Legal Experts Suggest Justice Department Unlikely to Win Antitrust Suit Against Apple

[MacRumors]

In the wake of yesterday's announcement that the U.S. Department of Justice has filed an antitrust lawsuit against Apple and a number of book publishers over alleged price fixing, CNET notes that the government may have a hard time winning its case against Apple. The publishers may, however, find themselves on the losing end of the case should they be unwilling to settle.

"It's a harder case against Apple than the publishers," says Geoffrey Manne, who teaches antitrust law at the Lewis and Clark Law School in Oregon and runs the International Center for Law and Economics.

One reason lies in the Justice Department's 36-page complaint, which recounts how publishers met over breakfast in a London hotel and dinners at Manhattan's posh Picholine restaurant, which boasts a "Best of Award of Excellence" from Wine Spectator magazine. The key point is that Apple wasn't present.

But even the case against the publishers is not a sure thing for the Department of Justice. Some experts suggest that even amid claims that the publishers met to discuss a shift to an agency model being championed by Apple, the publishers may not be found guilty of antitrust violations.

Specifically, the Supreme Court has ruled in the past that pricing arrangements among competitors are not automatically considered to be violations of antitrust law, and that the setting of minimum retail pricing by manufacturers is a permitted policy.

Several of the publishers involved in the lawsuit have already settled, but Macmillan and Penguin are holding out along with Apple to fight the case. Almost immediately following the filing of the Department of Justice's lawsuit, a number of states filed their own claims against the companies, citing customer overcharges of over $100 million since the move to an agency model of pricing. Regulators in other countries are also reportedly looking at whether they wish to take action on the matter.

Article Link: Legal Experts Suggest Justice Department Unlikely to Win Antitrust Suit Against Apple

 

[clibinarius]

For all my complaints about Apple, 20% per item isn't much at a retail price point. It'll be a glorious day when an author is his own publisher and puts all the other fools out of business. Apple can offer this.

 

[brock2621]

So they weren't even present, and the publishers control the price? Umm.... why is Apple being sued again?

 

[bad03xtreme]

Another waste of taxpayer dollars...

 

[Born Again]

I believe apple will settle

 

[apple4kim]

We want free books!!!

[url=http://cdn.macrumors.com/im/macrumorsthreadlogodarkd.png]Image[/url]


In the wake of yesterday's announcement that the U.S. Department of Justice has filed an antitrust lawsuit against Apple and a number of book publishers over alleged price fixing, CNET notes that the government may have a hard time winning its case against Apple. The publishers may, however, find themselves on the losing end of the case should they be unwilling to settle.But even the case against the publishers is not a sure thing for the Department of Justice. Some experts suggest that even amid claims that the publishers met to discuss a shift to an agency model being championed by Apple, the publishers may not be found guilty of antitrust violations.

Specifically, the Supreme Court has ruled in the past that pricing arrangements among competitors are not automatically considered to be violations of antitrust law, and that the setting of minimum retail pricing by manufacturers is a permitted policy.

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Several of the publishers involved in the lawsuit have already settled, but Macmillan and Penguin are holding out along with Apple to fight the case. Almost immediately following the filing of the Department of Justice's lawsuit, a number of states filed their own claims against the companies, citing customer overcharges of over $100 million since the move to an agency model of pricing. Regulators in other countries are also reportedly looking at whether they wish to take action on the matter.

Article Link: Legal Experts Suggest Justice Department Unlikely to Win Antitrust Suit Against Apple

 

[Konrad9]

For all my complaints about Apple, 20% per item isn't much at a retail price point. It'll be a glorious day when an author is his own publisher and puts all the other fools out of business. Apple can offer this.

So can just about everyone else, and so can torrenting. Don't want to pay ANY publisher or hosting site? Put your work on a torrent.

 

[kolax]

For all my complaints about Apple, 20% per item isn't much at a retail price point. It'll be a glorious day when an author is his own publisher and puts all the other fools out of business. Apple can offer this.

Apple already does offer this.

 

[spiderman0616]

If Apple or the other publishers lose this battle, you are going to see Amazon being turned into the Walmart of e books. They can just undercut like crazy until everyone else shrivels and dies. It's suing one problem and protecting a whole other problem.

I personally like the agency model because it actually supports the industry. I'm not defending Apple's methods, because I still don't know if they're guilty of anything illegal or not, but I'm just saying that I'm not in favor of paying less for something if in turn it kills the company providing the content to me.

 

[diamond.g]

So they weren't even present, and the publishers control the price? Umm.... why is Apple being sued again?

I thought it was due to the "Most Favored Nation" clause?

 

[Gasu E.]

