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.
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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.