GREAT article at Dear Author titled
Antitrust Primer for the Publishing Price Fixing Lawsuit
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There is no written agreement of the defendants to fix prices. Instead, the government is arguing that the conduct of the publishers is indirect evidence of the agreement hence the allegations of meetings, phone calls and double delete email warnings. The government must show that independent action was not likely. John Sargeant’s statement that he made his decision alone in his basement on the treadmill is an argument that Macmillan’s pricing decisions were independent of any other publishers.
Price fixing monopolies are considered unstable because the incentive to cheat on a partner in the cartel is too great. Overtime, at least one or more of the firms in the cartel will reduce prices to gain market share thus shattering any agreement. It is much easier to maintain a cartel if the market players involved are oligopolistic. While there are a number of small publishers, the Big 6, as they are called, control some 80% or more of the trade book business.
The jury instructions tell a jury that they cannot find price fixing solely on the fact that Apple and the publishers talked about prices in person or wrote about different prices, or that there was a suggested price that everyone followed or that the publishers refused to deal with anyone who didn’t adopt their retail price maintenance model. The instructions focus on the existence of an agreement and the compliance with the agreement.
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There are two elements that stood out for me in reading the DOJ’s complaint. First, Apple set the pricing floor and ceiling for ebooks and every publisher accepted those terms. Did the publishers individually attempt to negotiate for differing floor and ceilings? Why was it the same for every publisher? No other app in the app store has a pricing floor or ceiling like the books in the iBooks store. Why were books treated differently?
Second, the David Shanks email to Barnes and Noble. In the email, Shanks urges Barnes & Noble to punish Random House for not hopping aboard the pricing agreements that the other publishers had agreed to with Apple. This type of email is evidence that the DOJ will point to as attempting to police or enforce a collusive agreement. In other words, if there is only conscious parallelism why would Shanks need Random House to engage in the same type of pricing. That is one piece of evidence that seems to rule out independent action.
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As I stated earlier, this is no easy case for the government. There are three parties left in the suit: Apple, Macmillan, and Penguin. The three will have differing arguments. In the beginning, it will behoove all three to stick together, all arguing the same points of law. The first step is to file a motion to dismiss but I think the DOJ petition pleads enough facts to overcome a motion to dismiss. After the motion to dismiss, the parties will engage in what is called “discovery.” Depositions will be taken. Those are oral questionings recorded by a court reporter. Written questions called interrogatories will be sent back and forth as will requests for documents and admissions. After discovery is complete, the defendants will ask for a summary judgment meaning that the DOJ doesn’t have enough evidence to move forward to a jury trial. It is my belief that if the defendants cannot win at the summary judgment stage, their likelihood of prevailing drops dramatically.
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