Personally, I think consumers can take care of this by shopping wisely. Don't be confused by all that "marketing"-- all books are essentially the same, really just words on a page. A smart consumer can get the best value by looking for extremely big books with lots of words-- those tend to give you the best value in terms of words per dollar.

Honestly, the best thing the government could do is to require unit pricing. Every publisher should be required to print the number of words in each book. The retailers should have to provide unit price labels indicating the price per word. Then it would be up to each consumer to make the right choice.

 

[Evan_11]

If Apple or the other publishers lose this battle, you are going to see Amazon being turned into the Walmart of e books. They can just undercut like crazy until everyone else shrivels and dies. It's suing one problem and protecting a whole other problem.

I personally like the agency model because it actually supports the industry. I'm not defending Apple's methods, because I still don't know if they're guilty of anything illegal or not, but I'm just saying that I'm not in favor of paying less for something if in turn it kills the company providing the content to me.

I wouldn't worry about the publishers or god forbid, Apple. There's no doubt that Steve Jobs rigged the deck when he pushed publishers towards the agency model. He wanted to pull Amazon's only advantage away from the iPad release.

As far as Amazon undercutting, I don't see what the problem is. I bought a Kindle so that I could read e-books cheaper than buying soft and hard cover versions. The agency model actually makes the ebook more expensive for new releases since the hard cover is usually heavily discounted by ALL retailers, not just Amazon. It's a screwed up system so I'm all in favor of righting it in some way.

 

[pandamonia]

MAP PRICING IS ILLEGAL IN EU.

Good luck Apple.

They will tear you a new one.

Good job you can afford it.

 

[LaWally]

So they weren't even present, and the publishers control the price? Umm.... why is Apple being sued again?

Apple is being sued because it has agreements with the publishers who are accused of trying to use the agency model to allegedly price fix and is therefore considered complicit in the act. Apple is in effect "aiding and abetting" the alleged price fixing in the government's eyes by providing a vehicle through which the publishers can price fix.

 

[Amazing Iceman]

Another waste of taxpayer dollars...

Yep. The DOJ should be more concerned about regulating the price of gasoline and food, so we the consumers don't have to keep paying those outrageous prices. People can choose to buy or not to buy a book, but people have no other choice than to buy gas and food.

What happened to paying under $1 per gallon?

 

[KPOM]

I thought it was due to the "Most Favored Nation" clause?

The MFN clause itself is not a problem. The DOJ was alleging that Apple participated in a conspiracy to engage in price fixing. If they participated in a meeting where they and the publishers discussed a strategy to engage in price fixing, that could be a problem.

However, it would not be a problem if Apple simply individually negotiated terms with each publisher, even if the publishers told Apple what other deals they received, or if Apple told the publishers what other publishers were willing to accept. Unilateral action is OK, and revealing other deals is a legitimate attempt to gain leverage. That's the crux of Apple's defense in the separate class action lawsuit.

 

[pcharles]

When was the last time that the Justice Department filed something, and really won? I swear they are just "filing" to make it look like they have our interests at heart.

 

[GadgetDon]

I wouldn't worry about the publishers or god forbid, Apple. There's no doubt that Steve Jobs rigged the deck when he pushed publishers towards the agency model. He wanted to pull Amazon's only advantage away from the iPad release.

As far as Amazon undercutting, I don't see what the problem is. I bought a Kindle so that I could read e-books cheaper than buying soft and hard cover versions. The agency model actually makes the ebook more expensive for new releases since the hard cover is usually heavily discounted by ALL retailers, not just Amazon. It's a screwed up system so I'm all in favor of righting it in some way.

The problem is that Amazon was well on its way to having a monopoly on ebook sales. They were using their strength in the traditional book market to force the agreements they wanted on publishers, and were selling both books and kindles below market to drive everyone else out of the market.

And historically, when a single company has a monopoly, it's not good. It limits innovation, and there's an overwhelming temptation to use that control in one arena to force people to do what you want in another arena. (And given the way Amazon used their traditional book control to reinforce their ebook position, seems unlikely that they'll resist it.)

 

[spiderman0616]

I wouldn't worry about the publishers or god forbid, Apple. There's no doubt that Steve Jobs rigged the deck when he pushed publishers towards the agency model. He wanted to pull Amazon's only advantage away from the iPad release.

As far as Amazon undercutting, I don't see what the problem is. I bought a Kindle so that I could read e-books cheaper than buying soft and hard cover versions. The agency model actually makes the ebook more expensive for new releases since the hard cover is usually heavily discounted by ALL retailers, not just Amazon. It's a screwed up system so I'm all in favor of righting it in some way.

Fair enough--honestly, I don't care whether I buy the book from Amazon or iBooks. I think the iBooks app is much better than the Kindle app, but in the end, both are just ways for me to stare at words on a page.

