Home » Amazon, Apple, Big Publishing, Legal Stuff » Apple Loses Federal Appeal in E-Books Case

Apple Loses Federal Appeal in E-Books Case

30 June 2015

From The Wall Street Journal:

A federal appeals court on Tuesday upheld a 2013 decision finding Apple Inc. liable for conspiring with publishers to raise the price of e-books.

The 2-1 ruling Tuesday by the Second U.S. Circuit Court of Appeals in Manhattan follows three years of litigation, millions of dollars in legal fees and a bold decision by Apple tochallenge the U.S. Department of Justice to a trial, even after all the publishers with which it was accused of colluding had settled their cases.

The iPhone maker is expected to pay $450 million, most of it to e-book consumers, as part of a November agreement with private plaintiffs and 33 states that joined the Justice Department’s 2012 lawsuit accusing Apple of violating civil antitrust law. The deal hinged on the outcome of the appeal. The penalty amounts to less than 3% of the Cupertino, Calif.-based company’s profit in the quarter that ended in December.

“We conclude that the district court correctly decided that Apple orchestrated a conspiracy among the publishers to raise e-book prices,” wrote Second Circuit JudgeDebra Ann Livingston. The conspiracy “unreasonably restrained trade” in violation of the Sherman Act, the federal antitrust law, the judge wrote.

. . . .

At the time, publishers were dissatisfied with Amazon’s aggressive discounts. Apple’s agreements ceded the power to set prices to the publishers, in what’s known as an agency model. But there was an exception: If another retailer were selling an e-book at a lower price, the publisher would have to match that price in Apple’s bookstore.

With a new outlet for their e-books, the publishers had the leverage they needed to reclaim some pricing power from Amazon, Justice Department lawyers said. Change was inevitable: The publishers couldn’t afford to sell their e-books in Apple’s store at Amazon’s discounted prices of $9.99 for most best sellers.

Prices on many e-books increased immediately. Lawyers for Apple said the company unwittingly facilitated the push against Amazon by the publishers.

But the Second Circuit majority said the evidence showed the technology company knew what it was doing.

“Apple understood that its proposed contracts were attractive to the publisher defendants only if they collectively shifted their relationships with Amazon to an agency model — which Apple knew would result in consumers facing higher e-book prices,” Judge Livingston wrote in a decision joined by Judge Raymond J. Lohier Jr.

Link to the rest at The Wall Street Journal (Link may expire) and thanks to Nirmala for the tip.

When PG first read the trial court’s opinion, he was impressed by two things:

  1. The good job the trial judge did in analyzing the evidence in the case and crafting an excellent opinion that was unlikely to be overturned on appeal.
  2. How amazingly inept the the price fixing conspirators in Big Publishing and Apple were. The evidence showed them to be a bunch of bumblers and their testimony during trial did nothing to ameliorate this impression.

In a nutshell, Apple can now ask for a rehearing in front of the three judges who just ruled against them or an en banc hearing before all the judges in the Second Circuit or try to persuade the Supreme Court to accept an appeal.

PG doubts any of these paths would change the result in this case.

He will warn all and sundry to expect sporadic outbreaks of Amazon Derangement Syndrome.

Amazon, Apple, Big Publishing, Legal Stuff

14 Comments to “Apple Loses Federal Appeal in E-Books Case”

  1. Even the dissenting judge accepted that there was a conspiracy and Apple was part of it. He merely argued that antitrust didn’t apply because Apple was on a different stage of the supply chain.

  2. Yeah, I expect that point to be ignored….

  3. Is there anything still going on re Apple’s non-compliance with the court-ordered inside watchdog?

  4. I guess we need to add these two judges to the conspiracy against Apple in the federal judiciary. #sarcasm

  5. Always fun to visit Apple news sites on a day like today and read all the uninformed commenters rant and rave about the corrupt judicial system and Amazon.

    Somebody even suggested it was announced today so that it would detract from the new Apple music launch.

  6. I just love how this is turning out. It’s coming out right in line with the early legal experts who insisted Cote had done a land office job of making the opinion effectively appeal-proof. “But noooo!” all the Apple and publisher partisans insisted. “It’ll get overturned because we want it to!

    We can see how well that’s worked out for them so far, can’t we?

    And Apple’s comment in response is just as good. “We know we did nothing wrong back in 2010,” they insist…which is pretty darned funny given that they’re about the only one whose opinion doesn’t count in the courtroom.

  7. “Plainly, competition is not served by permitting a market entrant to eliminate price competition as a condition of entry, and it is cold comfort to consumers that they gained a new ebook retailer at the expense of passing control over all ebook prices to a cartel of book publishers,”

    • …or at the expense of a bunch of smaller competitors and an emerging interoperable ecosystem.

  8. Yay! So nice to see our Judicial system working for the greater good! Yay Judge Cotes! 🙂

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