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Wednesday, July 10, 2013

Reactions upon reading today's court ruling against Apple in the ebook price-fixing conspiracy case

I ought to have simply done this as a blog post to begin with, but:

When I started reading U.S. District Judge Denise Cote's written opinion in United States v. Apple Inc. this evening, I originally only intended to post a link to the opinion, with a very short comment, on Facebook, mostly for a few of my legally-inclined friends. But then I started leaving comments on my FB post, and it turned into a sort of "live-blogging" as I worked through the opinion.

Eventually I decided I ought to re-post it all here for a broader audience, with apologies for the disjointed format:

Ipad_ibook_reader

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Apple lost in court in New York today on the ebook antitrust case brought jointly by the Justice Department and several states (including Texas). U.S. District Judge Denise Cote's opinion is 160 pages (double-spaced), so it will take me a while to read it. But from the summary of findings (beginning on page 9 of the .pdf file), it looks like a major defeat for Apple. This paragraph (from page 11) seems key in my initial skim:

Apple and the Publisher Defendants shared one overarching interest — that there be no price competition at the retail level. Apple did not want to compete with Amazon (or any other e-book retailer) on price; and the Publisher Defendants wanted to end Amazon’s $9.99 pricing and increase significantly the prevailing price point for e-books. With a full appreciation of each other’s interests, Apple and the Publisher Defendants agreed to work together to eliminate retail price competition in the e-book market and raise the price of e-books above $9.99."

Here's a link if you're interested:

http://www.justice.gov/atr/cases/f299200/299275.pdf

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I hadn't realized that 38 different states had joined in this litigation, but I'm pleased to see that the Texas and Connecticut attorneys general were "liason counsel for the plaintiff states" (i.e., carried the ball and probably did most of the work for all the other state plaintiffs).

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The financial impact on Apple is uncertain, but treble damages loom: "The Plaintiffs have shown that Apple conspired to raise the retail price of e-books and that they are entitled to injunctive relief. A trial on damages will follow." And at that trial the question won't be whether Apple has to pay — today's ruling effectively decides that against Apple — but just how much, and to whom.

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No jury was involved in this, by the way. By consent of all parties, there was a bench trial in which Judge Cote served as factfinder in lieu of a jury.

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CEO Les Moonves of CBS (which owns Simon & Schuster, one of the defendants who settled before trial) is pegged as a major conspirator. I remember him from Rathergate.

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In footnote 38 on page 71, Judge Cote labels Apple Sr VP Eddy Cue's trial testimony as not being "credible" — which is the polite way to say she thinks Cue was lying under oath on at least some points. The factual recital is just brutal. Apple comes across as the proverbial 800 pound gorilla who bullied not only the consuming public and Amazon (which was fighting to keep ebook prices low), but Apple's fellow conspirators, five of the six big publishing companies. Appellate courts are particularly reluctant to overturn credibility determinations by the factfinder, whether that's been a judge or a jury. Apple's going to have a hard time digging its way out of the hole it's dug for itself.

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From pp. 85-86 of the .pdf file:

On January 27, Jobs launched the iPad. As part of a beautifully orchestrated presentation, he also introduced the iPad’s e-reader capability and the iBookstore. He proudly displayed the names and logos of each Publisher Defendant whose books would populate the iBookstore. To show the ease with which an iTunes customer could buy a book, standing in front of a giant screen displaying his own iPad’s screen, Jobs browsed through his iBooks “bookshelf,” clicked on the “store” button in the upper corner of his e-book shelf display, watched the shelf seamlessly flip to the iBookstore, and purchased one of Hachette’s NYT Bestsellers, Edward M. Kennedy’s memoir, True Compass, for $14.99. With one tap, the e-book was downloaded, and its cover appeared on Jobs’s bookshelf, ready to be opened and read.

When asked by a reporter later that day why people would pay $14.99 in the iBookstore to purchase an e-book that was selling at Amazon for $9.99, Jobs told a reporter, “Well, that won’t be the case.” When the reporter sought to clarify, “You mean you won’t be 14.99 or they won’t be 9.99?” Jobs paused, and with a knowing nod responded, “The price will be the same,” and explained that “Publishers are actually withholding their books from Amazon because they are not happy.” With that statement, Jobs acknowledged his understanding that the Publisher Defendants would now wrest control of pricing from Amazon and raise e-book prices, and that Apple would not have to face any competition from Amazon on price.

The import of Jobs’s statement was obvious. On January 29, the General Counsel of [Simon & Schuster] wrote to [the CEO of S&S, Carolyn] Reidy that she “cannot believe that Jobs made the statement” and considered it “[i]ncredibly stupid.”

Yeah, I agree that it was incredibly stupid. And arrogant. Jobs was bragging in public about the price-fixing conspiracy that his company had organized and executed to fix ebook prices. The reason the publishers were threatening to withhold their books from Amazon altogether was because that was the key term in the conspiracy that Apple was proposing. Unless Amazon agreed to knuckle under to the "agency pricing" model that Apple wanted (because it would eliminate retail price competition in ebooks, to Apple's benefit, and let Apple compete with Amazon on the basis of hardware, never price) — Amazon wouldn't be able to sell ebooks at any price.

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This whole fact pattern would never make a good exam question in an antitrust course in law school. It's way too easy. There's an arsenal of smoking guns. It's like no one at Apple ever heard of the Sherman Act.

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Maybe you aren't an ebook buyer, and because you only buy paper books, you think this conspiracy didn't affect you. Nope (p. 95): "The Publisher Defendants raised more than the prices of just New Release e-books. The prices of some of their New Release hardcover books were also raised in order to move the e-book version into a correspondingly higher price tier."

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From p. 103, Jobs is quoted as making the following brag — actually, a stunning admission to which he was blinded by his egotism — to his biographer:

Amazon screwed it up. It paid the wholesale price for some books, but started selling them below cost at $9.99. The publishers hated that — they thought it would trash their ability to sell hardcover books at $28. So before Apple even got on the scene, some booksellers were starting to withhold books from Amazon. So we told the publishers, “We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway.” But we also asked for a guarantee that if anybody else is selling the books cheaper than we are, then we can sell them at the lower price too. So they went to Amazon and said, “You’re going to sign an agency contract or we’re not going to give you the books.”

Yes, the customer pays a little more, but that's what you want anyway — if you're running a conspiracy to eliminate market competition via illegal price-fixing agreements, that is indeed exactly what you want.

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Key finding (from page 120, citation omitted):

In sum, the Plaintiffs have shown not just by a preponderance of the evidence, but through compelling direct and circumstantial evidence that Apple participated in and facilitated a horizontal price-fixing conspiracy. As a result, they have proven a per se violation of the Sherman Act. If it were necessary to analyze this evidence under the rule of reason, however, the Plaintiffs would also prevail.

That's a "belt and suspenders" finding: Judge Cote thinks (and I agree) that this is a "per se" case because of the type of conspiracies and restraints involved and where the players all were in the various supply chains. But she's also saying that even if she's wrong about that point, and even if Apple gets the benefit of the more flexible "rule of reason" standard instead of the "per se" standard, Apple would still lose.

That makes it much harder for Apple to win on appeal.

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This is just a methodical thrashing. In every appeal, the first thing the appellate judges (and their law clerks) read is the district judge's opinion. After reading this one, I think almost any appellate judge is going to be favorably impressed with its comprehensiveness and clarity. It's the kind of opinion after which you exhale and say, "Whew! That's going to be hard to fault in any significant way."

Apple is going to have a very tough row to hoe on appeal. I think they're well and truly hosed in this case, although it's not likely to threaten their existence as a company or even delay the next iPhone-whatever.

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Footnote 63 (at p. 135) is quite droll, as antitrust humor goes:

Apple uses the term 'competitive' to convey that it wanted its prices to be the lowest in the marketplace, not to convey that it wanted prices arrived at through the process of competition.

That means: "We want all the business, but at a higher, fixed price."

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In footnote 66 on p. 143, Judge Cote labels individual Apple and Publisher Defendant executives as "noteworthy for their lack of credibility" — which I would paraphrase as meaning they're "liars lying under oath and they can't be believed."

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Okay, finished. The last 30+ pages are devoted to anticipating every argument Apple can be expected to make on appeal and methodically rebutting or undercutting each of them. Judge Cote is a Clinton appointee who's senior status, so she has a lot of experience; and she's clearly learned how to write opinions in a way that make them particularly hard to reverse. The smartest and best federal district judges are usually the best advocates for why their own written decisions ought be upheld — they try to anticipate how the appeal is likely to proceed, and to make their decisions as nearly "bulletproof on appeal" as possible (which is to say, clear, well-reasoned, and correct). And this may be a candidate for the Second Circuit to "affirm on the basis of the district court's opinion" — basically the appellate court, instead of writing its own opinion, just saying, "Yeah, what she said." It's a very high compliment to a district judge when that happens in an important case.

Posted by Beldar at 08:47 PM in Books, Budget/economics, Law (2013), Mainstream Media, SCOTUS & federal courts, Technology/products, Texas | Permalink

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Comments

(1) Kendall made the following comment | Jul 10, 2013 11:09:18 PM | Permalink

I don't see how Apple can be accused of "price fixing", when all they were trying to do was to allow publishers to set whatever prices they wanted, and sell to everyone at the same price. It seems absurd to call Apple an "800lb Gorilla" when the other party is Amazon with such power that they could sell books below cost and just laugh if the publishers did not like it... at the time (and now) Amazon was the one with near monopolistic power over pricing eBooks, selling below cost to eliminate potential competitors.

Apple was trying to open the market to competition, unlike Amazon. Lesson learned, competition is bad now.

I don't think very many people realize how this screws over competition in a lot of other sectors going forward. I hope you like Amazon a lot because they are now free to do to anything else what they did to eBooks!

