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Ebook Case Injunction Dismisses Most-Favoured Nation Clauses in Contracts

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U.S. Judge Denise Cote handed down her final order in the eBook antitrust case against Apple.

While her ruling is mostly in line what the U.S. Department of Justice (DoJ) wanted, it could have been much worse for Apple. Most notably, Apple won’t be allowed to enforce most-favoured-nation clauses (MFNs) with any eBook publishing contracts for the five years. The MFN clauses prevented eBook retailers from undercutting Apple.

Judge Cote’s injunction forbids Apple from enforcing most-favored-nation clauses in any ebook publishing contracts for five years, and also forbids the company from entering into any book publishing contracts that contain them for five years. Apple had wanted this provision to be less broad, relating only to MFN clauses with the five publishers in the case who have already settled. Instead, it applies to all publishers.

While the judge had previously indicated that she wouldn’t want to regulate the App Store, her ruling may come as a disappointment for the DoJ, which went after Apple to change its in-app purchase policies. Judge Cote, however, ruled that Apple is not required to let Amazon and Barnes & Noble sell its eBooks on the iBookStore without handing the company its usual 30% cut.

Apple will need to negotiate new contracts with the publishers, which settled with the DoJ and the following order: HarperCollins, Hachette, Simon & Schuster, Penguin, and Macmillan.

Other great news for Apple that it can continue negotiations with its own terms because the anti-trust case applies only to eBooks.

Part of the DoJ’s request to ensure the company won’t fall into temptation ever again, Apple will be monitored for two years by a court-appointed External Compliance Monitor. The good news for Apple is the monitoring will be limited to its eBooks business only.

The penalties will be set by a separate jury next year, and the picture doesn’t quite look bright for Apple: the penalties could go up to hundreds of millions of dollars.

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