Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Justice Department, states oppose Apple’s appeal in e-book price-fixing case, (May 29, 2014)

By Lynn Stanton,TR Daily

The Department of Justice and the attorneys general of 31 states, Puerto Rico, and the District of Columbia have urged the U.S. Court of Appeals New York City to uphold a federal trial judge’s finding that Apple, Inc., and five publishers violated antitrust laws in an e-book price fixing scheme.

The federal district court in New York City last year barred Apple from entering into or enforcing provisions in agreements with e-book publishers that link retail prices charged by one retailer or publisher to the prices charged by another retailer or publisher.

In a joint brief filed yesterday with the Second Circuit, the Justice Department and the state attorneys general defended the district court’s ruling both on the grounds that Apple and the publishers— Holzbrinck Publishers LLC d/b/a Macmillan, Penguin Group USA, Hachette Book Group USA, HarperCollins Publishers LLC and Simon & Schuster, Inc.—engaged in per se antitrust violations and that, in the alternative, the companies’ “conspiracy … was illegal under the rule of reason because it had anticompetitive effects and no procompetitive benefits.”

The brief stated that Apple’s appeal “attacks a finding the [district] court never made—that Apple joined a pre-existing conspiracy. Next, it pretends that the district court condemned a series of vertical distribution agreements. The court was clear, though; even if the agency agreements were not unlawful on their own, it was unlawful for Apple to conspire with the Publisher Defendants to raise e-book prices through the terms of the agency agreements. Finally, Apple invents a new higher burden for antitrust plaintiffs when a defendant acts in its own interest. But compelling direct and circumstantial evidence established that Apple and the Publisher Defendants colluded to raise e-book prices precisely because it was in all of their interests to do so.”

The Justice Department and the state attorneys general said, “The district court properly found that the conspiracy was also illegal under the rule of reason because it eliminated retail price competition and raised e-book prices. Apple derides what it calls the court’s ‘one-paragraph’ rule of reason analysis, but disregards the court’s lengthy discussion of the conspiracy’s history, purpose, and effect, including a careful analysis of its price effects.”

They also defended the district court’s decision to exclude the testimony of an Apple expert witness who did not explain “her opinion that the conspiracy caused [a] purported price decline.” The brief also disputed Apple’s contention that the district court’s final judgment with respect to Apple amended prior consent decrees with the publishers.

The case is U.S. v. Apple Inc., No. 13-3741.

Attorneys: Mark W. Ryan for U.S. Department of Justice.

Companies: Apple Inc.; Hachette Book Group Inc.; HarperCollins Publishers L.L.C.; Simon & Schuster Inc.; Penguin Group (USA) Inc.; Holtzbrinck Publishers, LLC.

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