The funny thing is, I do like Amazon (I have a lot of Kindle books and a Prime membership). I just think competition should be allowed in a market and businesses should be able to set a price to sell products at.

(2) DRJ made the following comment | Jul 10, 2013 11:37:26 PM | Permalink

I found this post via a well-deserved Instapundit link. What a treat!

(3) JorgXMcKie made the following comment | Jul 10, 2013 11:42:53 PM | Permalink

Kendall, you certainly have an odd definition of competition. Would you be happy if the oil companies could " set whatever prices they wanted, and sell to everyone at the same price" and that price for gasoline was $20/gal when some stations wanted to sell it for $4/gal and the oil companies wouldn't sell to them? That is hardly competition.

As for Amazon selling "below cost" didn't the publishers get their price from Amazon? Even if there could be a case against Amazon for something like "predatory pricing" [IANAL] that is not a defense for price fixing.

The publishers' real problem is that their market and production models are outdated yet they can't or won't give them up. They are desperately trying to hold back the tide of change. That has never really worked.

Between Amazon and a lot of online publishers the current big publishers are doomed unless they adapt, and price fixing isn't going to save them.

Anyway it is incredibly clear cut.

(4) Shelby made the following comment | Jul 11, 2013 12:16:17 AM | Permalink

Kendall,

I'm fairly sympathetic to your perspective on general principle. But as an attorney (who has studied, but not practiced, antitrust law), Apple loses here. That's not a statement of principle, just of what the current state of the law clearly is. And I have to add (as someone who's worked in both the computer and publishing industries, before law school) that the executives involved are all very smart people who really have no excuse for not knowing and dealing with the current state of antitrust law, whether or not they think it's right.

(5) Owen Johnson made the following comment | Jul 11, 2013 12:18:59 AM | Permalink

Kendall, what part of "Price fixing" don't you understand? Let's say oil companies got together and decided that the minimum per of gas should $20/gal indpedent of cost and then coerced other suppliers to put out of business (by refusing to sell gas to them) anyone who did not agree.

Are you OK with that? Should the oil companies be able to set the price of gas at any level they like? That's exactly what you just said--businesses should be able to set a price to sell products at--and you called that "competition". I don't think that word means what you think it means.

Just FYI: In a market ecomony *buyers* set the price, not business and not the government.

(6) Owen Johnson made the following comment | Jul 11, 2013 12:28:01 AM | Permalink

I should, since I am a self-published author of eBook, add regarding this: "...pricing eBooks, selling below cost to eliminate potential competitors."

What exactly is a cost of an eBook? eBook are composed of electrons which are force-carrying particles and there are infinite number of them. Nothing, literally, is consumed in the production and transmission of an eBook. So on what basis do you set the cost of something that costs nothing to produce or deliver? How can Amazon be selling eBooks "below cost"?

(7) jamesbbkk made the following comment | Jul 11, 2013 12:37:43 AM | Permalink

Yes, Kendall, that Amazon outfit is just awful trying to get consumers a great price. Those poor publishers! Suffering under Amazon's boot after all those years of gatekeeping to make sure we only received great content and selling at prices they wanted and all customers could pay if they wished. This probably bodes poorly for college textbook publishers too, which should cause great concern. Amazon might be able to sell those college textbooks for less than 300 or more dollars a pop to students required to purchase those books by their professors. It's a sad day. Apple, Steve Jobs, and the publisher defendants really tried to help.

Finally, kudos to the reporter for noticing the pricing issues during and after the big iPad rollout. What's her name?

(8) Luke made the following comment | Jul 11, 2013 12:41:37 AM | Permalink

Kendall, you can believe that all you want.
But the Sherman Anti-Trust Act remains the law of the land, and price fixing is as blatant violation of it.

There's a reason all the participating publishers have elected to settle out of court.

Of course, Apple was not involved in competition. Their contract guaranteed that they would have the lowest prices. And their agreement with the publishers was that Amazon would be frozen out unless and until Amazon knuckled under to the price fixing scheme. (That Amazon agreed, and then proceeded to undermine established publishers by extending the same terms to small publishing houses and individual authors, was inspired. It's always lovely watching villains hoist by their own petard.)

Here's a handy tip: Competition tends to drive prices down for consumers.
Collusion tends to have the opposite effect.
They aren't synonyms.

(9) Brian made the following comment | Jul 11, 2013 12:57:42 AM | Permalink

Amazon bought a books for $15 and then sold them for $10. So the final sale made to the publisher was $15. In reality if Amazon manges to kill all the other distribution channels the final price to consumer would be $20. In Apple's model, the book sells for $15 and the publisher takes $10. There's money for the publisher, author and the distribution channel (cc processors, Internet companies, advertisers etc), and the price is lower than the Amazon model in the long run since its prices will be higher. I am not sure a judge can make an analysis about unecomic pricing when evaluating a competitive market. Everyone has to make money or the industry collapses. The judges analysis is not sound to compare promotional pricing with market pricing. Apple model's actually encourages lower prices by forcing the publishers to price for sales against other titles, not this retarded system where the channel gets hit when it should be the title owner taking the lower price in exchange for volume.

That market is far more competitve and a relief from Amazons crazy model. In the end if Amazon continues this practice the only way it can be sustainable is if unprompted lower sales books have thier prices raised to pay for the promoted books. That I turn means less choice and opportunities for artists and consumers alike. You have made a great argument for why the anti trust act is unworkable and should be repealed. The judges can't make a sound analysis. They should not be second guessing the reasoning of great men like Steve Jobs.

(10) DBinSD made the following comment | Jul 11, 2013 2:08:55 AM | Permalink

Man, Brian had me there for a minute, thinking he was being all serious and so forth.... Right up until I got to the part where he said a federal judge should not be second guessing a 'great man' like Steve Jobs. Spectacular trolling job, really. Bravo.

(11) Robin Munn made the following comment | Jul 11, 2013 2:25:59 AM | Permalink

Brian,

The problem with the scenario you posit, where Amazon kills the other distribution channels and then raises their price, is that distributing ebooks is *easy*. All you need is a web server and a decent checkout-cart system. The barrier to entry in that market is much, MUCH lower than with distributing physical books, where you need warehouses, shipping, and so on. If Amazon ever managed to become the Goliath of the e-pub world, how long would it take before an army of Davids* started swarming them and undercutting their prices?

* Thanks to Glenn Reynolds for the useful phrase.

(12) jamesbbkk made the following comment | Jul 11, 2013 2:58:55 AM | Permalink

Yes, how about we see Amazon raise those prices before we holler that merely offering low, low, prices is itself predatory? Usually the first to make such claims are other producers that are suffering from others being more efficient and competitive than they can be - those producers in industries undergoing major disruption as here, usually.

Indeed though, if Saint Steve approved, it must have been good for us too.

(13) David W. Nicholas made the following comment | Jul 11, 2013 4:06:36 AM | Permalink

The fun part about this has been the amount of negative publicity Amazon has gotten during this controversy, as the publishers tried to blame *Amazon* for the price increases that those publishers were trying to force Amazon to accept. Apple was pushing the idea that the user of their device (they imagined an upscale professional, perhaps a business traveler) wouldn't notice or care that ebook prices had gone up by 50% or so. It turned out this wasn't so (duh) and the publishers got in trouble for price-fixing...but of course Apple doesn't understand the meaning of the term, apparently, and so can't be convinced they violated the law...

(14) teapartydoc made the following comment | Jul 11, 2013 5:51:25 AM | Permalink

Part of the sentencing should be to make all of the defendants and their employees sing Material Girl, substituting "competitive world" for "material girl", in front of every new client and before each transaction. Would that be cruel and unusual?

(15) Beldar made the following comment | Jul 11, 2013 5:58:01 AM | Permalink

My thanks, as ever, to Prof. Reynolds at Instapundit for the link.

"Kendall" (applause for the punny alias) wrote above (#1), "I just think competition should be allowed in a market and businesses should be able to set a price to sell products at."

Kendall, when businesses conspire to set their prices, there is no competition. That's exactly the point of the Sherman Act, which was passed in 1890.

But Apple also made the "Amazon was naughty too!" argument, despite the fact that it was Amazon trying to keep prices low -- concededly because it believes that's how it can compete most effectively and cross-promote its own Kindle products in particular and ebooks in general. The difference is that (1) Amazon wasn't on trial, and more importantly, (2) Amazon was not conspiring with anyone else to restrain trade. Instead, Amazon was acting independently, in what it perceived to be its own self-interest, which is the fundamental premise of classical economics. Judge Cote really deals with this whole subject very comprehensively, so for more details about why Apple lost so badly with the very argument you're now making (and that Apple continues to repeat in the press), read the opinion.

Commenter Shelby (#4) is exactly right: Any attorney has to be horrified at how incredibly stupid both Apple's and the Publishing Defendants' key executives were. It's like none of them had any effective antitrust advice from their in-house or outside lawyers; made any serious effort to cover their tracks; cared how many smoking pistols (in the form of damning emails and other documents) they left in their wake. How could they have possibly believed what they were doing was remotely legal? Did they want to get caught? Even CBS, the company that conspired to fool America with forged documents to try to swing the 2004 election, recognized that what Apple was saying in public was "incredibly stupid."

This ruling should end the careers of many, many lawyers, and even more corporate executives — but it probably won't.

Brian (#9) goes even farther back than the 1890 Sherman Act for his preferred view of the law, which apparently is "The King can do no wrong" and that "Steve Jobs was King." I believe this is what would be known as an "Apple fanboy," and I expect many such comments on this post. How better to express in public your admiration for a price-fixer than to identify with and show fealty to its CEO's arrogant contempt for the law? If you look around this blog, you'll see that generally, and even on IP matters, I skew pronouncedly libertarian; but even the most hard-core libertarians still tend to support the Sherman Act, and its prohibition against price-fixing conspiracies is absolutely positively the clearest thing in antitrust law (and has been for more than a century).

