U.S. feds find a judge to rubber-stamp their anti-Apple antitrust claims

“A conspiracy to increase prices that results in lower prices is either incompetent or it isn’t a conspiracy,” The Wall Street Journal opines. “Take Apple’s entry into the digital books market with the iPad, which led to more consumer choice, competition and innovation, as well as lower e-book prices. That reality has not deterred a federal antitrust vendetta against Apple, now joined by Judge Denise Cote.”

“The federal district judge ruled Wednesday that Apple had colluded in 2009 and 2010 to fix e-book prices with a cartel of the major publishing houses. Her 160-page decision was expected, given that prior to the bench trial—before any testimony had been presented—she had already pronounced her ‘tentative view’ that Apple was a criminal conspirator,” The WSJ writes. “That does not make her reasoning any more coherent. As proof of Apple’s malfeasance she notes that the company ‘did not want to begin a business in which it would sustain losses’ and ‘hoped to launch a new content store that was both profitable and popular.’ Next up, indictments for every other successful American company.”

“Apple says it will appeal and it is doing a public service in doing so,” The WSJ writes. “The feds are attempting to declare certain normal business practices as “per se” violations, or inherently illegal, rather than having to prove that they help or hurt competition and consumers. Under Justice’s theory, any new media content or other distributor that planned to enter a market and negotiated prices or business models with sellers beforehand would be committing an antitrust crime, even if commerce is better off.”

The WSJ writes, “Judge Cote was credulous enough to buy it, but we trust the Second Circuit or even the Supreme Court will squelch this threat to competition and efficient markets.”

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” and, obviously, so is Judge Denise Cote.

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

Related articles:
U.S. DOJ’s court victory over Apple may turn out to be pyrrhic – July 11, 2013
Apple faces triple damages, longshot appeal over ebook conspiracy claim – July 11, 2013
U.S.A. v. Apple verdict could end the book as we know it – July 11, 2013
U.S. DOJ unwittingly causes further consolidation, strengthens Amazon’s domination of ebook industry – July 11, 2013
Where’s the proof that Apple conspired with publishers on ebook pricing? – July 10, 2013
U.S.A. v. Apple ruling could allow U.S. government to monitor, interfere with future Apple negotiations – July 10, 2013
Judge Denise Cote likely wrote most of her U.S.A. v. Apple ebooks case decision before the trial – July 10, 2013
U.S.A. v. Apple: NY judge rules Apple colluded to fix ebook prices, led illegal conspiracy, violated U.S. antitrust laws – July 10, 2013

51 Comments

    1. You must be confusing them with the NYSlimes. The Journal, recognizing the importance of competition in a free market, has been in Apple’s corner on this case from day one.

  1. the government could not possibly be picking on apple because it followed tax laws and is keeping money in Europe the feds want to spend? the fate of book stores that sell actual books is pretty clear to anyone who wants to peruse his drugstore rack of romance novels rather than heading out to borders or Barnes and noble to have an actual selection. how i ask you could apple come up with a fair price for digital content and pay publishers and authors what they deserve or even demand. removing the cost of printing,binding,and shipping paper books puts focus on the worth of content.its vallue is intangible and by nature must be agreed on in negotiation. if the price is set wrong people will simply not buy. and that can be a too low price as well. my friend makes incredible custom tips for pool cues. he was selling them in pool magazines for 10 dollars apiece i tried one and they were great!’ my friends thought 10 dollars was a rip off .I asked him to raise the price to 20 .he did and now people said “they must be really something if he wants 20 dollars apiece ill try one!” raising the price got them to sell and the public was done a disservice by not trying them at the first offered price. the point is its not about price that makes sales but value .It is not price fixing its called price point marketing. Next on the prosecution list is every product priced at $ XX.99 all those businesses are colluding to price a penny lower than the next dollar.RICO case if i ever saw one

  2. Apple colluded with industry to increase and fix the price of eBooks. They inflicted severe financial penalties on anyone not converting Amazon and others into an agency model.

    They colluded because they needed to break other companies’ ability to sell eBooks for less than them. This is anti-competitive, monopolistic, and illegal.

    Why should the publishing industry be locked into a business model that Apple wants? No company, EVER, should have that much power to control business models in an industry.

      1. Here’s our slimy Apple:

        “Apple decided to pressure Random House to join the
        iBookstore. As Cue wrote to Apple CEO Tim Cook, “when we get
        Random House, it will be over for everyone.” Apple had its
        opportunity in the Fall of 2010, when Random House submitted
        some e-book apps to Apple’s App Store. Cue advised Random House that Apple was only interested in doing “an overall deal” with
        Random House. By December, they had begun negotiations, and
        Random House executed an agency agreement with Apple in mid-
        January 2011. In an email to Jobs, Cue attributed Random
        House’s capitulation in part to “the fact that I prevented an
        app from Random House from going live in the app store this
        week.”

