Home » Apple, Big Publishing, Legal Stuff » DOJ is likely to lose e-book antitrust suit targeting Apple

DOJ is likely to lose e-book antitrust suit targeting Apple

12 April 2012

From CNet:

The U.S. Justice Department’s legal pursuit of Apple for alleged e-book price fixing stretches the boundaries of antitrust law and is likely to end in defeat.

That’s what happened in 1982, when an embarrassed Justice Department admitted its antitrust lawsuit against IBM was “without merit” and abandoned the case. And in 2001, a federal appeals court nixed the Justice Department’s ambitious attempt to rewrite antitrust law by carving Microsoft into two separate companies.

“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. (See CNET’s list of related articles and an explanation of e-book 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 Picholinerestaurant, which boasts a “Best of Award of Excellence” from Wine Spectator magazine. The key point is that Apple wasn’t present.

The Department of Justice “has a far better case against the publishers than Apple,” saysDominick Armentano, professor emeritus of economics at the University of Hartford and author of Antitrust and Monopoly who’s now affiliated with the Independent Institute in Oakland, Calif. “If the CEOs of the various publishers got together in hotel rooms to discuss prices, they are sunk” and might as well settle, he says.

. . . .

During a press conference yesterday in Washington, D.C., Attorney General Eric Holder accused the companies named as defendants of concocting a “conspiracy.”

But even Holder’s version of events didn’t accuse the publishers of agreeing on specific prices. If they agreed on anything, it was on a business model — namely, that the so-called “agency model” that Apple’s iBookstore offered was better than Amazon.com’s wholesale model.

Both Apple and the publishers benefit from a series of U.S. Supreme Court precedents since the 1970s, which the Justice Department would probably like to undo. In the 1979 BMI vs. CBS case, the court ruled that “not all arrangements among actual or potential competitors that have an impact on price are per se violations.” And in a 2007 case, the court said that manufacturers can enforce minimum retail prices, which is one aspect of what publishers are accused of doing with e-books.

Link to the rest at CNet and thanks to Ruth for the tip.

Apple, Big Publishing, Legal Stuff

9 Comments to “DOJ is likely to lose e-book antitrust suit targeting Apple”

  1. Hmm. What are the DoJ’s options for dropping Apple as a named party in the suit, then?

    The case against the publishers is not only solid, it has recent precedent: the music industry’s settlement in 2000. “Minimum advertised pricing” was Universal, Sony, EMI, BMG, et al’s way of controlling prices at the big box stores.

    (I talked about this more in an old blog post, but I’m no lawyer, so don’t take my word alone)

    UPDATE: … and as I scroll further through my feed, I see that Hachette et al. have settled. That’s what I get for not reading all the way before posting.

    • It’s very unlikely the DOJ will drop claims against Apple while Holder is Attorney General. Big antitrust cases take years and years to resolve.

      The article mentioned the Microsoft case. One of the reasons that case fell apart is that the turnover in Justice Department antitrust litigators meant the attorneys who started the case and probably knew most about it were long-gone and newbies were trying to move it forward.

      If I were Apple’s general counsel and planned to drag the DOJ case out as long as possible, I would be more worried about the states’ antitrust case and the class-action case.

      • so what happens if whenholder gets what he deserves for operation fast and furious? heh. #gratuitouslibertariansnark (yes i know this isn’t twitter but damn the hashtag is a convenient way to succinctly express the mood of the statement!)

  2. The article over at The Verge which details the salient points seems to tell a different story. I’d link to it, but I have no idea how to do links on this thing.

  3. I don’t really agree with the article. One of the main reasons the DOJ would file suit is so that it can get discovery over your companies documents…

    What is the odds that a company like apple is going to be squeaky clean in every aspect of its business? ( I know of no wrong doing done by Apple).

    Every technology company that has been involved in a major anti-trust case has found the experience very damaging. IBM, Microsoft… these companies had a pyrrhic victory at best.

    • What excuse are the DoJ folks going to be using to get into anything but the iBookstore parts of Apple? At most, iTunes records, yes, but they have no reason to go looking at “every aspect of its business.” And while iTunes is arguably a market dominator now, it wasn’t when they invented that sales model. (Likewise, the iBookstore was hardly exercising any “monopolistic” power — it didn’t exist when this deal was done!)

      Microsoft’s case was different, in that it was the entire company being looked at for company-wide monopolistic practices. (And maybe all those DoJ folks crawling around it kept it from behaving as much like a monopoly as it would like. ;) ) With Apple, I don’t think “price fixing of books” is going to wander over to patents of iPhone stuff, deals with Foxcon, etc.

      • In microsofts case, the original cause of the legal action was a tiny part of its business. People forget that now. The original case was very small. Once the DOJ get involved, they tend to go on a fishing expedition. US law, and the US courts will not protect apple: the european competition authority is about to launch an investigation into apple, and it has authority to investigate anything it likes with barely any judicial oversight. The treaties between the US and EU will require the EU to share the information it obtains of wrongdoing. If there is any wrongdoing discovered by the EU it will provide evidence for the DOJ to launch its own investigations into the matter.

        This is the same process that happened to Microsoft: a simple problem with an internet browser ended up in a decade long investigation into its entire business.

  4. Apple isn’t the primary target of this lawsuit. They were just the facilitators of the publishing industry’s nefarious activities. I’m a little surprised Apple hasn’t settled. They should have learned from Microsoft’s experience. Microsoft would have been far better off to settle that case.

  5. I’m sure the reason three of the companies settled was to avoid discovery and having the DOJ dig around where they might discover all sorts of interesting accounting tricks and anoalies that skirt the edge of the law. The fact is whether you are right or wrong should not affect your judgment (unlike John Sergent) and if it’s cheaper to settle, then settle. Macmillan may regret their stance.

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