It's interesting, too, that Apple was not only angling to prevent price competition from Amazon, but managed to stampede Google into adopting the "agency model" for its hoped for but as yet nonexistent ebook business. In other words, the price-fixing conspiracy among publishers that Apple promoted and facilitated and enforced to prevent Amazon from competing on price also preemptively tied the hands of one of the other conspicously-weighty gorillas in the jungle.

(Editing note: to eliminate a stylistic duplication, I've changed "comprehensive thrashing" to "methodical thrashing" in the original post.)

(16) Arie Korving made the following comment | Jul 11, 2013 6:07:35 AM | Permalink

Glad to read this.

I have self-published two books, “Before I Go” and an accompanying workbook. I used a print-on-demand printer, Ingram, who made the books available on Amazon and a few other on-line resellers like Barnes&Noble.com. My book has a retail price printed on the cover, and a lower price at which I offered it to Amazon and other distributors. I set that price. Amazon is free to offer it in its site at any price it wishes. In my case they have adjusted the price to demand, changing the price from time to time. The income I receive from the sale of the books does not change even though the Amazon price on its site changes.

The e-book version is also available on Amazon at a price I established.


Having spoken to other people in the publishing business, there is a thriving business in self-publishing. Even established authors are moving to it. In fact, if you are a big-name author, the reasons for going through a publisher are becoming fewer. The big publishing houses have been acting as gatekeepers, much like the big 3 networks and the rest of the MSM. Today, a lot of the books found at Amazon are self-published. It’s much too easy to be your own publisher today; that’s why that industry is under such tremendous pressure. Why collect rejection slips from agents and publishers when for a relatively small amount of money you can get yourself published?

(17) John Foster made the following comment | Jul 11, 2013 6:17:15 AM | Permalink

I practice in the SDNY (admiralty). It has over 45 judges (including those on senior status), who range in quality from the very good to the certifiably insane. Cote is (I think) highly regarded and is considered to be at the "good" end of the spectrum.

(18) Beldar made the following comment | Jul 11, 2013 6:21:16 AM | Permalink

Mr. Korving (#16), Amazon's support for ebook self-publishing is mentioned in Judge Cote's opinion — as another trend that Apple and the Defendant Publishers very much wanted to nip in the bud. Intending no disrespect to you or any other self-publisher — hey, I'm self-publishing here, just not at a quality level that anyone should expect to pay for! — no flea was too small to escape the attention of the 800-pound gorilla.

On the general subject of self-interest, I'll aggregate here factors which may affect my own views of this case, positively or negatively: I'm not an antitrust specialist, but I studied it extensively in law school, and it was a very significant part of my early practice at Baker Botts in the 1980s (including a series of hotly contested and fast-moving corporate takeover cases in which antitrust objections were potential deal-breakers), and into the early 1990s (e.g., this case) when I was a partner in the Houston office of Weil, Gotshal & Manges.

I've never represented Amazon, but I was lead counsel for one of Apple's co-conspirators — Simon & Schuster's parent, CBS Inc. — in a 1983 defamation appeal in the Fifth Circuit. I have long been a critic of Apple's business practices, especially its tying arrangements and support of abusive DRM schemes, and although I acknowledge that many of Apple's products are brilliant and that they help drive technological competition, I've long been appalled by how Apple seeks to suppress other sorts of competition.

This blog was also an "Amazon affiliate" for a few years in its early years, but I long ago decided to go non-profit and no longer get any ad, referral, or other revenues from Amazon. I do, however, own several Kindles, and my family and I frequently purchase ebooks from Amazon for use on them and other ereaders, so like millions of other Americans, I'm potentially an unnamed class member in the parallel pending civil damages action against Apple, with arguable damages in the low three figures (pre-trebling) if I assume Amazon's prices per ebook were about $3 higher as a result of the conspiracy's undeniable success.

So savage my credibility with these admissions if you wish. This post is actually more about what Judge Cote decided, though, than my remarks about her decision, so if you're critical of my objectivity, I hope you'll also address the substance of her much more comprehensive and formal legal analysis.

(19) Robert made the following comment | Jul 11, 2013 7:12:27 AM | Permalink

Libraries are fighting these same battles against these same publishers. They will not sell e-books to libraries or limit the number of downloads or jack up the price just for us. However my customers want bestselling authors in an E-book format that are only available from these publishers. I work in a medium sized city library. We have over 120 computers in our building and the city hasn't purchased us a replacement in over four years. Police, Fire, and Streets will always have higher priority over us and should. We have to depend on vendor supplied platforms for e-book delivery and we have to hope that the vendor does not go under or get bought out because books we thought we purchased can evaporate just like that. (Snaps finger) I may have just lost $40,000 thousand dollars in reference materials because our vendor is in chapter 11. Just thought I'd add my two cents.

(20) J.P. made the following comment | Jul 11, 2013 7:19:48 AM | Permalink

"[B]ut even the most hard-core libertarians still tend to support the Sherman Act, and its prohibition against price-fixing conspiracies is absolutely positively the clearest thing in antitrust law (and has been for more than a century)."

"Excuse me?" asked the genuine hard-core libertarian. Exactly WHERE on God's Green Earth did you come up with THAT little jewel? The Sherman Antitrust Act has been the basis of what has arguably been the most subjectivist element of business law for more than a century. If you like your "consumer" law heavy on the utterly arbitrary, then no wonder you LOVE the Sherman Antitrust Act. It isn't a law; it's an implied threat to all businessmen that "big" is bad -- whatever the hell "big" means at the time.

I wouldn't be bragging about that if I were, well, a hard-core libertarian. Sheesh.

(21) Frank Natoli made the following comment | Jul 11, 2013 7:38:41 AM | Permalink

I spent the better part of a year and a half, over $10,000 in development tools and travel, developing a native iPad app that was an interactive history of the events in the Belgian Ardennes in December 1944. The text of the product was based on an existing hardcopy book, but some half dozen interactive features, including using the iPad GPS and 3G maps and navigation capabilities, were far beyond what an eBook was allowed to do. eBook's have basically a severely crippled XHTML browser, and Apple doesn't let the eBook browser get beyond the iPad itself. Apple rejected my product, refused to let me sell it, and their word is final, appeal denied, no recourse. Now this makes more sense. Apple intends to corral as many products as possible into the eBook limits so Apple can fix prices on all products. Nice.

(22) Beldar made the following comment | Jul 11, 2013 7:44:32 AM | Permalink

J.P. (#20): Abolition of the Sherman Act wouldn't be "hard-core libertarianism," it would be radical libertarianism of a particularly shallow sort, radical libertarianism that's completely untethered to classical economics, radical libertarianism that doesn't even meet the "your rights end where mine begin" standard (because the object and effect of these conspiracies is to eliminate consumer choices and individual rights to enjoy the benefits of non-collusive competition). I understand that radical position, but I don't respect it; and we're not going to have that debate on this post at any great length.

If you want to undo all of antitrust law, fine; take your arguments to Congress. But at least acknowledge en route that the Apple's conduct as described in Judge Cote's opinion does indeed clearly violate American law that's crystal clear and that's been on the books for more than a century.

Indeed, Teddy Roosevelt would have mocked your position. There aren't many issues on which U.S. Attorney General Eric Holder and Texas Attorney General Greg Abbott (plus 37 other state AG counterparts) join in agreement, but this case is one of them; almost every state has its own version of the Sherman Act, which is why they're co-plaintiffs. And the Libertarian Party's 2012 presidential nominee, Gary Johnson, has himself been a named plaintiff who's sued under the Sherman Act (which he contended was being violated by the major political parties and the networks in their decisions to exclude him from debates), so it seems that you're part of some "fringe beyond the fringe" on this particular issue. (I concede that you're joined in this by Ron Paul, but not even his son Rand goes that far; Rand would leave the Sherman Act intact with respect to corporate competitors, even though he's been an Apple fanboy on unrelated tax issues.)

I'm certainly aware of the potential for government overreach in enforcing — and especially, in attempting to expand — the scope of the antitrust laws beyond their original intent. I am a critic, for example, of the federal government's cases against IBM in the 1970s, against Ma Bell in the 1980s, and against Microsoft in the 1990s and after. But this case isn't at all like those. The conspiracy alleged was not some sprawling, multi-decade affair with dozens or hundreds of parts, in which intent must be inferred circumstantially from complicated and conflicting economic data. Instead, this conspiracy played out in the space of weeks and months, and it involved only six corporate conspirators (Apple plus five of the "Big Six" publishers) acting through their very top corporate officers. We don't have to guess their intentions because they made it abundantly clear in their written communications that their joint intention was to eliminate retail price competition. That's not just a "smoking gun," that's a slow-motion 3-D high-definition video of the bullet exiting the barrel (with Steve Jobs squinting down the sights while shouting "I'm gonna kill you, retail price competition!").

(23) Karl Armstrong made the following comment | Jul 11, 2013 8:57:38 AM | Permalink

I think the crucial point missed in the arguments against Apple et al., is that books are not a commodity. This is a major distinction because A) There is nothing in the agreements to keep from bookseller A from selling book X at one price, and bookseller B from selling book Y at another price. Steven Kings' Scary Book IV is not the same product as Jane Whoes' Crappy Romance XIII. Indeed, from this perspective, it is technically absurd to say that 'book' prices are fixed. What is fixed is the price of book X and the price of book Y, but some would reasonably argue those are separate, and therefore legal, deals.
B) The agencies do not technically control the supply, or any meaningful part of it. They are simply agents for the supplier. It costs virtually nothing to produce another book, and nothing in this agreement discourages suppliers (authors) form bypassing the big agencies. Even Apple will happily deal directly with the supplier.

