Apple gripes about antitrust monitoring

[Robotech_Master]

Originally Posted by pwalker8

My basic understanding is that the main chink is the per se violation. Over the last twenty years, the Supreme Court has consistently said that per se only applies to horizontal not vertical. That is to say, while it may be a per se violation for several publishing firms to get together and discuss prices, it is not a per se violation for Apple to discuss prices with a publishing firm or multiple publishing firms.

Which is probably why Judge Cote went on to expound in great detail in her opinion on how it would also have failed the legal tests required even if it wasn't a per se violation. She seems to like to tie up little details like that. She also addressed all the points Apple had originally raised then dropped as time went on or that events had rendered moot in her decision denying a stay of the monitorship, even though the argument could be made that they were no longer relevant since Apple had dropped them.

That kind of attention to detail is probably part of why those aforementioned legal experts tend to think her decision is so strongly appeal-resistant.

[pwalker8]

Originally Posted by Robotech_Master

Jeff Bezos is honestly a brilliant marketer, and I can't say that enough. That doesn't necessarily mean he's a good person (indeed, marketers being what they are, it might mean quite the opposite!), but he's done an amazing job of building Amazon up out of nothing into an e-commerce powerhouse. Some of the things he's done have been a little iffy, and some have been very iffy, but they haven't crossed the line into illegal yet.

And certainly the thing he did that touched off the publishers' ire wasn't. Selling new titles at or below cost as loss leaders to boost sales of the backlist? That's not any different from Best Buy marking down some TVs to at or below cost in its sales circulars to draw people into the store. And yes, Peter, it is still doing that even now. Not to the extent it used to, perhaps, but more than the publishers would have allowed it to do under agency pricing.

For example, take a look at John Scalzi's "Old Man's War" series on Amazon. Earlier books in the series are priced at $6, on $8 paperback retail. That means they're taking in $2 each in profit on those books, assuming the standard 50%-of-retail wholesale rate. The latest book, however, is $11 on a $26 hardcover retail. Which means it's losing $2 per book at that rate on the expectation that buying that book will make consumers want to buy more than one of the other ones that earn them $2 each.

Now you can't tell me the publishers were too stupid to be able to do that same kind of research on Amazon.com and see for themselves what their backlist versus their frontlist titles were selling for. And they would have known (and if they didn't, their lawyers would have told them) that the legal standard for predatory pricing was that the company had to be selling everything at a loss, not just taking the loss on a few things to make a big profit on the rest.

Which is probably why they didn't try filing a complaint with the FTC alleging illegal behavior (the way Amazon later did when they committed illegal behavior). For all their loud complaints (in public and then later in Cote's courtroom) about Amazon's "predatory pricing," they knew they didn't have a legal leg to stand on. (And the DOJ itself made that determination as well when they looked at Amazon's books during the run-up to filing the suit.) They decided they'd find another way to bell the cat.

And the rest is history.

I don't disagree with that. The publishers reaction to Amazon was very similar to the music industries reaction to iTunes. Some may not remember that some music companies were so afraid the Apple was growing too strong that for a while they gave the Amazon digital music store everything (no-DRM, full catalog) that they refused to give Apple. But they eventually came to an agreement with Apple after years of fighting with the mulch-tiered price points (anyone remember that Apple once wanted to make all songs 99 cents?).

[pwalker8]

Originally Posted by Robotech_Master

Which is probably why Judge Cote went on to expound in great detail in her opinion on how it would also have failed the legal tests required even if it wasn't a per se violation. She seems to like to tie up little details like that. She also addressed all the points Apple had originally raised then dropped as time went on or that events had rendered moot in her decision denying a stay of the monitorship, even though the argument could be made that they were no longer relevant since Apple had dropped them.

That kind of attention to detail is probably part of why those aforementioned legal experts tend to think her decision is so strongly appeal-resistant.

She seems to think so, certainly she wasn't interested in hearing any counter argument when she was the judge listening to the appeal. But then again, that's her reputation. As I've said before, she has been overturned a number of times, even though she shows this level of detail in most of her judgments.

As I mentioned before, most of the legal opinions that I've read are split. Some say she made some serious errors in her judgment and will certainly be over turned, others say that she dotted all the i's and crossed all the t's and thus is appeal proof. We will have a better idea once Apple actually files the text of their appeal, which will give the legal rational.

[Purple Lady]

Originally Posted by pwalker8

Amazon is going to be very hard to dislodge from their dominant position as long as they play their cards right. In a lot of ways, they are to ebooks as Apple is to digital music. For most people, Amazon simply works and has the biggest selection of any ebook store by far. The only way I see it happening is if Amazon drops the ball at some point.

