July 18, 2014

Apple: “Never before has a court found a company liable under the antitrust laws for entry into a market dominated by a single company”


DOJ-Apple-imageOn Wednesday—a month after a deal was announced—the terms of Apple‘s U.S. v. Apple settlement with the states and consumers were filed. As Publishers Weekly‘s Andrew Albanese reports, “Apple could pay consumers as much as $400 million—or, potentially, nothing.” That is, the deal is “contingent upon the Second Circuit’s review” of U.S. v. Apple; if Apple wins the appeal, they’re off the hook.

And—unsurprisingly, given the amount of money involved (to say nothing about the implications a successful appeal would have on the American ebook market)—Apple is going to fight hard to win an appeal. According to Albanese, Apple filed a brief with the Second Circuit earlier this week that “stressed the unprecedented nature of [Judge Denise] Cote‘s 2013 decision, and doubled down on its belief that Cote simply botched the case, by relying on too many inferences drawn from “highly ambiguous” evidence, and ignoring the “pro-competitive” nature of Apple’s entry into the e-book market”:

“Never before has a court found a company liable under the antitrust laws for entry into a market dominated by a single company, through admittedly vertical and lawful distribution agreements, to launch an enterprise that the court admitted benefited consumers and competition, where the company did not desire higher prices and the agreements did not specify prices to be charged, and which resulted in more competition, lower market prices, and increased market output… Plaintiffs do not cite a single analogous case, and there is none. The district court’s decision finding Apple per se liable under the antitrust laws was therefore reversible error.”

That “single company” that dominates the market? You guessed it: it’s Amazon. Apple’s argument here is similar to the one it used in the trial presided over by Judge Cote—namely that Apple’s entry to the market benefited consumers and that the presence of Amazon—the 800 lb. gorilla which dominated up to 90% of the ebook market when Apple started selling iBooks dictated a certain level of collusion. Now, that argument has some pitfalls—anyone who has read the U.S. v. Apple decision knows that the evidence in favor of collusion is pretty damning—but Judge Cote clearly was not interested in the complexities of the ebook market (to say nothing of the complexities of the publishing industry). She, after all, famously made up her mind about the case before it went to trial—something that is, again, evident in her decision. But Amazon’s lingering presence was a bit of a curveball—one she took great pains to address near the end of her decision (the portion that wasn’t written before the trial began)—and it may be more effective in an appeals court, especially considering that that Amazon’s monopsony is once again making headlines.

Maybe. Maybe not. Either way, Apple has nothing to lose—except $400 million.


Alex Shephard is the director of digital media for Melville House, and a former bookseller.