(24) Beldar made the following comment | Jul 11, 2013 9:14:18 AM | Permalink

Mr. Armstrong (#23), thanks for the calm and civil comment. The law does not consider each book title, however, to constitute its own relevant market; nor do macro-economists. And in fact what happened here was that the Publisher Defendants (which you call "agencies") agreed among themselves to use a set of pre-determined prices — prices fixed not by market supply and demand, but through their own collusion — across entire categories of books, including all new book releases, carefully defined in policeable ways (to prevent cheating) and with special attention paid to the most successful category of those (the NYT Bestsellers).

So, respectfully, the reason others are missing the main point you're trying to make is that it's (a) contrary to law and (b) contrary to fact.

You're correct that content-creators (writers) are the ultimate suppliers. That's why Judge Coat's opinion, which you might wish to at least skim, refers to the traditional (pre-conspiracy) business model — whereby publishers pay authors for the exclusive right to resell their content into the downstream supply chain — as the "wholesale" model. It's as illegal for wholesalers to conspire to fix prices, though, as it would be for the authors to do so. Their practical ability to perpetrate their conspiracy came from their chokehold on the market when acting collectively, a chokehold none of them had individually. And without the mechanisms offered by Apple to keep them all banded together (even while losing money in the short run from withholding ebook sales), the Publishing Defendants' conspiracy would have fallen apart.

(25) Michael Wade made the following comment | Jul 11, 2013 9:21:39 AM | Permalink

Sorry, Beldar, but libertarians actually are not in favor of the Sherman Act. That doesn't mean that we're in favor of monopolies either. Indeed, under both Austrian and Chicago schools of economics, monopolies can't exist without (a) government support (e.g. cable companies), or (b) natural control of supply (usually referred to as the "electric utility" example. Therefore, the Sherman Act is both unnecessary and intrusive.

IIRC, CJ Taft wrote a great opinion outlining how the different contractual relationships between parties should be perfectly acceptable, and took a very narrow view as to what activities the Sherman Act should even address. Of course, later courts have simply ignored and overridden that opinion ;)

WRT to Apple, I'll bow to your expertise (and knowledge since you read the opinion and I haven't/won't). However, the impression I've gotten is that Apple agreed to the publishers' "agency model" of pricing, but basically said it wouldn't make the deals unless they (the publishers) also charged everyone else under the same model (essentially meaning Amazon). Since Amazon wasn't/isn't charging the full price anyway, and isn't involved in negotiations, it makes no sense that this is a "horizontal price-fixing scheme". Such a scheme would have to be between Amazon and Apple. Instead, this appears to be more like a monopsony (cf. the Toys R Us case out of the 7th Cir. (J. Diane Wood opinion IIRC)), albeit one in which retailer is looking to raise it's suppliers' prices.

The reason I think that distinction is important is because of this: Apple and Amazon really aren't in the business of selling ebooks; they're in the business of selling eReaders. Apple was trying to move the competition more onto a field in which it could be competitive. That, to me (albeit having not read the opinion), is not anti-trust, but instead increasing competition and attacking Amazon's market share dominance.

Of course, I can also see an argument that Amazon has a really good business interference claim against Apple, and perhaps those actions alone are enough to run afoul of the Sherman Act. But the economics of what little I've seen from the fact pattern, don't seem to fit anti-trust IMHO.

Anyway, I enjoyed your analysis and thanks for reading the opinion so I don't have to ;)

(26) Beldar made the following comment | Jul 11, 2013 10:06:53 AM | Permalink

Mr. Wade, thank you for the civil and good-natured comment (#25) and its kind words. You really ought to at least read more about the opinion, even if you don't want to read it. You'd know then, for example, that this case was precisely about Apple's attempt to eliminate competition among ebook retailers (not ereader makers or sellers) because Apple was relying on that before rolling out its iBookstore and itself becoming an ebook retailer.

From the better press coverage, you'd read that this was not a Sherman section two "attempt to monopolize" case, but a section one "contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce" case. So your comments about monopolies just aren't apt.

But you'd probably actually have to read the opinion to see that the Toys R Us case you reference is actually cited several times in Judge Cote's opinion, sometimes supporting her ruling against Apple; but with respect to the distinction you're trying to advance, Apple made it too, and Judge Cote rejected it (see pp. 152-54 of the .pdf), as I would have too.

Finally, my friend, none of us who style ourselves libertarians, or even libertarian-leaning, can purport to speak for all libertarians. (I admittedly experience some cognitive dissonance as I write that phrase "none of us," but I can manage it in this context.) I am nevertheless very confident than no more than a tiny fringe of the many libertarian critics of the antitrust laws (again, I'm more usually one of those) wishes to legalize naked horizontal conspiracies to fix prices among major multinational multimedia companies. That's an absolutist position, and I'm not going to discuss it further here because I just can't take it seriously. If you want to repeal the Sherman Act, write your Congressman.

(27) fustian made the following comment | Jul 11, 2013 10:48:57 AM | Permalink

I don't know about all of this.

It is clear there is one monopolist here and it's Amazon. They are using their monopoly power to undercut the prices required by smaller competitors.

Apple did not decide what prices books should cost, nor did they intend to. They offered a platform in which publishers set prices. Apple just wanted their cut.

The publishers apparently got together to discuss prices which sounds illegal, if futile.

And various Apple people said some very foolish things, but that doesn't mean that Apple was setting prices.

And you can test this theory. If the market spoke and customers were unwilling to pay the prices set by publishers, would Apple prevent them from lowering those prices?

Don't think so.

Where's the monopolist, anti-trust behavior again?

Clearly with Amazon.

(28) horn made the following comment | Jul 11, 2013 11:11:04 AM | Permalink

It seems facile to say that Apple bullied *Amazon* when Amazon today still has over 70% of the e-book market. [N.B. I am not an Apple fan, but an Amazon one.]

But more importantly, the US SC has already explicitly ruled in a prior case that manufacturers and retailers may conspire to set prices, [minimum or otherwise] especially on new products AND specifically referencing new technologies where the 'right' price isn't necessarily apparent [I think it was Scalia, if memory serves.].

After all, 12.99 & 14.99 aren't the minimum price Apple is forcing on the marketplace, but only some of the prices that publishers are offering on new best-sellers.

The Agency model is legal, and normal in several industries [after all, there are only ~two models]. MFN-pricing is legal. Minimum-pricing agreements, again, as the US SC has recently ruled, are explicitly legal.

Beldar - since IANAL - can you explain in somewhat simple terms why this one judge is unilaterally allowed to disagree with prior Antitrust cases such as Leegin vs PSKS from just a few years ago [as well as the various allowed price-fixing cases, at least one of which was unanimously ruled]?

Vertical price-fixing is not prima facie illegal, after all.

(29) werewife made the following comment | Jul 11, 2013 11:58:45 AM | Permalink

Well, I used to be just a lowly production editor and now am just a lowly public librarian, and anything I know about US law was learned from Instapundit, Legal Insurrection, and "The Good Wife." But what I've learned about publishers is this: that if the public library movement were getting started today instead of back in the 1850s, public libraries would not exist outside of utopian fiction. Merely an observation.

(30) Sigivald made the following comment | Jul 11, 2013 1:20:41 PM | Permalink

"Kendall, what part of "Price fixing" don't you understand? Let's say oil companies got together and decided that the minimum per of gas should $20/gal indpedent of cost and then coerced other suppliers to put out of business (by refusing to sell gas to them) anyone who did not agree. "

Let's imagine a publisher who has, as every publisher has for current authors, an exclusive contract on each individual book.

Let's say that publisher set a price on that nice, popular, in-demand book, of $20 - twice the cost of other books - regardless of the reseller.

That's perfectly legal. It was before this, and it still is, and always will be, as long as there's IP protection for books (which I support).

Books, unlike oil, are not fungible goods, so much, so the idea of wicked monopoly/cartel pricing falls apart from its own core assumptions; all books that aren't public domain are "monopoly priced" to begin with, because the seller has a monopoly on their production and - to the extent that specific book is demanded, not "some book or other" - demand is not substitutable.

(Also, in the cartel example you try? Every oil company has a huge incentive to cheat and sell gas at $95 to capture more of the market and thus more profit. Then each has an incentive to sell at $90. Etc. The cheater equilibrium point devolves to the market price.

This is why OPEC cannot control the world's oil supply, even back when it produced most of it. Cartels are inherently fragile and weak, even when they can control the creation of competition, which domestic oil companies (or publishers) can't.

This is also why anti-trust laws are a giant waste of everyone's time, despite the scare stories. Ask an Austrian.)

(31) Beldar made the following comment | Jul 11, 2013 2:22:46 PM | Permalink

Fustian (#27): Thanks for your civil comment, but this wasn't a section two case about monopolization. It was a section one case about contracts and conspiracies to fix prices. See my comment #26 or, much better, Judge Cote's opinion for the relevant law, because your understanding of the law is simply wrong. Antitrust law includes more than just monopolization and always has; and there's a reason that section one of the Sherman Act is quite literally the very first section in Title 15 of the United States Code. Market power is still important, but in a different context: Here it's important because between them, the conspirators included five of the "Big Six" publishers, and between them they had, and were embarked upon actually using, the power to effectively drop Amazon's market share in ebook retailing to almost nothing in a matter of days and weeks if Amazon didn't capitulate to the "agency" model.

Horn (#28): Your description of what you think the law says bears almost no resemblance to the actual law, which may be why you can't remember the name of the case you think you remember Scalia writing. Leegin, for example, doesn't say vertical price fixing conspiracies are legal, it says they're analyzed for legality under a "rule of reason" rather than "per se" standard; and Judge Cote found that Apple's conduct violates section one under either the per se or rule of reason standard. (By the way, "per se" and "prima facie" have different and distinct meanings from one another.) Indeed, Judge Cote not only didn't go against or ignore Leegin, she cited it repeatedly (e.g., pp. 106-07, 153) for propositions on which it applied, and she distinguished it on propositions on which it didn't.