    1. Ah, more of the same inaccuracies.

      “Apple colluded with industry to increase and fix the price of eBooks. They inflicted severe financial penalties on anyone not converting Amazon and others into an agency model.”

      There was never evidence presented, or any facts given in the ruling, that state Apple’s contracts with the publishers required “severe financial penalties” of anyone not using an agency model with any other retailer. If you have that specific wording and can quote the specific contract then do so. (In reality you can’t because that wording isn’t there!

      Even the judge’s ruling quotes Apple executives as saying that they know they cannot force the publishers to use an agency model across the board AND that Apple will work with the publishers to get 30% of “whatever the lowest retail price is (whether agency or wholesale)”. [quoted from the ruling].

      “They colluded because they needed to break other companies’ ability to sell eBooks for less than them. This is anti-competitive, monopolistic, and illegal.”

      A Best Customer clause is not illegal. Do you even know the name of the organization that uses a Best Customer clause in its contracts more than any other entity one the Earth?

      It’s the U.S. Government. Many, many U.S. Government contracts have a Best Customer clause.

      “Why should the publishing industry be locked into a business model that Apple wants? No company, EVER, should have that much power to control business models in an industry.”

      As I said above, the contracts between Apple and the publishers do NOT dictate what model (agency or wholesale or whatever) the publishers can have with the other retailers. Even the judge’s own ruling states this.

      1. Shut up:

        “The agreements also included a price parity provision, or
        Most-Favored-Nation clause (“MFN”), which not only protected
        Apple by guaranteeing it could match the lowest retail price
        listed on any competitor’s e-bookstore, but also imposed a
        severe financial penalty upon the Publisher Defendants if they
        did not force Amazon and other retailers similarly to change
        their business models and cede control over e-book pricing to
        the Publishers.”

    2. Fir less than them? Try again, troll.

      For less than the goddamn books cost at wholesale. When you’re buying books from publishers at 13.99 and selling them for 9.99, that’s just bullshit criminal attempt to destroy every legitimate book seller across the nation. That’s not “selling cheap”. It’s poisoning real competiton. That should have been prosecuted.

      Amazon had already destroyed 90% of its competiton with its warchest. Even Barnes and noble had already decided to stop sellin ebooks completely, because its impossible to run any honest business buying books for 13.99 and selling them for 9.99. If Barnes an noble was crushed in ebooks, amazon would have owned 95% of every sale, so they could stop selling at a loss. Publishers were getting their full 13.99, so they were bribed to go along.

      Once competiton was extinguished amd amazon hiked proces, No competitor could enter, since all amazon would have to do is enter the red again and bleed competitors out fast.

      You need to pull your head out of your amazon loving ass. Amazon is a fucking vampire, not an honest enterprise. All apple did was buy book a at 9.99 ( less than amazon was bribing publishers with) and sell them at a normal markup.

  3. “The company ‘did not want to begin a business in which it would sustain losses’ and ‘hoped to launch a new content store that was both profitable and popular.’”

    If Apple thought it was going to be unprofitable to get into ebooks then it shouldn’t have. I don’t know of any other example where a new entrant to an existing market came into it, and bullied the vendors into changing their existing business model, and then have those changes forced upon the existing competitors. I also don’t know of any start up that was able to stack the deck in their favor to make sure they are profitable and popular. Every new venture has an inherent risk to it. If it didn’t, the majority of new businesses wouldn’t fail because everything would be profitable. What Apple did stinks and I for one am glad that the judge, predisposed or not, ruled against them. I may have a lot of Apple gear, but I am not blinded by them. I also do not buy my ebooks from them either, primarily due to what they did at the onset of their entry to the ebook market, and I was online, Day 1, iPad 1, buying my first of 5 iPads.

    1. As I wrote above, Apple did not force changes on competitors. The judge’s own quotations of testimony shows that Apple knew that it could not force such a change — and had resigned itself to that fact.

      The only thing the judge points to in an attempt to claim that Apple wanted to force all the publishers to an agency model for all the publishers’ retail outlets were UNSENT emails by the late Steve Jobs. Apple’s IT department claims they were never sent, just drafts kept within the system because the law requires emails to be kept and not destroyed (thank you SOX!). Cue claims he never got them. Steve Jobs is not around to testify he never sent them. Yet the judge uses them as justification to claim that Apple demanded an entire industry shift to an agency model. Absolutely no evidence was presented showing this demand was made to any publisher. It never showed up in any contract.