What I'm more worried about is letting Amazon have all the control over pricing and the publishers having none of the control. Maybe authors will start going the "offer it for a nominal fee on my website" route in the future, much like Louis CK did with his last standup video.

Hopefully there's a happy medium somewhere. But I don't think the purpose of ebooks was to ever charge you any less. ebooks are about convenience.

 

[gnasher729]

The MFN clause itself is not a problem. The DOJ was alleging that Apple participated in a conspiracy to engage in price fixing. If they participated in a meeting where they and the publishers discussed a strategy to engage in price fixing, that could be a problem.

However, it would not be a problem if Apple simply individually negotiated terms with each publisher, even if the publishers told Apple what other deals they received, or if Apple told the publishers what other publishers were willing to accept. Unilateral action is OK, and revealing other deals is a legitimate attempt to gain leverage. That's the crux of Apple's defense in the separate class action lawsuit.

Well, Apple offered the publishers the same deal as the music industry and to software developers, so that should be fine. And it was a deal that they all liked and agreed to, which is also fine. And then the publishers went to Amazon and said "look what a good deal Apple is giving us, we don't want your crappy deal" and Amazon had to improve its offer. That's also fine. In addition Apple said "look, I'm offering you a good deal, so I don't want you to turn around and offer anyone else a better deal, or my good deal is off the table". That's fine as well.

Unlike some people seem to believe, no book publisher is under any obligation to sell their books cheaply. They are also allowed to talk to each other, including at expensive restaurants, for example how they can all handle threats against their industry (like Amazon). The only thing that isn't allowed is that they would talk about not competing with each other. For example by agreeing what prices to charge for books between publishers that should be competitors. Publisher A saying to Publisher B: "I sell this book for $9.99, so you should sell your book for $9.99 as well", that is illegal. Publisher A saying to Apple "I want you to sell my book for $9.99", and Publisher B saying to Apple exactly the same thing by coincidence is perfectly fine.

 

[a.gomez]

they have no need to win - If the DOJ wins the suit they get to tell the publishers what to do - what Apple thinks is a mute point.

if they loose everything - they have 3 publishers already in agreement - the pricing system in the market is split.

this is over.

 

[bbeagle]

All these Fandroids who clammor that Apple should be slammed for this... do you get that it's possible that Apple might win even if they lose this lawsuit?

There is no problem with the Apple book store not having sale prices. The only thing that might be illegal/anti-competitive is Apple restricting the same price for e-books sold elsewhere.

Well, if the publishers lose this battle, the publishers will be upset, and the only way for them to keep e-book prices high would be to sell their books only to the Apple store. If all the publishers do this, Amazon won't have e-books to sell, thus Apple wins and controls the e-book market.

At this point, there is a monopoly, but there would be no problem with this monopoly, as Apple, the monopoly, is not doing anything wrong, they're not setting prices - the publishers are.

 

[farmboy]

I thought it was due to the "Most Favored Nation" clause?

That's not illegal.

 

[bbeagle]

When was the last time that the Justice Department filed something, and really won? I swear they are just "filing" to make it look like they have our interests at heart.

Correct.

And including Apple in this lawsuit could result in Apple counter-suing for defamation of character.

 

[IJ Reilly]

The MFN clause itself is not a problem. The DOJ was alleging that Apple participated in a conspiracy to engage in price fixing. If they participated in a meeting where they and the publishers discussed a strategy to engage in price fixing, that could be a problem.

However, it would not be a problem if Apple simply individually negotiated terms with each publisher, even if the publishers told Apple what other deals they received, or if Apple told the publishers what other publishers were willing to accept. Unilateral action is OK, and revealing other deals is a legitimate attempt to gain leverage. That's the crux of Apple's defense in the separate class action lawsuit.

QFT. The CNET article is heavily spun, which is not surprising considering who wrote it. Legal analysts are going to be all over the map at this point, if only because they've seen only the government's complaint, not Apple's or the publisher's responses. But if you quote libertarian think tanks you are going to get predicable results.

Obviously it's the publishers who are at the pointiest end of the stick, but I don't think Apple needs to have been present at any meetings to be found a party to price fixing. It's going to be difficult to claim that all of these publishers came to the same terms with Apple by mere coincidence. The one quoted email from Jobs pretty much refutes that theory anyway.

All antitrust cases are difficult for the government to prosecute. Citing the DoJ's failures in recent history isn't telling close to the whole story, since most of these cases never make it to trial. They are overwhelming settled out of court by consent decrees, in which the government typically gets at least some of the changes they are seeking. Mr. McCullagh doesn't share that little factoid with us because it doesn't make the government look blithering.