And Amazon's market share is irrelevant as a defense to Apple's and the Publisher Defendants' naked conspiracy to set prices. As for whether this was horizontal or vertical conspiring, and the differing standards applicable to each, Judge Cote dealt with that very thoroughly as well, and I've already mentioned it more than once in passing (in reference to the "per se" and "rule of reason" standards). She also explains why the antitrust law sometimes (but only sometimes) permits MFN clauses and agency-type business models, but how that doesn't mean you can use those legal means to achieve an illegal goal — the elimination of retail price competition by price fixing. I appreciate your civil tone, but you're simply badly informed about both the facts and the law here. If you'll actually read Judge Cote's opinion, perhaps you can formulate a more coherent position to argue, or at least a question that is possible for me to answer at less length than Judge Cote's 160 pages.

Folks, I genuinely appreciate the efforts of those of you who think you know the law even though you don't, or who think you've figured out these facts even though you haven't. You're either making arguments that are too ridiculous for even Apple's lawyers to have tried — and the opinion documents a whole succession of questionable positions that Apple took and then abandoned during the course of the litigation — or they're arguments that Apple made and the judge rejected.

I don't want to rule out the possibility that one of my pro-Apple commenters is going to come up with an argument or a precedent that's much more persuasive than anything Apple's own lawyers managed to cite for Apple, but none of you are remotely close to that yet. If you're going to continue fussing at me about individual precedents which you think this judge ignored, I'm going to mock you pretty severely if you haven't even bothered to do a text search on the .pdf of the opinion to see whether Judge Cote already discussed them. Before you assert that I'm wrong in my description of the opinion, please read, or at least skim, the opinion.

(32) fustian made the following comment | Jul 11, 2013 10:46:55 PM | Permalink

Beldar: Sorry, but I meant to preface my post with the fact that I am not a lawyer and have only fairly primitive notions of the legal issues involved which I understand are quite complex. I wasn't intending to argue points of law.

Instead I was trying to understand, from what I know of the case, who are the bad actors and why.

My understanding is that the publishers felt they were being driven out of business by Amazon's attempt to sell ebooks at below what they considered to be market prices. I can certainly see that having the publishers get together to decide what the price of ebooks should be is problematic (although ultimately futile).

But if we take the oil company example, imagine being a car company that makes high mileage cars. In discussions with the oil companies you are aware that they plan to raise prices. Someone asks why they should buy one of your high mileage cars when your competitor has more desirable cars albeit with poorer mileage. The President of the car company says: "see how we do this spring when the oil prices rise. " In this case, I don't see why the car company should be guilty of price fixing even though they benefit.

I would certainly guess that Apple didn't think they had done anything wrong or they would have been shooting off their mouths like they did, not that Jobs has always been the best judge of what's legal.

And I don't understand why the Jobs quote you pulled from his biography proves anything. There is nothing wrong with raising prices to see if the market will bear it. The publishers believed that Amazon was selling below market price. Jobs offered them another vehicle in which they could test out that model, and he rightly observed that they wished prices to rise. I don't see that as inherently evil. If it didn't work, prices would go down, or they wouldn't sell any books through Apple. I just don't see it as damning as you do. Lower prices are not necessarily better if they kill the market.

And didn't the threat to withhold books from Amazon came from the publishers not from Apple? I certainly didn't follow the case closely, but I assume it would have been big news if someone had proved that Apple put them up to it. My understanding is that this idea came from the publishers and they had already been in discussions with other retailers before coming to Apple. How was this an Apple conspiracy?

For all that "Apple seized the moment and brilliantly played its hand", in the end, this whole "conspiracy" didn't work. Amazon is still setting prices that are killing their competitors.

While I know this is not a legal argument, it still strikes me that in the big picture Apple was, in fact, offering marketplace competition and Amazon is the one actively engaging in anti-competitive behaviors (although the publishers gave it the royal try). I'm an Amazon fan, but I'm not dewy-eyed enough to believe that Amazon is selling books at very low prices out of the goodness of their hearts. Unless they are a little harder headed than that, there won't be an Amazon much longer. Do people really believe that Amazon will keep prices low once there is no longer any competition?

I still fail to see why Apple is the bad guy here, and it seems like Judge Cote doesn't care for them much. For example, you say that she believes Eddie Cue was lying under oath. Was this proven? Or does she just read minds?

(33) Brian made the following comment | Jul 11, 2013 11:05:37 PM | Permalink

Apparently no one here bothered reading the emails. The industry didn't want agency pricing, they wanted full price that amazon paid. Steve said this was in effect a gimmick, that they were destroying their business and eventually if the iPad platform failed for books that they would eventually demand publishers accept sub $10 across all platforms. That's why they accepted agency pricing and the right to set their proces. They wanted to keep their price anchor high.

The publishers have to keep prices high, they are living in an era where they are be becoming irrelevent. They offer little over self publishing that can't be bought over the spot market for cheap. Unfortunately for them they didn't understand that Jobs was giving them the rope to hang themselves. Books are commoditized consumption platform. A person can only read so much at a time, if you can use price to manipulate sales to gain that consumption, you will use it. Where title sales are Inelastic, prices will rise. By agreeing to direct pricing in an agency model, they are agreeing to a more efficient market, pitting major publishers against the guy writing in his basement. They will be forced to lower prices even more so than amazon even dreamt of just like what happened in the App Store where the mean price of software collapsed.

What you precieved of as hubris, was simply a confidence.game, that's why they were so brazen. Apple was selling the publishers a pipe dream that they would be able to better keep prices high better than forcing apple and amazon go at it being a middle man for pricing and terms. Now they have to slug it out with each other and everyone else with a computer and dream to write.

After reading this thread it seems that the general opinion is law worship and legal fan boyism. This isn't even good law under any standards, by letting each and every publisher inuding Joe Schmoe set the price on his book to whatever he pleases is "price fixing?". Right and when amazon gets to decide the price of each and every book regardless of anyones wishes, thats not? becuase its one corp and not 2 or 3? Steve Jobs ripped the absurd price control schemes down and replaced it with a directly competitve market and now he is "some king who could do no wrong". Maybe Steve was a guy who just hated BS and rent seekers. He turned the whole publishing industry into basically gas you buy at the pump, completely commoditized and uniform.

How do I know this? Steve sold billions of apps for .99 on the apple store, and apple is already really wealthy why would he care if books sold for $10 or $15. He probably just wanted content on his device at the best possible price for his customers so they would buy his iPad and not Amazons kindle. You see that was the market Steve cared about. Everything else was about the experience on the iPad. He didn't give a crap about publisher's business model (peanuts), he wanted them to fight for scraps while he racked in a huge amount of money in iPad sales.

I am astonished that the legal community can't even establish what people are really fighting over. This is a big and anti consumer travesty since the whole Sun / MS trial, where no one would even bother talking about the one issue the trial was really about. This whole system is broken to the core. This is just insane.

(34) Beldar made the following comment | Jul 11, 2013 11:20:46 PM | Permalink

Fustian, thanks again for the civil, indeed polite, response (#32). I'm not fussing at you for not being a lawyer and, indeed, one of my primary goals in this blog is to make complicated legal proceedings accessible to intelligent lay audiences. So your comments are indeed welcome.

Judge Kote observed Cue and other key defendant witnesses on the stand under both direct and cross-examination, just like a jury would. Actually, she gave them the unusual opportunity to custom-tailor their original direct exam presentations into formal written affidavits, so their lawyers could make sure that those witnesses' original presentations were as perfectly managed and polished as they could be; but besides presenting those written affidavits, the parties participated in almost a month of live testimony that included both cross- and redirect examinations. So Apple and the (settled) Publishing Defendants got every opportunity to explain themselves and to try to get their stories straight.

Judge Cote watched them try to explain documentary evidence — their own notes and emails and correspondence — that was wildly inconsistent with their oral testimony on the stand. She goes into considerable detail at various points in the opinion (albeit often in footnotes) to explain why she concluded that they are not credible.

So yes — that Cue and the other names she names are indeed liars has been proven now in exactly the way that courts have been deciding between liars and truth-tellers for hundreds of years. Apple could have had a jury make the determination of witness credibility, but they deliberately decided to waive that right and they put their trust in Judge Cote. And the rules of appellate review will prohibit either the Second Circuit or the SCOTUS from second-guessing the factfinder's (here, Judge Cote's) determinations on credibility issues.

As for Amazon: It wasn't the defendant, and that is a complete and entirely sufficient answer to your questions.

But even if Amazon's conduct had been on trial: Nobody pretends Amazon is doing anything other than competing as vigorously as it can to try to maximize its own long-term profits for its own shareholders. Many consumers, including me, believe that Amazon has correctly identified its own interests, in this particular case, as corresponding mostly with those of consumers, such that by serving its own interest Amazon has also been serving the interests of consumers. But that may not be true in every context, or at every time in the past or future.

Nevertheless, with respect to these particular events regarding the contracts by which publishers will do business with ebook retailers (be it Amazon, Apple, or Google), the difference is that (1) Amazon has been acting individually, rather than conspiring with others to change the rules and artificially eliminate market competition through contracts and combinations in restraint of trade, and it's only the latter that's illegal under Sherman section one; and (2) Amazon perceives its own best interests to be served by price competition, in which its efficiencies permit it to make money doing what other companies (see, e.g., Barnes & Noble) haven't figured out how to do profitably, so the results of its competition have indeed been to lower prices to the consumer.

I am utterly perplexed by your assertion that "lower prices are not necessarily better if they kill the market." Better for whom? Anyone but the conspirators? No one has suggested, or could plausibly suggest, that authors are all going to stop writing unless Apple can successfully fix retail prices at artificially high levels; that's preposterous. This isn't a dying industry, this is a new and booming industry. And the simple fact is that since 2011, ebook purchasers have been paying something north of $3/book more than free and fair supply and demand would have dictated — and that's been as a direct and immediate and easily traceable result of this very successful conspiracy. How you think that's a good thing for any consumer, or why those excess profits are essential for writers and publishers to stay in business, eludes me. It certainly isn't an argument that Apple's lawyers have ever made, although they've certainly made a great many other unserious and laughable arguments.

