Apple urges U.S. appeals court to void ‘radical’ e-books ruling

“Apple Inc urged a U.S. appeals court to throw out a judge’s ‘radical’ finding that it violated antitrust law by manipulating electronic book prices, and blamed publishers for running a conspiracy it claimed to know nothing about,” Jonathan Stempel reports for Reuters.

“The request on Tuesday night came after U.S. District Judge Denise Cote in New York concluded last July after a nonjury trial that Apple had played a ‘central role’ in illegally scheming as early as December 2009 with five publishers to raise e-book prices and impede competitors such as Amazon.com Inc.,” Stempel reports. “In a filing with the 2nd U.S. Circuit Court of Appeals in New York, Apple said it ‘had no knowledge that the publishers were engaged in a conspiracy’ at any time.”

“It said it lawfully took advantage of market “discord” and the publishers’ own frustrations with Amazon, and ‘kick-started competition in a highly concentrated market, delivering higher output, lower price levels, and accelerated innovation,'” Stempel reports. “Cote’s decision ‘is a radical departure from modern antitrust law,’ Apple said. ‘If allowed to stand, the ruling will stifle innovation, chill competition, and harm consumers.’ The Cupertino, California-based company asked the 2nd Circuit to reverse Cote’s decision or else give it a new trial before a different judge.”

Read more in the full article here.

MacDailyNews Take: There was simply no proof that Apple had played a “central role” in any “conspiracy.” U.S. Federal Puppet Denise Cote’s ruling is based upon fantasy, delusion, incompetency, and/or something else other than fact.

Related articles:
In pretrial view, judge says leaning toward U.S. DOJ over Apple in e-books case – May 24, 2013
Lawyers have complained for years that Judge Denise Cote pre-judges cases before she enters the courtroom – August 14, 2013

Apple’s e-book appeal to higher court: Toss out the verdict, or give us a real judge – February 26, 2014
U.S. Federal Puppet Denise Cote: ‘Apple’s reaction to the existence of a monitorship underscores the wisdom of its imposition’ – January 16, 2014
Judge Denise Cote denies Apple request block her friend as ‘antitrust compliance monitor’ – January 13, 2014
Antitrust monitor Bromwich rebuts Apple accusations of ‘unconstitutional’ investigation – December 31, 2013
Apple seeks to freeze its U.S. e-books ‘antitrust monitor’ – December 15, 2013
The persecution of Apple: Is the U.S. government’s ebook investigation out of control? – December 10, 2013
Apple’s Star Chamber: An abusive judge and her prosecutor friend besiege the tech maker – December 5, 2013

31 Comments

  1. The something else is an appointment to a higher bench by the present administration, which is being lobbied for protection by Amazon, after Amazon helped it considerably in past elections.

  2. Forget this legal justice BS…we know we aint going to get any.

    Drop all book prices lower than Amazon can…..kick them in the balls. Then go after their main business by setting up an Apple subsidiary with warehouses selling everything Amazon does.

  3. Man the fanboys… there IS evidence. Go and read it.

    And in Canada, the Anti-trust folks just did a similar thing to spawn more competition in eBooks. The Justice Department in the US is on very solid footing with their findings that Apple engaged in a conspiracy to fix eBook prices.

      1. 1. Cue did an intense, 10 day trip to New York and had meetings with all the big publishers. Phone records show a bevy of calls between said parties at the time.
        2. Former CEOs of the big publishers admitted that Apple played a part. Read the testimony from the Justice Department’s website.
        3. Steve Jobs, through written Emails, talking about prices set at $12.99 and $14.99 and how all bets are off if the industry isn’t pushed to an agency model with the most favoured nation clause.
        4. Prices actually going up after Apple entered the market, and Steve Jobs doing an interview with Mossberg saying the prices between iBooks Store and Amazon will be the same.
        5. A CEO of Simon and Schuster being quoted as saying Jobs was stupid for saying that publicly… how he let the cat out of the bag.
        6. Publishers admitting they didn’t want to compete on price.
        7. Jobs/Apple pushing the publishers to give Amazon and ultimatum on dumping wholesale contracts.

        I could go on and on. This is a conspiracy. None of you are lawyers. Conspiracies are a big deal in corporate law.

        1. There is nothing wrong with Apple recruiting publishers to sell their titles throughout the iBookstore on an agency basis, as this is standard Apple practice. They took the same approach with the music and movie industry. It is not illegal. There is also nothing illegal with Apple saying they will not sell books through their iBookstore if the publishers also sell the same books through other outlets at a lower price. The biggest “crime” in this whole thing was the stupidity of the publishers. If publishers had implemented e-book sales to Amazon on an agency basis at the outset, none of this mess would have arisen.

