Apple eBook Antitrust Case
going to US Supreme Court?
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Posted on 10/29/2015 11:21:38 PM PDT by Swordmaker
NEW YORK (Reuters) - Apple Inc has asked the U.S. Supreme Court to overturn an appellate court decision that found the iPad maker conspired with five publishers to increase e-book prices. Apple asked the high court on Wednesday to review a June ruling that favored the U.S. Department of Justice, and found the company liable for engaging in a conspiracy that violated federal antitrust laws.
If upheld, the decision would also force Apple to pay consumers $450 million under a 2014 settlement with 33 state attorneys general and consumers that was contingent on the company's civil liability being upheld. Apple in its petition said the June decision by the 2nd U.S. Circuit Court of Appeals in New York contradicted Supreme Court precedent and would "chill innovation and risktaking."
"The Second Circuit's decision will harm competition and the national economy," Apple wrote.
(Excerpt) Read more at news.yahoo.com ...
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Assume here they are talking about identical titles carried by different e-book platforms. How do price copycats get stopped anyhow? One fellow raises his price, the others view that as an opportunity to get more as well, and no “collusion” needed.
The success of the states' lawsuit against the tobacco companies laid the ground work for this and wetted the appetites of the states' attorneys for big payouts.
This is no more than suing for dollars. Either the big corporations fold; making deals in which they pay but admit to no wrong doing or fight in court but risk huge judgements.
It would never occur to judges or juries that prices like water seek their own level.
The tobacco deals were not about alleged barriers to fair competition, but about alleged vice.
IIRC, some of the earliest antitrust action was in situations like Rockefeller’s Standard Oil company, in which agreements were made with product transportation companies to favor one brand of a fungible product over a different brand. It’s harder for water in a sealed reservoir to find its level with anything else.
The attorney generals don’t care what the issue is as long as they can extort cash out of the company.
My point is not about anti-trust but about lawyers seeking money.
True there’s always the temptation to be a selfish, self-styled “hero” with no larger connection to what is fundamentally right.
I don’t pretend to be able to fathom all the issues. God may furnish insights. In the meantime is it blasphemous to say that we are glad we can get e-books and to wish this were the worst problem to address in the world.
There are Federal Anti-Trust laws? Who knew?
They aren't. During the period in question, the price of books in general actually went down overall, the only difference was that Apple entered the market that Amazon had been the monopoly share holder with a whopping 90% share, and offered a different model of sales than the current wholesaler to retailer model in which Amazon was selling ALL Best Sellers and A list titles of the publishers for 30% below wholesale price of $9.99, freezing any competitors out of the market by making the 80% bread-and-butter profitable book sales of any book seller completely unprofitable! It was how Amazon maintained their monopoly position in the book market. They claimed it was a "loss leader" so they could sell their Kindle Readers at cost. However, even the publishers themselves could not compete against the monopoly using predatory pricing that were below their wholesale cost to them and every other competitor, and no competitor could possibly stay in business without meeting Amazon's negative and profit less pricing on the 80% of the books most people buy!
When Apple looked to enter the e-book market with the introduction of their iPad in 2010, they independently approached the big publisher separately to offer them the same contract they use for app sales. The publishers would use the soon to be announced Apple Book Store, selling their titles for what they wanted with three tiers of pricing, with-in per-volume price CAPS, Apple would charge them their normal selling agent fee for service of 30%, which includes providing access to Apple's customer's who'd use the store, Apple's online payment, creditcard database with over 600 million buying customers, and Apple's online delivery systems. In other words, Apple proposed replacing the ill fitting wholesale model—in which the publishers sold X number of licenses for the book to a vender who'd then proceed to sell those e-book licenses for whatever price the vendor chooses from inventory until they were depleted and then order more—with an agency model in which the publisher retains ownership of the licenses to the e-books and sells directly through Apple's Book store themselves at a retail price the publisher selects, paying an agency fee, or commission, to Apple for access to Apple's services and store. Apple also required that the publisher not permit any competitor to sell the same title at a lower price than they offered the title to Apple's customers.
