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Apple News: Electronic Book Price Fixing Settlement; IBM Partnership; EU Concerns About In-App Purchases By Children

Last week, the Office of the Massachusetts Attorney General (AG) announced a settlement with Apple Inc. regarding electronic book (a/k/a e-book) price fixing allegations. AGs from 33 states had filed lawsuits against the company:

"Contingent upon the resolution of Apple’s appeal of a U.S. District Court verdict from 2013, consumers nationwide will receive a total of $400 million, with Massachusetts consumers estimated to receive more than $12 million in refunds.The agreement also remains subject to approval by the U.S. District Court for the Southern District of New York."

Additional details about the Apple settlement:

"The exact amount of consumer relief is contingent upon the affirmation of a U.S. District Court’s July 2013 verdict that Apple violated federal and state antitrust laws by orchestrating a conspiracy with five publishers – Penguin Group (USA), Inc. (now part of Penguin Random House); Holtzbrinck Publishers LLC d/b/a Macmillan; Hachette Book Group Inc.; HarperCollins Publishers LLC; and Simon & Schuster Inc. – to artificially raise prices for E-books between 2010 and 2012 in order to eliminate retail price competition."

Information about the publishers' settlement:

"E-book purchasers nationwide are already entitled to refunds totaling $166 million in settlement funds paid by the five publishers involved in the conspiracy. Massachusetts consumers are due more than $5 million from these funds in compensation pursuant to these settlements."

Martha Coakley, the Massachusetts AG, said in a statement:

“Price collusion amongst competitors is unacceptable and this agreement will ensure that those responsible are held accountable... We are hopeful that this settlement will go through so that affected consumers can receive significant refunds as a result of these violations.”

New York State AG Eric T. Schneiderman said in a statement:

"... the biggest, most powerful companies in the world must play by the same rules as everyone else... We will continue to work with our colleagues in other states to ensure that all companies compete fairly with the knowledge that no one is above the law.”

Good. I applaud the AGs with this enforcement action. In related news, Apple announced a partnership with IBM Inc. to:

"... redefine the way work will get done, address key industry mobility challenges and spark true mobile-led business change—grounded in four core capabilities:

1. a new class of more than 100 industry-specific enterprise solutions including native apps, developed exclusively from the ground up, for iPhone and iPad;
2. unique IBM cloud services optimized for iOS, including device management, security, analytics and mobile integration;
3. new AppleCare® service and support offering tailored to the needs of the enterprise; and
4. new packaged offerings from IBM for device activation, supply and management."

Meanwhile, many parents in Europe are concerned about how app-based games are marketed. Engadget reported last week:

"... while Google addressed its concerns around games with in-app purchasing, Apple has yet to offer a strategy. Following hordes of complaints by outraged parents, the EU asked both companies to implement changes to the way they sell such apps in their stores. Those include not misleading consumers about supposedly "free" games, not "directly exhorting" children to buy in-game items, thoroughly informing customers about payment arrangements and forcing game-makers to provide contact information."

The request by the European Commission and the Consumer Protection Cooperation (CPC) Network included:

"1. Games advertised as "free" should not mislead consumers about the true costs involved;
2. Games should not contain direct exhortation to children to buy items in a game or to persuade an adult to buy items for them;
3. Consumers should be adequately informed about the payment arrangements for purchases and should not be debited through default settings without consumers’ explicit consent;
4. Traders should provide an email address so that consumers can contact them in case of queries or complaints."

The Engadget news article also included this statement by Apple:

"... over the last year we made sure any app which enables customers to make in-app purchases is clearly marked. We've also created a Kids Section on the App Store with even stronger protections to cover apps designed for children younger than 13. These controls go far beyond the features of others in the industry. But we are always working to strengthen the protections we have in place, and we're adding great new features with iOS 8, such as Ask to Buy, giving parents even more control over what their kids can buy on the App Store..."

This statement was after a $32.5 million settlement in March 2014 with the U.S. Federal Trade Commission (FTC):

"... a final order resolving FTC allegations that Apple Inc. unfairly charged consumers for in-app purchases incurred by children without their parents’ consent... by March 31, 2014, Apple must change its billing practices to ensure that it has obtained express, informed consent from consumers before charging them for in-app purchases. Apple also must provide full refunds, totaling a minimum of $32.5 million, to consumers who were billed for in-app purchases that were incurred by children... Should Apple issue less than $32.5 million in refunds to consumers within the 12 months after the settlement becomes final, the company must remit the balance to the Commission. By April 15, 2014, Apple must notify all consumers charged for in-app purchases with instructions on how to obtain a refund for unauthorized purchases by kids."

In-app purchases can be expensive. Experts advise parents to closely monitor their children's game activity.

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