Again, I'm collapsing many, many pages of analysis from Judge Cote into a few sentences; if you want to know why Amazon's conduct is no defense for Apple's, read the opinion. That was indeed Apple's last stand of a defense, but it's a very silly and inapt one that, in my opinion, Judge Cote simply eviscerated as a legal argument.

Be assured that if Apple, or Google, or the DoJ or FTC or state attorneys general, think they can catch Amazon breaking the law like Apple and these publishers did, they can and will sue Amazon too.

(35) Beldar made the following comment | Jul 11, 2013 11:40:46 PM | Permalink

Brian (#33): Thanks for being civil, but your comment evidences a fundamental and massive understanding of the underlying facts. When you assert that "amazon gets to decide the price of each and every book regardless of anyone's wishes," you're badly misinformed. The chance from the wholesale to the agency model meant that Amazon was forced to give up all control over the prices that were being charged on Amazon.com for these publishers' ebooks. That's what the case was about at the most fundamental level.

I apologize for being so blunt, but your comments here aren't going to persuade anyone if you're so badly wrong on the most fundamental facts under discussion, so you're wasting my bandwidth.

(36) Brian made the following comment | Jul 12, 2013 12:10:18 AM | Permalink

Sorry I assumed you understood more about the underlying facts of the case such as Amazons dominant market position. When I was saying Amazon's pricing capacity in respect to its position in the market, given their sales relative to their competitors, it is basically a monopoly engaging in price engineering to maximize revenue. Also implicit in that statement is the understanding that only a monopoly or near monopolist would engage in price engineering like that because if the market was more like a "bazaar" than say Macy's, customers would not tolerate it.

So to tie it together, I'm saying that it doesn't make sense to complain about a collision of pricing when your apparently okay with monopolist pricing. Your simply for market inefficiency and higher prices. Complaining about a superior market model being formed freely and agreed upon by changing the players competing from distributors to suppliers is demonstrating the antiquated and small minded thinking of those enforcing and interpreting the law. Don't take my word for it, ask any economics professor about which mind of markets provide the best pricing to consumers. Distributor based pricing, or supplier based pricing?

(37) Brian made the following comment | Jul 12, 2013 12:31:52 AM | Permalink

Btw, feel free to blunt. I don't take any offense. I have been in tech for about 15 years and I'm just confused every time I see major government intervention in technology. Imagine if a random tech company could just waltz into the legal profession, make arbitrarily and ham handed decisions based on superficial analysis and the. you had to abide by without any regard to whether they were doing great harm or good. It's like WTF? This is not even about right or wrong, good or bad. It's about an evidentiary and evaluation process completely devoid of substance set up to be gamed by hammering square pegs into round holes.

Applying the Sherman anti trust act to prevent a more competitive market (or destroying one) from forming is just insane. When I read your analysis, is see lots of trees but no forest. Your 100% correct in your narrow analysis and reading of the available evidence. I am not arguing the trees, I'm arguing the forest. Your burning down a forest to save some trees. It's completely arbitrary and nuts that the law is being used like this. That's why I increasingly feel like this is simply too much power for the government to have and law should be repealed until you can make a process that works. The profession simply can't be trusted in its current state.

(38) fustian made the following comment | Jul 12, 2013 1:15:59 AM | Permalink

Beldar: You stated: I am utterly perplexed by your assertion that "lower prices are not necessarily better if they kill the market."

If oil costs $20 to produce and the price is set at $18, no one will look for oil any more because it is no longer profitable. In the end, this leads to shortages and is bad for everyone.

That was my point.

If Amazon starts offering books for a quarter and is only willing to pay the author a penny or two per book, then people that used to be able to make a living by writing full time will be forced to turn elsewhere.

Underlying all of the turmoil here is an important question about publishers. Are they still needed? Do they still provide a service in a digital world? I don't really know.

If they do still provide a value, then Amazon may be pricing books below the requirement to have a thriving market. If publishers are disappearing before our eyes, maybe the lower prices are justified. But this doesn't strike me as something for Judge Cote to decide.

I'm also troubled by the fact that the Judge told Apple before the trial that they would probably lose and recommended that they settle. Isn't this a little problematic?

I just read 6 contemporaneous accounts of the Eddy Cue testimony and none of them indicated that he was an untrustworthy witness. He was certainly subjected to rough questioning by government lawyers and, in the end, he kept to his story. I wasn't there. Possibly I'd feel differently had I been, but I would have thought that if Mr. Cue was such an untrustworthy witness that more of this would have come through the contemporaneous accounts. Maybe I read the wrong ones, but this is certainly part of the surprise for me.

Taken with the Judge's pre-trial comments I cannot help but wonder if Cue's responses to typical "did you beat your wife" questions would appear very differently depending on your original opinion of Apple and their behavior.

And I still do not know what Apple specifically did to violate the Sherman Anti-Trust laws. I can certainly see possible issues for the publishers.

And again, I fail to see how the consumer is better off over the long term with an Amazon monopoly which is the only end this judgment serves.

(39) Beldar made the following comment | Jul 12, 2013 10:28:54 AM | Permalink

Brian (#36 & 37), I again appreciate your civility, although I'm having to bite my lip pretty hard at your suggestion that I am unaware of Amazon's market share in ebooks. That is indeed a very core fact, one that was discussed extensively and from many different angles in Judge Cote's opinion — which you still, apparently, won't even attempt to skim, or you'd know that.

I'm not going to debate here, in these comments, whether the Sherman Act ought to be repealed. The point of my post was to explain to an educated lay audience not just the result of this decision, but how it got made and why it came out as it did.

Judge Cote and I both operate in a framework begun when both chambers of Congress passed, and President Benjamin Harrison (!) signed into law, the Sherman Act in 1890. Courts have substantially elaborated upon that framework in 123 years of judicial precedents since then. I understand that that framework is mostly unfamiliar to you and to most laymen, even including very technologically sophisticated ones, but it's very much as real — to me, to Judge Cote and the judges of the Second Circuit and SCOTUS, and to the inside and outside counsel for Apple, the publishers, and Amazon. We can't just jettison big chunks of it — like Sherman section one's prohibition on contracts and combinations in restraint of trade (of which price-fixing much like this was the original and most blatant example) — at our whim.

On appeal, Apple will be trying to convince the Second Circuit that Judge Cote made one or more important errors in the law. They may also try, but if so, in my opinion they are almost guaranteed to fail, in persuading the Second Circuit that she was also wrong in her credibility determinations and her conclusions on such ultimate (but still subjective) questions as Apple's and its co-conspirators' intent. The direct evidence of that, in the form of smoking gun documents and public admissions in and out of court, is spectacularly fulsome compared to most antitrust cases precisely because Apple, up to and including Jobs, were spectacularly stupid and arrogant in admitting both their intended tactics and results — price-fixing to eliminate price competition in ebook retailing. I'm pretty well acquainted with the governing law going back 123 years, and I believe Judge Cote understood and applied it correctly, and I reach the same conclusions about the facts that she did (albeit she's seen vastly more detailed evidence than I have or than she's summarized in the opinion).

That's apparently insufficient for you, but I'm not sure what more you want from me. I'm not going to agree with you that this law should be changed because I don't think that. I'm not going to agree with you that Judge Cote misapplied the law because she didn't. So I think we're out of things to discuss. Write your Congressman.

Fustian (#38), in response to your follow-up questions, I assure you that the grade-school level economics you're lecturing me about, I already knew. So does Judge Cotes; so did every single person involved with this case. There's more to it than that, but the simplistic scenario you paint in which authors stop writing because Amazon's not paying enough is very, very silly, and not worth further discussion. I could get into a long and protracted discussion with you about entry costs and barriers, elasticity and cross-elasticity of supply and demand, the availability and accuracy of market information to market participants, definition of any relevant markets and sub-markets, and a dozen other factors that antitrust law can, and does in other contexts, take into account. But none of that discussion is necessary because most of those things are less relevant in this price-fixing case under section one than they would be in other kinds of antitrust cases. I can't teach a law-school level antitrust course in my comments sections.

I can tell you from personal experience as an ebook buyer that as a result of Apple's conspiracy, the prices I paid suddenly shot up by 30% or often more in the space of a few weeks; that wasn't market forces, that was market manipulation, and it was not remotely pro-competitive. So I have a hard time not laughing in the face of anyone who insists that by trying to fix prices at artificially high levels the market couldn't otherwise support, Apple was somehow "helping" consumers. The only way I can constrain my laughter is that it's such a very bad, ugly joke.

I get that people really, really like their iPhones and iPods and iPads and iWhatevers. So did Judge Cote; that's a very subsidiary fact that doesn't control the result under the law. So read the opinion.

As for your other questions:

Whether publishers are or aren't needed in a digital world is an interesting issue on which I profess no special expertise. It's not what this case is about, it's a matter that will be sorted out over a period of years in a global and ever-changing market — as it should be. Hopefully it will be sorted out by individual buyers and sellers acting legally instead of through an illegal price-fixing conspiracy like this one, though.

Judges can and routinely do urge parties to settle in pretrial and even trial proceedings — just not in front of the jury. As part of that, they can and routinely do make comments to the lawyers about the strengths and weaknesses of their respective positions. And judges can and routinely do preview their concerns to help the litigants address those concerns mid-trial, when something can still be done about it, and the litigants are grateful for that opportunity. Since they can't raise anything on appeal that they haven't already argued in the trial court, they make sure to capitalize on such opportunities. Judge Cote apparently previewed much of her thinking in a May status conference, and she did it precisely so that Apple could take her preliminary comments into account for their final filings, so they could know and focus on their biggest problems. Despite that, they failed. But the fact that she gave them that opportunity first is something the appellate court will applaud, not condemn. If Judge Cote had done anything remotely improper or unethical, you can damn well guarantee that Apple's PR flacks would have had that in newspaper headlines across the country within 12 hours. She hasn't.