      We’ve all done drafts of emails that we’ve never sent. We’ve written something, then set it aside coming back to it later and realized “That’s not what I meant to say.” Then we’ve written another draft.

      The judge pointing to emails that were never sent as proof that Apple forced something is just the judge making things up and grabbing at straws to support her position. Again, there was never anything presented (no draft contracts, no final contracts, no negotiation memos, nothing) that shows Apple forced the publishers to go to an agency model across the board.

      There is, however, counter data. The contracts themselves. Per the contracts, the publishers were not forced into any model for any other retail outlet as the contracts say absolutely nothing to force this!

      1. Shadow:

        Just shut up already. You make zero sense and deny facts.

        Apple forced publishers into agency by:

        1. Telling them they won’t enter the eBook market unless they get other retailers on the agency model;
        2. Through the MFN clause;
        3. Through a clause that severely, financially punished any publisher whose book was being sold for less under a non-agency model at other retailers.

        This and the gathering up of all of the largest publishers, and getting them all on board and leading the meetings… Apple attempted to thwart Amazon’s low prices because they admit they didn’t want to compete on price.

        They didn’t want to compete on price.
        They didn’t want to compete on price.
        They didn’t want to compete on price.
        They didn’t want to compete on price.
        They didn’t want to compete on price.

        So they tried to change the business models of EVERY retailer… the entire industry… eliminating competition completely.

        Wake the fuck up.

        1. No, here is what YOU don’t get, Amazon had a MONOPOLYMONOPOLYMONOPOLYMONOPOLYMONOPOLYMONOPOLYMONOPOLYMONOPOLYMONOPOLYMONOPOLYMONOPOLY which all the publishers wanted out of because it only benefited Amazon. The market was stifled by the prices set by Amazon to suit its own ends. The publishers had no control over their own product. By bringing an end to the SELF-SERVING AMAZON MONOPOLY the result has been a rejuvenation of the e-book market, with better selection and in fact OVERALL LOWER
          PRICES.

          1. Sorry. I was smoking weed and playing with myself when I post the previous entry. You’re right. You’re all right. I’m just an ass licking troll who doesn’t understand shit about free enterprise because how can a decision that leaves the pricing power in the hands of a 90% player not be correct?

          2. No, Amazon NEVER had a monopoly. You are so US centric.

            Amazon does not have a monopoly on books across the world, not even close.

            And the reason Amazon had such a large percentage of the eBook market in the US is simply because they innovated before anyone else did. They were pretty much first, along with Sony.

            But you’re the same idiot who was sadistically revelling in Apple’s 80%+ share of the MP3 market at the peak of the iPod/iTunes. And how the music you bought was locked to the iPod. Nothing wrong with that, right?

            In other words, you have no idea what you’re talking about and you’re a hypocrite.

            Self-serving? No shit. Every company is, and Apple is greedier than anyone. It is NOT ok or legal to try and force and control the business models that companies use across an entire industry. That’s what Apple tried to do.

            There is no way any company should have that much power, and the decision was the right one. Apple is guilty.

            1. Given that the case was in the US and concerned supposed anti-competitive behavior the US the mention of Amazon’s market position is entirely appropriate.

            2. Your concern, along with others, about Amazon… that it’s an alleged Monopoly, and that it had an MFN clause… that these things mean that Apple should be absolved of any wrongdoing here because they weren’t alone in having an MFN clause… and hey, well… a monopoly is just a bad thing so Apple was right to try and break it.

              First, it hasn’t been proven that Amazon has a monopoly in the publishing industry. In fact, there is lots of competition with Amazon at around 50-60% marketshare of books in the US, with lower marketshare abroad, so that destroys the argument that Amazon has a monopoly in the publishing industry.

              Second, a Monopoly itself is not illegal… that is, a significantly dominant position in the market. The abuse of this Monopoly is an issue.

              The Judge summed things up nicely in the decision report:

              “This trial has not been the occasion to decide
              whether Amazon’s choice to sell NYT Bestsellers or other New
              Releases as loss leaders was an unfair trade practice or in any
              other way a violation of law. If it was, however, the remedy
              for illegal conduct is a complaint lodged with the proper law
              enforcement offices or a civil suit or both. Another company’s
              alleged violation of antitrust laws is not an excuse for
              engaging in your own violations of law. Nor is suspicion that
              that may be occurring a defense to the claims litigated at this
              trial.”

