trial might follow.

Al Jazeera and wire services