I have no idea what accounts you've read about Cue's testimony, nor whether any or all of them are reliable, but legally such second-guessers are irrelevant, so I'm not going to waste my time discussing them. Everyone's got an opinion, but Apple's lawyers certainly knew that either a judge or a jury would decide on their witnesses' truthfulness, not the press and not bloggers and commenters on the internet. She actually saw, heard, and read all the evidence. I suggest that instead of reading the opinions of probably less well-informed talking heads, you read her opinion (including her quotes from the damning documents that are wildly inconsistent with the stories Cue and others were peddling on the witness stand).

Your suggestion that Cue was victimized by "beating your wife" questions is, I'm afraid, terribly naive. I will concede that your naivete might be due to travesties and mockeries of justice like the O.J. trial or what's going on now in Florida with George Zimmerman; those weren't trials, they were circuses, and they bear zero resemblance to what happened in this complex, nonjury business litigation trial.

Apple had its choice among the best lawyers in the world, and Apple's lawyers got to ask all the follow-up, clarifying, or alternative questions they wanted. The notion that this was decided based on some sort of schoolyard taunt-exchanging or through judicial brow-beating of helpless and unsophisticated witnesses is simply laughable.

As for what Apple did to violate section one of the Sherman Act, it forbids contracts, combinations, and conspiracies to restrain trade. Apple fomented, directed, facilitated, enforced, and profited from a conspiracy with the publishers in which they restrained trade by fixing prices according to their agreed-upon schedule. That is exactly what Sherman section one prohibits. To be liable, one need not be one of the sellers or re-sellers who are fixing the price; one only need be part of the conspiracy, and Apple wasn't only part, it was the ringleader, the glue, and the club to enforce the conspirators' continuing participation and prevent cheating.

Thanks to you both for returning to read my responses to your comments, and again for your civility and good cheer. I hope I haven't seemed snarky or dismissive in my responses; sometimes things that seem obvious or simple to those in my profession seem very different to those who aren't, and sometimes we don't make enough effort to communicate with those who aren't already thoroughly steeped in the history and minutiae of the law.

But this is exactly the kind of behavior that the antitrust laws were written to prevent. To those of us who've studied and practiced that kind of law, the only thing remarkable or difficult about this case is figuring out how Apple ever thought it could have gotten away with this. They aren't stupid by nature, so this stupid behavior I can only explain as the product of overwhelming arrogance and contempt for the law. You may have a different interpretation for why they did what they did, but there is no reasonable interpretation under which what they did is legal.

(40) Brian made the following comment | Jul 12, 2013 12:49:02 PM | Permalink

Thanks Beldar for keeping your tone civil; I just want to say I am not arguing with you, I am simply clarifying my original position which you questioned so you understand. I never questioned your analysis as being anything other than a dead on legal analysis, or anything but 100% correct given the context of the law. To make an analogy I simply view you and the judge as a cop that gives a guy a ticket for swerving over a double yellow line because some kids ran into the middle of the street unexpectedly and he didn't want to kill them. You can be one part 100% correct in analyzing the legal requirements, but there is something more to the application of the law that does not require the government to do horrendous things to punish the people who are actually doing more to help society than any judge could possibly do. Remember when you hated your cellphone? When a computer was unusable and everything was filed in triplicate? When software costed 100x what you can buy it for today? When was the last time the Sherman anti-trust act did anything like that?

I just think its very shameful that Apple is face being punished for doing something to lower prices and provide a better experience in buying and reading books.

(41) horn made the following comment | Jul 12, 2013 2:04:36 PM | Permalink

Beldar - I appreciate very much your comments and clarification to a busy layperson like myself. I've read Leegin, I've read the sections you've highlighted in Cote's ruling, and I'm still confused about one thing [mainly]:

Judge Cote says while vertical price restraints are allowable under Leegin subject to rule of reason, that this case is not about vertical price-fixing, but horizontal.
She asserts it is, 'at root, a horizontal price restraint' thus subject to per se analysis.

Here's the confusion from the 40-something MBA with no skin in this game: In Leegin, the manufacturer of women's products entered into vertical price agreements with the retailers to enforce minimum pricing.

Here, we have the manufacturers and a retailer entering into vertical price agreements to enable differing price points [and MFN status.]

These price points were higher than Amazon's -- but this is the identical argument made in Leegin v PSKS: PSKS was discounting the product below the manufacturer's suggested price!

So the USSC determined that behavior in Leegin is allowable vertical price fixing, but Cote says that something that looks awfully identical to a layperson -- is horizontal? I'm mystified.

In short, it seems Judge Cote begged the question entirely, [possibly due to Apple's extremely sketchy behavior].

On pages 152-54, she makes it clear that she regards this as horizontal because there is more than one player on the 'level' that co-operated, just as there is in Leegin.

thanks for your time, with much gratitude for pointing out the sections I was looking for.

(42) Beldar made the following comment | Jul 12, 2013 2:39:15 PM | Permalink

Horn (#41): Your kind words are noted and appreciated. I'm not sure that I could improve on Judge Cote's discussion of Leegin, but to do so I'd certainly have to spend a great deal more time than I can presently spare in going back and looking at it and several of the other cases Judge Cote cites.

I will readily acknowledge that this isssue probably as close to a substantive appeal point as Apple can manage — not because these facts are new or unusual, but because the whole distinction between "vertical" and "horizontal" conspiracies has been problematic in actual application, and the subject of much academic criticism and lower-court confusion, for several decades. It's the kind of subject that law professors aspiring to earn tenure can and do write law journal articles on, and it explains Judge Cote's care in discussing and attempting to distinguish Leegin (and some similar cases). So I'm not trying to be evasive or duck your question when I say that it's beyond the scope of what I can do here.

But what I have pointed out in this post and its comments, and I reemphasize in response to your question, is this:

It doesn't matter much for purposes of Apple's appeal whether this is treated as a horizontal price-fixing conspiracy that's "per se" illegal, or some other type that's subject instead to the more flexible "rule of reason" analysis. The reason it doesn't matter is that Judge Cote also went through the "rule of reason" analysis and concluded that Apple loses under it, too.

Some of the press reports I've read, the ones most obviously influenced by Apple's post-decision spin or otherwise sympathetic to Apple, have urged it to take heart about its appellate prospects because so many cases end up being decided at the circuit (appellate) court level instead of at the trial court level. But lately (going back a couple of decades at least), those defense wins in the appellate courts have mostly been because trial courts applied only the tighter "per se" standard. Leegin itself is such a case; the remedy wasn't a judgment for Leegin, but a chance for it to re-try the case with the benefit of additional testimony about the pro-competitive effects of its policies that had been excluded (as irrelevant) under the trial court's ruling before the first trial that Leegin had committed a "per se" violation.

Many antitrust plaintiffs, on remand and retrial, find that they can't meet the more difficult burden of proof if the more flexible "rule of reason" standard is applied. So very often, the choice between whether something's analyzed under "per se" or "rule of reason" becomes, as a practical matter, outcome-determinative. That is, it effectively either ends the case one way or another, or at least that choice makes the outcome so certain that it leads to a quick and one-sided settlement.

But here, by contrast, in this bench proceeding — in which the district judge can make alternative findings of a sort that juries can't — Judge Cote has already, in her alternative ruling, given Apple the benefit of the "rule of reason" standard. And even under it, Apple still lost. Perhaps Apple can persuade the Second Circuit that this shouldn't be analyzed as a horizontal conspiracy among publishers in which Apple was a non-publisher co-conspirator; perhaps Apple can persuade the Second Circuit that Judge Cote's "per se" analysis was therefore inappropriate and wrong. But even if they do, the result of that (that the rule of reason standard applies) won't be a basis for reversing Judge Cote's decision. Given that she went ahead and admitted evidence, then made an alternative set of findings, under the "rule of reason" standard, any error as to the alternative applicability of "per se" becomes "harmless error"; and even if the Second Circuit says "per se" doesn't apply, the Second Circuit still would end up affirming her decision that Apple loses based on her alternative "rule of reason" finding.

Indeed, the very most likely appellate result is that the Second Circuit will say, "We're not going to even discuss whether this is 'per se' or 'rule of reason' because we don't need to, since the answer won't affect whether we affirm or reverse." Judge Cote surely, surely anticipated that exact possibility. That's very canny on her part but, again, it's something Apple ought to have expected.

I'm tempted to speculate and to second-guess with hindsight the decision by Apple's lawyers to waive a jury trial. But regardless, they didn't. And as a result, they're going to have a substantially harder time getting any relief on appeal. They almost certainly knew that in advance, but Apple decided they'd rather take their chances with Judge Cote than a jury even at the cost of fewer appellate opportunities if they lost. Now they're stuck with the consequences of that decision, and I think they're pretty much hosed.

(43) Beldar made the following comment | Jul 12, 2013 3:11:44 PM | Permalink

Here's the reason why Jobs' and other Apple executives' repeated public, private, and even written admissions about Apple's intent to eliminate retail price competition for ebooks was so stunning to anyone who has a clue about antitrust law:

Even with the benefit of the "rule of reason" standard, Apple would have had to show, in effect, that it had legitimate business purposes — purposes that were either pro-competitive or competitively neutral or competitively insignificant — for its policies. And in other contexts, defendants have convincingly made just those sorts of arguments for MFN and agency arrangements.