Amazon doesn't have to only play their cards right, they can also profit from others mistakes. Before Apple and the publishers started price fixing I never would have bought an ebook from Amazon; I bought mostly from Fictionwise or Kobo because their coupons made them the cheapest anyway. After Fictionwise went out of business it really didn't matter where I bought - it was full price or nothing. I chose nothing or I borrowed from the library. When prices were allowed to be discounted again Kobo didn't discount so I started buying some from Amazon. After I bought the first it was easy to buy more. All Apple and the publishers did in my case was to create another Amazon ebook customer.

[Sil_liS]

Originally Posted by pwalker8

My understanding is that for a violation to have occurred by Apple, they have to have knowingly entered into a conspiracy with the publishers, and no, offering each publisher the same contract is not proof of a conspiracy.

The issue isn't that Apple offered each publisher the same contract, it is that they discussed the terms that the publishers will offer other retailers.

Originally Posted by Robotech_Master

Jeff Bezos is honestly a brilliant marketer, and I can't say that enough. That doesn't necessarily mean he's a good person (indeed, marketers being what they are, it might mean quite the opposite!), but he's done an amazing job of building Amazon up out of nothing into an e-commerce powerhouse. Some of the things he's done have been a little iffy, and some have been very iffy, but they haven't crossed the line into illegal yet.

Amazon did cross the line into illegal by sending ultimatums to POD (print on demand) publishers to use their service, but they settled.

Originally Posted by pwalker8

She seems to think so, certainly she wasn't interested in hearing any counter argument when she was the judge listening to the appeal. But then again, that's her reputation. As I've said before, she has been overturned a number of times, even though she shows this level of detail in most of her judgments.

As I mentioned before, most of the legal opinions that I've read are split. Some say she made some serious errors in her judgment and will certainly be over turned, others say that she dotted all the i's and crossed all the t's and thus is appeal proof. We will have a better idea once Apple actually files the text of their appeal, which will give the legal rational.

You can't say that it is a legal opinion if it is an anonymous comment. And you have been asked before to clarify how often she was overturned. I imagine that most judges will have been overturned a number of times if their career has been long enough.

[jgaiser]

Originally Posted by Sil_liS

And you have been asked before to clarify how often she was overturned. I imagine that most judges will have been overturned a number of times if their career has been long enough.

I too am curious about all those overturned cases. If you look at her Wikipedia page she appears to be a pretty competent judge with quite a few successful high profile cases.

[PatNY]

Originally Posted by pwalker8

My basic understanding is that the main chink is the per se violation. Over the last twenty years, the Supreme Court has consistently said that per se only applies to horizontal not vertical. That is to say, while it may be a per se violation for several publishing firms to get together and discuss prices, it is not a per se violation for Apple to discuss prices with a publishing firm or multiple publishing firms. Thus Jobs discussion a price point with Murdock is _not_ a per se violation (even if those particular discussion were not rendered moot when Apple went with the agency pricing). Cote appears to have dismissed all of that with a wave of her hand.

To the contrary, Cote addressed exactly why Apple should be judged as more than just a vertical player (bold emphasis mine):

Cote:

"While vertical restraints are subject to review under the rule of reason, Leegin, 551 U.S. at 907, Apple directly participated in a horizontal price-fixing conspiracy. As a result, its conduct is per se unlawful. The agreement between Apple and the Publisher Defendants is, “at root, a horizontal price restraint” subject to per se analysis."

It doesn't matter that Apple was a vertical partner of the publishers. Apple took on an additional role as a horizontal conspirator. That is the key to Cote's ruling. And while discussing price points with a publishing house or multiple houses is not a per se violation, acting to orchestrate price fixing among multiple companies certainly is. So, of course, it's OK for Jobs or Eddy Cue to have discussed prices with Murdoch. They just can't also tell Murdoch that all the publishers need to act as a GROUP, and then go serve as the go-between for the group, assuring each publisher who was on board and how many had bought into their plan. That is what got Apple into big trouble.

My understanding is that for a violation to have occurred by Apple, they have to have knowingly entered into a conspiracy with the publishers, and no, offering each publisher the same contract is not proof of a conspiracy.

Knowingly entering into a conspiracy with the group of publishers is exactly what they did. In fact they orchestrated it. So, again, simply agreeing to a vertical price agreement with a publisher wasn't the big problem. It was their other behavior.

As I've said before, she has been overturned a number of times, even though she shows this level of detail in most of her judgments.

Is that really a persuasive argument? What federal judge hasn't been overturned a number of times? There are none.

As I mentioned before, most of the legal opinions that I've read are split. Some say she made some serious errors in her judgment and will certainly be over turned,

Perhaps you'd like to share with the rest of us such an optimistic prediction from a sound legal mind or legal website by giving a link? Even if it is a short analysis/opinion? I haven't seen one yet, and am curious what the reasoning would be. I'm sure others are too.