              And:

              “First, it is no defense to participation in an illegal
              price fixing conspiracy to suggest that others did it too.
              Second, focusing on the precise terms of agency agreements and the extent to which they may have been similar is far too narrow a focus. The issue is not whether an entity executed an agency agreement or used an MFN, but whether it conspired to raise prices. Apple has pointed to NO EVIDENCE that either Amazon or Google desired either to eliminate retail price competition or to raise retail prices. Quite the contrary. Amazon was ADAMANT in its support of retail price COMPETITION and lower prices. It did not relinquish its control over retail pricing easily.

              As Penguin’s Shanks described at trial, when Penguin demanded that Amazon yield its discretion over retail pricing, Amazon “yelled and screamed and threatened. It was a very unpleasant meeting.”

              For its part, Google had been negotiating wholesale distribution agreements with Publishers and only switched to agency agreements at their insistence. Amazon was so hopeful that the Publisher Defendants would relent and revert to a wholesale model once they saw how much money they were losing with the agency model that it added a “model-parity” clause in its agreements.

              In sum, Apple’s independent business reasons for creating
              an e-bookstore and for adopting an agency model to do so have not created any ambiguity in the evidentiary record that should require hesitation before finding Apple liable. The totality of the evidence leads inextricably to the finding that Apple chose to join forces with the Publisher Defendants to raise e-book prices and equipped them with the means to do so.”

            3. Amazon is only marginally in the publishing business. Though they may leverage their way into in the future currently they are only a retailer.

              What I’m alleging is that they are using their strong position in retail to depress the amounts they pay publishers. It has very little to do with anti-monopoly laws until they turn on the consumer. Something they will likely never have to do since they can cut a fat margin out of the publisher’s cut once their retail competition is on the ropes (Which luckily now includes Apple in e-books at least).

              Amazon will only enter publishing after they squeezed the existing publishers for all the margin they can, then they will either buy them out or begin to compete directly with them in order to feed the content mill.

            4. Shock Me:

              You keep posting long diatribes but what you’re saying is irrelevant to this trial, just like the Judge pointed out.

              This case is about one simple matter: Apple conspiring to raise and fix eBook prices and eliminate competition.

              The particulars of the agency model and MFN clause are essentially irrelevant.

              The evidence that Apple joined forces with the publisher defendants to raise prices and eliminate competition is overwhelming. And that is what this case is about.

              It’s not about other companies. It’s about Apple and the publishers and how they came together to destroy competition in the market.

              The evidence is there. The motive is there. The prices did in fact shoot up right after Apple went live.

              We’ve even got Cue in writing telling Cook it’s “over for everyone” once Random House signs. Meaning Apple would become a monopoly that they hoped in the eBook industry like they were with MP3 players and music. And that they’d be eliminating competition.

              And Cue actually blocked Random Houses iPad Apps to squeeze them into signing on.

              Choising to ignore the evidence is up to you. But it’s there. And the courts rightfully found Apple guilty.

              Look, I want Apple to be successful. But this behaviour is not acceptable from any company. That includes the publishers. They are all guilty.

              Do I think the DOJ should sue Apple for a bunch of money? Not really. But what is important is that companies like Apple should not have so much power as to dictate pricing and business models along with eliminating competition.

              This is a win for consumers and the industry. You will benefit.

              There’s lots of innovation happening in this industry with fresh new business models. With Apple’s way, that innovation would struggle to see the light of day.

      2. If we’re going to start using unsent information then it’s all over. The next step is the thought police. We all think bad things, we all consider doing things that we don’t do because we realise that for whatever reason they’re wrong.

  4. “… we trust the Second Circuit or even the Supreme Court will squelch this threat to competition and efficient markets.”

    I wouldn’t hang any of my hopes on that. They are still agencies of the federal government. I would trust then about as far as I could throw them.

  5. If the DOJ wants to really work on something that will really help consumers, why don’t they go to work on the health care industry. It is downright shameful what you pay for health care supplies. I am not talking about professional services or even prescriptions, but many of the supplies people consume to address their health issue.

    The amount I pay for simple CPAP supplies for my sleep apnea condition is mind-boggling. Simple plastic and rubber, much of which could be reused if they would just supply the perishable parts. But NO!!!, you need to buy the whole thing at exorbitant prices.

    Most people, including myself, are smart enough to realize that if I can buy the same ebook for $3 less, that is where I will go to buy it. Unless the higher cost one provide considerable compelling value, it will not be chosen.

    Apple has money and the DOJ wants it. Simple as that.

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