None of what Apple did was at all illegal. In fact, it was perfectly legal. the DOJ claims however that the results of Apple's perfectly legal acts was somehow illegal because some prices went up, even though the overwhelming evidence is that the only reason those prices were artificially low in the first place was because of arguably market damaging anti-competitive actions by the monopolist market leader keeping them low which had the effect, regardless of the stated reason, of preventing entry of any viable competition. (Amazingly, Judge Côte accepted the DOJ's claim that couldn't possibly be true because Apple had indeed entered the market. . . ignoring the inconvenient facts that 1) Apple, unlike your average startup e-book seller had almost a hundred billion dollars in cash backing such a venture, 2) they were now in the process of slapping Apple down for daring to make the market profitable for competition, 3) the publishers had capitulated under threat of prosecution because they did not have deep enough pockets to defend themselves, and were unable themselves to compete in their own market with a product THEY produced and still make a profit (!), and 4) other e-book marketers who'd tried it were not able to compete except in niche markets which refused to allow Amazon to sell their e-books. So they used the fact that Apple had "successfully entered the e-book market as proof that Amazon was not using predatory pricing to keep competition out, as they were prosecuting Apple for offering a way to fascilitate those price changes that allowed Apple to actually successfully enter the market, which they claim were not keeping competitors out in a case instigated by the company which had been using its artificially low pricing, fighting to maintain its control of the market and keep competition out. Right, logical. )
There was no collusion, no "secret meetings" of Apple and all of the publishers as Judge Côte created in her own mind to convict Apple of being a "ring leader" in a "price setting conspiracy." The only monopolist involved was Amazon, with its predatory pricing on the only e-books that really mattered, the best sellers and the A list books. . . and it was Amazon that filed the complaint claiming Apple and the publisher committed illegal price fixing, despite evidence that overall e-book prices went DOWN and that competition was increased after Apple entered the market!
This is kind of thick manifesto/screed, label laden and name scanty, and thus hard to follow.
A clarification would help.
It's a complex case that should never have been brought.
Essentially, Apple was accused of doing perfectly legal things that the DOJ said that when taken in total resulted illegal price fixing because prices went up on certain e-books, while it actually caused e-book prices in general to go down.
However, Judge Denise Cote (Liberal Democrat, appointed by President Clinton), ignored the explicit guidelines set down in dicta from the Supreme Court on just such cases to reach her judgement, which she actually announced before the trial even commenced, saying as far as she was concerned, based solely on its accusation, the DOJ had already proved its case before she heard an ounce of testimony or seen any evidence! (Judge Cote has a reputation in her district for prejudicial, pre-trial decisions in favor of the government.)
The Supreme Court dicta specifically said that if there were legitimate legal business reasons for doing something, and even if it has the effect of causing prices to rise, that lower courts were to construe such activity as legal, and specifically, that it is NOT illegal price fixing. All of that applied. Judge Cote ignored that specific directive by the US Supreme Court in which the Court explicitly outlined as how they wanted these matters handled, she can't do that, but she did.
She declared before the trial, before hearing any evidence, that she agreed with the DOJ, that Apple had conspired with the publishers (even though Apple had not met with them in concert) to "fix prices" on e-books. However, it was Amazon. . . the complaining party. . . that was using predatory pricing, something that is explicitly against anti-trust law, to prevent competition from entering the e-book market. In a non-Jury trial, Judge Cote ruled that Apple was guilty of conspiracy to illegally fix prices and anti-trust activities.
She then proceeded to appoint an attorney, a man she was living with, who knew NOTHING about anti-trust law, as a court appointed special monitor with extraordinary power, to monitor Apple's day-to-day operations to assure they did no more anti-trust activities, and ordered Apple to pay him whatever he chose to bill them. He chose $1200 an hour. He then hired another attorney who DID know anti-trust law to advise him at $1000 an hour, also billed to Apple, and both of them went on fishing expeditions through Apple's operations, which Apple vehemently objected to, demanding documents and interviews far beyond the scope of the e-books decision.
Apple appealed.
Two judges of the 2nd appellate court district (IIRC) agreed that Judge Cote had the power to do what she did, while the third was appalled at the decision, and even more appalled at his colleague's upholding of Cote's decision, citing the specific Supreme Court's dicta on the matter and calling the two other justices on his bench on the carpet. . . an almost unheard of thing to do in a judicial dissent. . . for ignoring the US Supreme Court's precedent on the issue.
Instead of asking for an en banc re-consideration of the entire district, Apple is going to the US Supreme court, because of Cote's and the Appellate court's ignoring of the Supreme Court's explicit directives on how to handle these cases.
The appeal to en banc might be what is needed before the USSC would even listen, however. Just saying. You can always get one rotten apple.
The USSC will sometimes step in if the lower courts have been egregious in ignoring precedent they themselves have set, especially if it already at an appellate court level. . . but sometimes they don't. It's catch as catch can. This one, however, is important as it touches on a lot of anti-trust rulings and needs clarification.
I’ve located Apple’s appeal brief to the USSC, if you can call 213 pages brief. You can read it here:
I am wading through it now.
Wow, I’ve never seen such a clear recitation of the facts!
Interesting...
Thanks!
Ed
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