From Legal Minimum:
As I’ve been reviewing the documents and the posts around the Web on the Apple e-books price-fixing litigation, I’ve seen a few things that it seems people don’t understand. To help give some background I’ll explain so that you can have an easier time following this important litigation.
. . . .
1. So what’s the illegal activity in this situation? The technical term is something called horizontal price maintenance. There’s two types of price maintenance: horizontal and vertical. Vertical is the one we’re more familiar with: the manufacturer sets the price and everyone else agrees to pay it. Horizontal is less common because it requires a conspiracy among competitors: it occurs when everyone at a certain level in the market (e.g. the publishers) agrees on the cost for a certain good (e.g. e-books).
It’s illegal because it harms consumers. Everyone in the chain of commerce before the consumer actually benefits from this. The DOJ has explained it in the Apple context so let’s use that: publishers get higher prices therefore higher profits, and Apple gets a percentage of those prices therefore higher revenues as well as gets to make sure its competitors can’t undercut it. (And don’t forget authors: higher prices means higher royalties for them too.) The only people who lose out are consumers. That’s why it’s illegal: because if it wasn’t then everyone would do it.
. . . .
3. Why did the DOJ sue publishers that were willing to settle? Although the DOJ brought charges against 5 publishers, 3 of them were willing to settle immediately. So why charge them? Two reasons:
- If the DOJ gets a settlement from a publisher, it has a contract with them. If the publisher breaches the contract, the DOJ can sue them. But if it charges first and settles in the context of the trial, then it gets a judgment. If the publisher breaches a judgment, that’s contempt of court.
- Antitrust laws exist to protect the public, so it’s important not to settle a criminal offence in quiet behind closed doors. Think of this as similar to a plea bargain: even where both sides agree on a plea charges still have to be filed so that a judge can review the arrangement and decide whether it should be acceptable. In an antitrust case there’s also a law called the Tunney Act that requires the court to solicit, receive, and review comments from the public before accepting a settlement, which has happened here and about which I’ve written a few times (links below).
Link to the rest at Legal Minimum