The U.S. federal prosecution of Apple Inc. is pointless and harmful

“The Justice Department’s prosecution of Apple for allegedly violating antitrust laws is but the latest example of misguided federal efforts that aim to protect consumers, but end up doing more harm than good,” Richard Rush and Wayne Crews write for Forbes. “The DOJ’s stated goal is to bar companies from engaging in anti-competitive practices, but its actions will hinder innovation.”

“Even if Apple were trying to capture monopoly profits in the e-book market, such efforts would still fail, even without government taking action, because of the market’s highly competitive nature and evolving dynamics. Rapidly evolving technology and market forces render such prosecutions irrelevant as soon as they’ve begun,” Rush and Crews write. “This insight dates back to Adam Smith, who warned that businessmen often engage in ‘conspiracies’ to ‘raise prices’ for their own narrow gain. But far from arguing that such collusion calls for state intervention, Smith maintained the free market would address the problem, because “an effectual combination” requires the ‘unanimous consent of every single trader, and it cannot last longer than every single trader continues of the same mind.’ In other words, competitors will move to provide the same product or service at a lower price because there are profits to be made.”

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Rush and Crews write, “We don’t need federal prosecutors to protect us in a fluid market where the most profit to be had is by satisfying customers.”

Read more in the full article here.

MacDailyNews Take: As we wrote the day the DOJ filed this lawsuit, “The U.S. DOJ is plainly inept.”

Killing real competition for the appearance of competition is just plain stupid.

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  1. “In other words, competitors will move to provide the same product or service at a lower price because there are profits to be made.”

    Ohhh, yeh. That works SO well with the competition with cell phone plans or with gas, or with…..

  2. Where was this aggressive DOJ when Microsoft had a real monopoly, was actively engaged in abuses of that monopoly, had a measurable and deeply negative effect on the market, and actually hurt consumers with higher prices and lower innovation than a competitive market would have produced?

    1. They were found guilty, but nothing was ever really done about it. It was analogous to a slap on the hand for Microsoft, and a slap on the face to the rest of the industry.

      1. Actually, Apples stock value is a reflection of Apples ethics. It’s stock price is a reflection of the efforts of manipulators and gamblers on Wall Street. Two very different things, value and price.

    1. Renaldo, Apple cannot get away with the illegal tactics that Samsung uses.

      If Apple wins this case, as we hope it will, it will stand as a deterrent to other legal agencies attacking Apple….

      Apple is building a super huge trademark of a company that builds great products, puts the consumer first, and is super honest. It will be like the government trying to attack the Red Cross. You can attack a person working in the Red cross but you do not go after it.

      Just a thought.

    1. The book companies worked together (illegally) to change prices. Apple was just trying to be a new distributor of books. It was left out of the illegal negations.

  3. Yeah… let the market handle it – that old naive libertarian saw.

    “In theory there is no difference between theory and practice. In practice there is.”

    1. It’s not naive… what’s naive is accepting anything the government tells you.

      Besides, I’d rather be naive than ignorant (as so many are) of how convoluted a 100+ years of economic regulatory laws are in this country, and how corporations are actually protected by innumerable government/agency policies, regulations and laws originally implemented to control them have been amended/altered to the point they actually protect them from real competition, allow them to collude, and end up making consumers/citizens pay more.

      The market could handle just about anything thrown at it… provided it was left alone to do so. Meddling (however well intentioned) just messes up things for everyone. As has been well documented by the late Noble Prize for economics, Milton Friedman.

      Remember: “There are none so blind as those who will not see.”

      1. Milton Friedman’s only legacy will be that he actually trusted the good old economist norm that people act rationally and for the common good. Free markets are not made up of either rational people or people who largely care about the common good. As a result, the 2008 crash. Thank you Milton. Sorry friend, but some “meddling” will always be required.

  4. Don’t blame the DOJ.

    If I am not mistaken, this whole fiascal started by an “E-books Antitrust Litigation filed in California” back in 2011.

    “Hagens Berman has filed a nationwide class-action lawsuit claiming that Apple Inc. and five of the nation’s top publishers, including HarperCollins Publishers, Hachette Book Group, Macmillan Publishers, Penguin Group Inc. and Simon & Schuster Inc. illegally fix prices of electronic books, also known as e-books.”

    As well, as published in a Arstechnica article, “EU investigating if publishers conspired with Apple on e-book pricing”, it stated, ” The same five publishers named in the EC’s investigation, as well as Apple, were recently on the receiving end of a class-action lawsuit making similar claims of price-fixing and anti-competitive behavior, only fuelled the issue.”

    As such, the DOJ really had no choice but to proceed against Apple. At the time, their evidenced was based on ‘he says, she says’, and not pursing as the law requires would be irresponsible.

    And lets not forget, Amazon didn’t make any effort to be forthcoming. “Amazon’ claims as supported and recently testified by their testimony, “During the third day of the U.S. Department of Justice’s antitrust suit against Apple, a high ranking Amazon executive said the agency model used by Apple and five major book publishers was meant to slow down the success of online retailer’s popular e-book reader.”

    Importantly also, consider by April 2012† “The three publishers that agreed to settle are Lagardère SCA’s Hachette Book Group, CBS Corp.’s CBSA …Simon & Schuster Inc. and…HarperCollins Publishers LLC. (News Corp. also owns The Wall Street Journal.)

    Unfortunately further acquiescences by the so-called conspirators since the first suit was first laid didn’t help Apple’s cause, e.g., “A group of 16 states, led by Connecticut and Texas, filed their own suit Wednesday against Apple, Macmillan, Penguin and Simon & Schuster. The states said they have reached tentative settlement agreements with HarperCollins and Hachette. Those two publishers have agreed in principle to provide more than $51 million in restitution to e-book buyers….”

    No doubt the evidence presented to date seems to favour Apple. Surely Apple would rather not have to be in litigation as they are so often forced to defend. However, I am pretty sure that they just can’t wait to be exonerated and get their just dues.


  5. That is a nice thought. In theory it works. Not always in the real world… This free market blah blah stuff. How ever, in this case apple has done nothing wrong.

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