This post is not meant as a pro-Apple (or any other company) post. I am serious in my question, as I have read all I can find and still don’t understand the ruling:
I understand Apple had a pretty ugly contract/agreement they expected publishers to sign (particularly independent publishers/individuals) if their material was to be carried by iBooks.
BUT - I’m trying to figure out how antitrust plays in - Apple didn’t force anyone to sign up with them. They laid pricing guidelines (as many other companies do in many differing categories of products) as part of the “deal” if you wanted to sell through them. 100% of those publishers had the right to not choose Apple’s iBooks format -
Further, as Apple said in their defense, eBook prices have fallen since Apple joined the fray, with or without the agreement/use policy in place. I don’t see how consumers were harmed (indeed, they benefit with competition).
IN other words - my question is: What, exactly did Apple do wrong (legally)? How did they harm consumers? Indeed, WHO was harmed- particularly to the tune of $450million?
“IN other words - my question is: What, exactly did Apple do wrong (legally)?
First sentence of the Sherman Act. 15 U.S. Code P1
“Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”
How did they harm consumers?
Totally irrelevant but since you ask, ebook prices jumped up 30 to 50% immediately upon implementation of the contracts.
” Apple didn’t force anyone to sign up with them. “
No, but Apple conspired with them fix prices higher than the present market.
“They laid pricing guidelines (as many other companies do in many differing categories of products) as part of the “deal” if you wanted to sell through them. 100% of those publishers had the right to not choose Apple’s iBooks format “
You are missing the point. Apple conspired with the publishers to set pricing guidelines for the publishers, NOT just what Apple would pay for the books.
The publishers conspired amongst each other to fix prices and Apple was a part of that conspiracy.
I would not consider it "ugly." In fact it was pretty much similar to the contract used in the App store. Apple merely required that Apple's customers would not be put in the position of being forced to pay higher priced books than were available elsewhere. The publishers were free to continue selling books on the wholesale model as they chose, but if a major retailer started undercutting prices again, as Amazon had done, then the same ebook on the Apple bookstore had to be available at the same price.
Even Judge Denise Cote stated as a matter of law and fact that the contract with the publisher was perfectly legal. The lawyers of the publishers all signed off on it. The DOJ lawyers also agreed it was perfectly legal. . . and similar to other contracts executed between retailers and suppliers using an agency model which contained what was being called a "most favored nation clause." It was, in fact, an advancement of competition.
Further, as Apple said in their defense, eBook prices have fallen since Apple joined the fray, with or without the agreement/use policy in place. I don’t see how consumers were harmed (indeed, they benefit with competition).
Before Apple entered the e-book market, there simply WAS no "fray", because Amazon with its 90% share, was keeping all significant competition out of the market. What "competition" in e-books there was, came from people who had bought reading devices that had systems incompatible with Amazon's Kindle system and could not load apps to install a Kindle App—those were only available from micro-monopolists with captive customers, or were non-A list ebooks available from their publishers only. There literally was no competition from Amazon, who was keeping competition out of the market, even from the publishers themselves, by pricing the best-selling and A-List eBooks—those that account for approximately 80% of the profitability in the eBook market—at 60% of the lowest wholesale cost eBook! No reasonable competition could open an eBook store guaranteed to lose 40%-50% — taking a loss of between $5 and $8 per eBook—on 80%, the vast majority of its sales, merely to be in that market!
IN other words - my question is: What, exactly did Apple do wrong (legally)? How did they harm consumers? Indeed, WHO was harmed- particularly to the tune of $450million?
That was what I've been trying to get through to some people on here. That is what the Rule of Reason, which the US Supreme Court 2004 Areeda & Hovenkamp decision and the got more explicit and set down rules in the 2007 Leegin decision, is all about. . . and which these people keep obfuscating what I write. That is why I call them out when they keep repeating the same non-responsive claims. They simply REFUSE to budge from a know-nothing attitude. . . despite the facts in front of their faces. It doesn't take a genius to see that a definition is "definitive" and that LIBERALS are the ones who change words to mean what THEY want them to mean as they go along to get the result they want on a whim, not what the law actually says.
The Rule of Reason says the government has to DEMONSTRATE that the public has to have been substantially damaged by the accused activity.
The defense only has to PROVE that by their activity, COMPETITION was increased. It doesn't even have to be a substantial increase in competition, only that competition is increased. PERIOD. What is hard to understand about that?
Price is NOT a question in this competition equation. Prices go up and down all the time due to many market forces.
Since Apple could easily demonstrate that before Apple's entry to the eBook market, Amazon literally dominated the eBook market with a 90% share and could dictate retail prices to the publishers—prima facie evidence of that domination—and that after Apple's entry, Amazon's market share dropped to only 60% and its ability to dictate retail pricing had been broken, competition was obviously and massively increased.
The Rule of Reason, as established to be used by the lower courts by the US Supreme Court, to be applied to a vertical participant in such activity, is did competition increase due to the defendants' actions. If it competition increased, then the spirit of the anti-trust law was met, increasing competition, and the defendant is not liable. It is therefore obvious Apple met the burden required by the Supreme Court to be shown, Apple, by definition in law, had NOT violated anti-trust law. The anti-trust laws were NEVER intended to protect a monopoly, but that is what the DOJ and the courts in this case have come down to, corrupting the LAW by using the rule of Men.
District Trial Judge Denise Cote, who had ASKED to try this case from the District head judge, admitted to have determined from the beginning that price increases was the only evidence she needed to prove damages to the consumer, an ignorant LIBERAL viewpoint not based in any economic facts, theories, or jurisprudence. For Cote, everything else was irrelevant. To her, the prices went up was proof enough. . . but it isn't. An unsustainable market model is, in and of itself anti-consumer, damaging them in the long-run, but Cote did not want to hear any testimony about that. Her ignorance of economics trumped all of that. All she could see was retail prices went up after Apple entered the market.
Judge Cote also had made her determination of GUILT before reading Apple's response or hearing any testimony at trial, and announced she had written 80% of her decision before the trial had even begun. She also announced this conclusion publicly. This is a practice she is well known for. . . and one of the reasons she has the reputation as the worst "judge" in the district. She already KNOWS before the trial starts how she is going to rule and excludes any testimony that doesn't support her pre-judicial opinion. What she doesn't exclude that doesn't match her pre-assumed conclusion, she assumes are lies. You can see that in her written decision where every testimony of Apple witness is concluded by her to be false or discounted, even when supported by other evidence.
Had Judge Denise Cote not EXCLUDED the testimony of economists from the trial, any economist about what the trial was about they would have testified that increasing price is a naturally expected result of BREAKING the artificial anti-competition barriers erected by a monopolist to the entry of competition they would naturally have to increase to their natural, sustainable, competitive market prices! Instead, Cote took the word of the Department of Justice's LAWYERS that price increase was all that had to be shown to prove anti-competitive behavior in concert.
It seems to me, as an economist, that the consumers who bought the eBooks at the new prices after Apple entered the market and BROKE Amazon's predatory pricing, willing bought those eBooks at the prices then offered. That, under well established economic laws, shows that those consumers were willing buyers buying products from willing sellers at prices agreeable to both. That means that the prices established by the market place of eBook competition, absent the completely non-market driven artificial anti-competition pricing put in place by a 90% Market Gorilla wiling to accept huge losses on each sale to keep out any competitor, were entirely acceptable prices to the purchasers, they were happy with the prices they paid for the eBooks they bought by the millions. . . and the market more than DOUBLED after Apple entered before Amazon filed its antitrust complaint with the DOJ!