But those companies' executives didn't confess repeatedly on video, in print, and all over the internet, that their real intention was to eliminate retail competition. Even if that was most or part of their real intentions, they'd been better coached and disciplined by their antitrust lawyers! Apple was admitting and bragging about an anticompetitive intention which other plaintiffs typically have to try to prove by inference from circumstantial evidence (like "conscious parallelism" or other forms of market signaling).

Maybe the outside and inhouse lawyers giving Apple its antitrust advice during all this thought they could definitely get this case under the Leegin rationale and that they could therefore justify what Apple was doing under the "rule of reason." That would be ballsy and imprudent, but not too surprising for a company with Apple's history and worldview.

But it doesn't do any good for your lawyers to argue in court that your real motives are pro-competitive or neutral while your executives are getting headlines bragging about eliminating competition. That's why "rule of reason" gave Apple no safe harbor and precious little refuge of any sort: Steve Jobs decided to sail instead into the center of the antitrust hurricane.

To finish thoroughly mixing my metaphors: Apple, and Jobs in particular, after achieving their desired goal (Amazon's compelled but unwilling switch to the agency model), showed all the subtlety of Obama bin Laden after 9/11. (No, I'm not comparing bin Laden to Jobs or Apple execs generally, I'm just talking about a comparable lack of subtlety on a pair of specific occasions.) I think they'd have likely lost anyway, but their recklessness and foolishness made this outcome very predictable, and turned what could have been a much harder civil antitrust prosecution into a very one-sided one.

(44) fustian made the following comment | Jul 12, 2013 7:42:01 PM | Permalink

Well, Mr. Beldar, Possibly I'm oversensitive, but it feels to me that you did veer into incivility this time. "Grade school economics", "naiveté", and "laughable" imply a definite lack of respect at least to my delicate ears.

I'd like to make three quick points before heading out to do other things today.

First: you have continually implied there is something inherently better about lower prices. To use your phrase, I maintain this is "laughably" false, and if you have the deep economic understanding you profess, then I fail to see why you were so baffled at such an obvious statement of universal truth. I still have no idea what you were troubled with, and I apologize for "lecturing you on grade school economics" but I do not apologize for at least being clear.

Second: With this quote: "I will concede that your naivete might be due to travesties and mockeries of justice like the O.J. trial or what's going on now in Florida with George Zimmerman; those weren't trials, they were circuses, and they bear zero resemblance to what happened in this complex, nonjury business litigation trial," you imply a standard for the law that I don't believe it warrants. The law is a cesspool of despicable behavior, corruption, special pleading, influence peddling, politics, and general lack of competence. About the only thing it has going for it is that other systems appear to be worse in at least some respects.

As a technical person I am aware of how many trials are conducted by people that simply do not have the technical chops to sit in judgement of the issues involved. And if you want to maintain that the OJ trial was an outlier, I'm afraid we're going to have to agree to disagree. I think most people know that your success or failure in a civil trial can depend as much on the judge you draw as the case you present. Because the law is so complex, so ambiguous, so inconsistent, and so incomplete it is too easy to make the law dance to whatever tune you wish. It is, in fact, a common exercise in law school to task students with trying to create a consistent legal theory out of precedents that are clearly at odds with each other. Now, it may be true that this case is open and shut just as you say. But the general implication that only a few show trials are suspect is simply untrue.

Finally I am somewhat surprised by your answer to my specific question about what Apple did. You answered thusly: "As for what Apple did to violate section one of the Sherman Act, it forbids contracts, combinations, and conspiracies to restrain trade. Apple fomented, directed, facilitated, enforced, and profited from a conspiracy with the publishers in which they restrained trade by fixing prices according to their agreed-upon schedule. That is exactly what Sherman section one prohibits. To be liable, one need not be one of the sellers or re-sellers who are fixing the price; one only need be part of theconspiracy, and Apple wasn't only part, it was the ringleader, the glue, and the club to enforce the conspirators' continuing participation and prevent cheating."

These are general statements about the Sherman Act, but nothing specific to Apple except the implicit statement that they did all of it. Understand that I am aware it is not your job to convince me, and I completely understand that if I were so motivated I could read the decision myself. Still I just want to point out that you took an awful lot of time to with your reply to not actually answer my question. If it had been me, I would have tossed in a few of what I felt to be the most egregious Apple behaviors. Color me surprised.

I'm off now. At this point I'm largely in it for the argument. I continue to be surprised by the outcome since the legal opinions I read as the trial proceeded suggested that the government shouldn't have moved forward with this case to begin with, and that their arguments fell apart as the trial proceeded. Many people were surprised by the outcome. I suspect it hinges on Cote's "feeling" that Cue lied. Many others do not agree. I cannot tell you what their pedigree is any more than I know much about the Judge. I came here originally to get insight into that disconnect. And largely the message I've gotten from you is that the opinion is well written.

I spent a little time on a writer's blog this morning and they were devastated. They feel that, while Apple may continue to sell books, this is a huge victory for Amazon and will likely drive all of the smaller players out of the market. Yes I read your earlier post in which you point out that you bought a few books for slightly more. The real question is what happens to books over a longer term. My understanding is that the Sherman Act is meant to foster competition. In this application of it, at least some people believe that it seems to have accomplished the opposite.

(45) Beldar made the following comment | Jul 12, 2013 8:13:49 PM | Permalink

Fustian, I'm only responding to one point in your last comment (#44), regarding civility. You've continually misstated or misparaphrased my statements. That's not civil.

You're entitled to have contempt for the legal system. You're entitled to believe you understand it, and antitrust law, better than I do. You're entitled to believe any damn thing you want. You're entitled to have contempt for me. But you're no longer entitled to publish it here. Please go away, you've forfeited my respect and exhausted my patience.

(46) Andrew Munster made the following comment | Jul 13, 2013 11:28:29 AM | Permalink

Buy this judgement it is ok for amazon to sale below a fair price thus making it hard for anyone to compete with them. think about this who do think would win if it came to a ebook price war with apple, amazon and other ebook venders. It would be apple but they did not go this way i think they tried to make fair for the publishers. But now the DOJ has supported amazon model watch out amazon the price war is coming using the model you set up and approved by the DOJ.

(47) DtM made the following comment | Jul 14, 2013 7:27:16 PM | Permalink

Thank you for such a clear write-up, and may I say I admire your patience, tolerance and politeness in the replies. The confusion that exists (and IMO is fostered by those with a large stake in traditional publishing and the Apple fanbois) between monopolization of the market and collusion does muddy the waters a great deal. I think I can clarify why the editors and possibly Apple acted with such hubris. When I commented - when the charges were new back on another forum in a response to 'Amazon is monopolizing why are the good people being charged?' - that it was collusion not monopolization that was being dealt with, an editor said that absolute nonsense and merely showed the DoJ knew nothing about the publishing industry, and that such discussions and the sharing of sales data etc to an extent that would never happen in other businesses were the norm in the Publishing industry and therefore they hadn't done anything wrong. When I suggested that actually breaking the law and getting away with it that did not legitimise the behavior, but in fact meant the industry should be deeply grateful the the DoJ was not familiar with its normal practice, and that it should operate by normal business rules I was met with roars of outrage. Publishing is special and different I was told. I am glad the Judge (and thus presumably the law of the land) has established that it is not. So the hubris may well be the product of a long habit considering themselves above the law, outside its bounds, and thus not worrying about it.

If I might ask - what is the likely time for this to go to appeal as it probably will? When can we expect this lot wrapped up by? Or is that 'as long as they want to fight it'?

(48) Gregory Koster made the following comment | Jul 15, 2013 12:54:06 AM | Permalink

Dear Mr. Dyer: Conceding your proprietor's right to write about what you find intersting, I must admit that your last two posts fill me with faint joy. It's as if it were 1943 and you were blogging about the winding up of the Works Progress Administration instead of all this pesky war stuff...

Given that, the most interesting part of the Apple kerfuffle is the utter failure of legal ethics to have stopped this idiotic plot in its tracks. I am baffled at why Jobs & the publishing ninnies charge forth so brazenly despite all the howling their counsel did against it. Bah, who am I kidding? That question is easily answered: Apple's legal counsel is either just as arrogant as Jobs, or unwilling to take on such arrogance when said arrogance is signing the enormous pay checks said lawyers are taking home.

Next, there's this gem from your 39:

"We can't just jettison big chunks of it — like Sherman section one's prohibition on contracts and combinations in restraint of trade (of which price-fixing much like this was the original and most blatant example) — at our whim."

Why not? See e.g. California's "we aint' gonna defend no law we don't like, specially after a liberal bigot federal district court judge spit on the peasants who wrote this, gee, that looks like fun" shtick. Look further at the US Supreme Court, which asked the California Supreme Court, hey do the authors of Prop 2 have standing to defend it. CA sez, of course! The Feds snicker, say, no they don't, and whaddaya gonna do about it, sucker? Or consider the Obamacare business mandate, which a mid-grade Treasury bureaucrat said, we ain't gonna enforce. Consider the IRS's "principles" for deciding what nonprofit groups get tax exempt status. See the Director of National Intelligence fibbing to Congress about not spying on Americans, with no indictments following his fibs. Show me the good faith in any of these propositions, and I'll show you Harry Reid's informant who told Harry Mitt Romney didn't pay any income taxes.

Why should lawyers have all the fun of kicking over chessboards when they are losing? To be sure, this isn't intellectally honest, but law is no longer about honesty. What else explains John Roberts's gyrations in the rulings he's issued?

Sincerely yours,
Gregory Koster

(49) Dale Newland made the following comment | Jul 15, 2013 2:40:43 PM | Permalink

There is a very extensive analysis of why the Judge was wrong as a matter of law and for engaging in a tautology in the factual development of the case at http://macsfuture.com/post/55390849579/the-courts-antitrust-decision-against-apple-is-wrong. The solution that Apple must bring an anti-trust suit against Amazon and wait 5 years rather than using legally sanctioned means of competing is ridiculous.

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