--Pat

[Robotech_Master]

Here's one antitrust law expert (I googled him, he appears to have reasonable credentials.) He seems to be arguing against the facts as stated in the case, calling the evidence weak and circumstantial.

[DiapDealer]

Any argument in defense of Apple's non-guiltiness in this matter that includes phrases such as "but Amazon...," or "if Amazon...," or "when Amazon..." can be safely written off as irrelevant.

[pwalker8]

Originally Posted by PatNY

To the contrary, Cote addressed exactly why Apple should be judged as more than just a vertical player (bold emphasis mine):



It doesn't matter that Apple was a vertical partner of the publishers. Apple took on an additional role as a horizontal conspirator. That is the key to Cote's ruling. And while discussing price points with a publishing house or multiple houses is not a per se violation, acting to orchestrate price fixing among multiple companies certainly is. So, of course, it's OK for Jobs or Eddy Cue to have discussed prices with Murdoch. They just can't also tell Murdoch that all the publishers need to act as a GROUP, and then go serve as the go-between for the group, assuring each publisher who was on board and how many had bought into their plan. That is what got Apple into big trouble.



Knowingly entering into a conspiracy with the group of publishers is exactly what they did. In fact they orchestrated it. So, again, simply agreeing to a vertical price agreement with a publisher wasn't the big problem. It was their other behavior.


Is that really a persuasive argument? What federal judge hasn't been overturned a number of times? There are none.



Perhaps you'd like to share with the rest of us such an optimistic prediction from a sound legal mind or legal website by giving a link? Even if it is a short analysis/opinion? I haven't seen one yet, and am curious what the reasoning would be. I'm sure others are too.

--Pat

Oh, I'm sure there are federal judges who haven't been overturned. The point is that since Judge Cote has been overturned (the most recent was one this past fall, which I pointed to in the previous thread about this case, some that I found with a casual search include Tyco v Walsh, Barclays v Theflyon thewall.com and Caiola v Citibank, there are others) the assumption that she won't be overturned because she wrote such a detailed judgment doesn't hold water.

[bgalbrecht]

Originally Posted by pwalker8

And you are now able to buy those ebooks at the previous price now that the evil Apple and agency pricing has been slapped down? Amazon was pricing specific books at less that cost to get people to buy kindles and to attract people to their ebook store. Those prices were going up regardless, Apple is simply a convenient villain. Amazon controls roughly 70% of the ebook market in the US.

Sometimes, but not often. During one of Kobo's trivia contests they allowed coupons to be used on the big publishers books, but either Kobo or the publishers but the kibosh on that. My suspicion is that it was the publisher's doings, but we'll probably never know for sure.

[pwalker8]

Originally Posted by Robotech_Master

Here's one antitrust law expert (I googled him, he appears to have reasonable credentials.) He seems to be arguing against the facts as stated in the case, calling the evidence weak and circumstantial.

True, but while it's possible that Apple may try to appeal based on finding of facts (and they will most certainly mention the thinness of the facts that she bases her thesis on), that's a real difficult row to hoe depending on which judges are on the panel. As I said earlier, there are actually quite a few interesting legal opinions out there about the case, you just have to weed through a lot of bashers and fan boys to find the ones that actually discuss the legal issues.

[pwalker8]

Originally Posted by Sil_liS

The issue isn't that Apple offered each publisher the same contract, it is that they discussed the terms that the publishers will offer other retailers.


Amazon did cross the line into illegal by sending ultimatums to POD (print on demand) publishers to use their service, but they settled.


You can't say that it is a legal opinion if it is an anonymous comment. And you have been asked before to clarify how often she was overturned. I imagine that most judges will have been overturned a number of times if their career has been long enough.

Most of the legal analysis of the case that are of interest are not anonymous comments. There are actually quite a few lawyers who have blogs. I think that it's a combination of many lawyers being naturally talkative and it's good advertisement for them.

It's perfectly ok for Apple to discuss with publishers what terms the publishers will offer other retailers, the doctrine is called a most favored nation clause. This is why a lot of anti-trust lawyers (and companies) are worried about Judge Cote's ruling. If upheld it will cause a lot of existing contracts to be called into question. I suspect that it will be one of the most likely lines of appeal for Apple.

[SteveEisenberg]

Originally Posted by Sil_liS

And you have been asked before to clarify how often she was overturned.

While individual court rulings are public, as far as I can tell, the overturn rate for individual federal judges is something you have to pay for. And these reports are expensive . . .

So, while someone is right and someone is wrong about whether she gets reversed a lot, I don't think we can know.

[jgaiser]

Originally Posted by SteveEisenberg

So, while someone is right and someone is wrong about whether she gets reversed a lot, I don't think we can know.

So... Maybe someone should stop talking about how many times Cote has been overturned. Unless someone is willing to pay the price and prove their point. Yes?