DoJ Asks Supreme Court to Deny Apple’s Appeal

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The US Dept of Justice filed its brief in response to Apple's Supreme Court appeal last week.

Arguing that the July 2013 antitrust ruling that concluded Apple was "a member of a horizontal price-fixing conspiracy was supported by overwhelming evidence", the DoJ asked the US Supreme Courts to refuse to hear Apple's appeal.

You can find the brief attached to this post as a PDF (*).

Last week's filing is the latest stage in a legal battle dating to 2010, when state and federal investigators started inquiries into allegations that Apple and five publishers (Hachette, Macmillan, Penguin, HarperCollins, and Simon & Schuster) had conspired to end Amazon's dominance and control of the rapidly growing ebook market.

The Price Fix Six collectively negotiated contracts which would give the publishers control over their  retail ebook prices. It also included a most-favored nation clause which would require each publisher to set the price in the iBookstore to the lowest price found in competing ebookstores, thus giving the publishers an incentive to force Amazon to accept the new terms (which it did in early 2010).

The US Dept of Justice, as well as several state's Attorneys General, investigated the conspiracy and filed charges against the Price Fix Six in 2012.  The five publishers settled in late 2012 and early 2013, but Apple chose to defend itself in court.

Following a three week trial in the summer of 2013, Judge Denise Cote issued a ruling in July 2013 which stated that Apple had committed a per se violation of US antitrust law when it acted as the hub for the publishers' conspiracy.

Following numerous petty appeals, that ruling was upheld earlier this year by the Second Circuit Court of Appeals, and Apple filed an appeal to the US Supreme Court in October.

Apple argued in its appeal that, under the rule of reason, it had not violated antitrust law. Several of the amicus echo that argument, and expand upon it.

Several parties have filed amicus briefs in support of Apple, including the ABA, B&N, and The Authors Guild, That brief showed a resounding lack of a valid legal argument, but the briefs filed by outside parties (including economists, a couple law professors, etc) presented better arguments that Judge Cote erred in her ruling, and that the appeals court was wrong to uphold that ruling (more on this later).

And last week the DoJ disagreed, arguing that price-fixing wasn't a legitimate way to increase competition (which makes sense, given that it prevents price competition). The DoJ's brief faults Apple for conspiring with the publishers to "to reduce Amazon’s dominance in the ebook market, not by introducing new goods or pricing policies that consumers would find more attractive than those that Amazon had previously offered, but by increasing the price (and thus reducing the attractiveness) of Amazon’s own wares".

P.S. A special thanks to Gary Price of InfoDocket for helping me get the filing.

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image by Håkan Dahlström

 

About Nate Hoffelder (11284 Articles)
Nate Hoffelder is the founder and editor of The Digital Reader: "I've been into reading ebooks since forever, but I only got my first ereader in July 2007. Everything quickly spiraled out of control from there. Before I started this blog in January 2010 I covered ebooks, ebook readers, and digital publishing for about 2 years as a part of MobileRead Forums. It's a great community, and being a member is a joy. But I thought I could make something out of how I covered the news for MobileRead, so I started this blog."

1 Comment on DoJ Asks Supreme Court to Deny Apple’s Appeal

  1. “… thus giving the publishers an incentive to force Amazon to accept the new terms…” The publishers already had plenty of incentive to force Amazon to accept new terms. They wanted to raise prices to protect their print business. A most-favored nation clause is common in business, and even Judge Cote noted this. The clause simply meant that Apple was entitled to the same deal the publishers made with anyone else.

    The publishers never offered Apple the same deal that they have given to Amazon before. Their goal from the very beginning was to find a way to raise prices, but they were afraid to take on Amazon if there was no other marketplace for their books. Apple refused to raise prices as high as they wanted, and also refused to allow them to charge more for ebooks than for hard covers.

    I have yet to hear a good argument for what Apple should have done in this case, other than to have stayed out of the ebook business. It’s also worth noting, the publishers eventually got their way. They are selling their books on an agency model, at higher prices as they wanted. Ultimately, I think that higher pricing will hurt them, but they’re entitled to set their own rates, and not have the government decide for them.

    It will be interesting to see what the Supreme Court decides.

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