In a memo filed with the Southern District of New York, Apple argues that the Department of Justice’s proposed settlement with three book publishers forces Apple to tear up existing contracts. That is “fundamentally unfair, unlawful, and unprecedented,” Apple says: It’s not settling, so it’s entitled to a trial.
“Apple is taking a bold stance by ignoring the Judge’s admonition to the parties not to oppose the settlement, other than submitting comments,” said attorney and RoyaltyShare CEO Bob Kohn, who is seeking permission to file an amicus brief in the case. “Apple makes a good point that the proposed settlement terminates Apple’s agency contracts without a trial and that would be an unprecedented violation of Apple’s right to due process.” Apple also says the most favored nation clauses in its contracts have not “forced any publisher to adopt agency with other retailers,” and notes that “many independent publishers” — not mentioned by name here, but they include Sourcebooks and Scholastic — have agency pricing agreements with Apple and wholesale agreements with Amazon.
Kohn objects to this. If the settling publishers were to terminate their agency agreements with Amazon, he says, “that would (a) allow Amazon to resume predatory pricing (i.e., selling below its marginal cost) and (b) allow Apple, under its agency agreement with the publishers, exercise its MFN clause to match Amazon’s discounts. Since the publishers get 70 percent of what Apple charges, this could really hurt the settling publishers. I don’t think the Apple lawyers intended this, but it does seem an unfair result to the settling publishers.”