        2. None of that is illegal. . . and in fact overall ebook prices went down after Apple entered the market. In addition, price increases are NOT evidence of price fixing per se, and, according to the Supreme Court dicta on Anti Trust cannot be used as evidence of conspiracy as Judge Cote did. Increased prices often are a sign of a HEALTHY market. Judge Cote’s use of inferred evidence, just as you are, is also prohibited by the US Supreme Court dicta for Anti Trust cases such as this. Cote will be reversed. Your number 5 is urban legend. 4 is a mis quotation attributing a statement of Jobs to Mossberg from an interview to another reporter about the result of market forces resulting from a Agency models not price fixing. . . which is not happening and in fact was not demonstrated. I suggest you read the Apple appeal to the appellate court for the reasons why all of what your source says is bogus:

          Click to access us-v-apple-opening-brief.pdf

        3. By the way, since publishers don’t publish the same books, the really don’t care about competing on price. . . They never go head-to-head on the same product. It simply never happens. Publisher A never prints and sells an identical copy of Stephen King’s latest blockbuster at the same time as Publisher B. . . That’s what the RETAIL BOOKSELLERS do. By including that statement, you demonstrate a complete lack of understanding the market, the issues at hand, why there was a problem, the nature of the competition, what happened, why it happened, how, and everything else, . . and make the SAME errors that the attorneys at the DOJ and Judge Cote did, who show they have no concept of economics. That’s where I have my degree along with a minor in Business Admin. . . and I think those attorneys and Judge Cote got their law degrees out of a box of Cracker Jacks. Her skills at economic reasoning and understanding are even less. She makes basic LEGAL errors in applying case law she should know. . . especially when top notch attorneys provided briefs for her CITING the cases but she uses OLDER superseded case law which will get her reversed!!!! She is incompetent!

      2. Actually, no, the publishers did not admit to any conspiracy. In fact the four of the five publishers testified under oath at Apple’s trial there was no conspiracy. The fifth did not testify. They merely copped a nolo contendré plea in which they admitted no wrong doing and agreed to pay a fine because it was cheaper than fighting. Apple refused to plead out and chose to fight.

        1. The publishers were rolled by the DOJ. Faced with an intractable bully, they folded and paid-up. They were too small to fight back. It certainly does look like a conspiracy to me: the DOJ-Amazon conspiracy.

      1. I think Apple will get a new trial because a number of Cote’s conclusions are not supported by the facts and/or are made under the wrong legal standard. I don’t think Apple will get a full reversal (and a judgment in its favour) because there *is* some evidence against it. For example, from the trial opinion: “Cue asserted at trial that “solves Amazon issue” [in his notes and emails] referred to pricing e-books in the iBookstore above $9.99, and was not a reference to raising prices across the industry or eliminating Amazon’s ability to set prices. Indeed, Cue protested at trial that, throughout its negotiations with the Publisher Defendants, Apple was concerned only with the pricing that would prevail in the iBookstore and sought only to “fix” Amazon’s pricing or “solve the Amazon issue” in its own e-bookstore. In this and several other aspects of Cue’s testimony, regrettably, he was not credible. The documentary record and the commercial context of the negotiations leave room for no other conclusion. Apple’s pitch to the Publishers was — from beginning to end — a vision for a new industry-wide price schedule. Any other course would have left the Publishers vulnerable to Amazon’s pricing strategies and would have forced Apple to compete on price. Accordingly, Cue’s repeated assertion at trial that his sole “focus” was on thinking about the agency deals and their effects “from an Apple point of view,” cannot be taken at face value.”
        Those notes of Cue’s do show that he was a part of the publisher’s plan to raise prices. That in itself is not necessarily enough to find Apple guilty, but it does raise an issue that should be tried. And that is the job of a trial court, not an appellate court.
        I just hope they get a different judge for the retrial – Apple’s appellate brief is replete with caustic criticisms of Cote. Apple won’t do well if they end up back in front of her.

        1. US Supreme Court dicta states that the mere increase in prices is not indicative of anticompetitive action, nor is discussing pricing, problems with other competitors, suppliers, etc., in the normal course of business. Cote’s conclusions inferring conspiracy were based on assuming conspiracy. . . when she is REQUIRED to assume normal business practices unless there is HARD evidence, not mere circumstantial evidence, of said conspiracy. Said evidence must be in the form of recording, written, or oral sworn testimony that there IS indeed an agreement to act. . . not the mere inference of something, which is what Cote built her conclusions on. Parallel actions that by themselves are legal ARE NOT EVIDENCE of a conspiracy and Cote stated everything Apple did was, absent her conclusion of a conspiracy, legal! The US Supreme Court has stated if that is the case, that if all of the acts can be construed to have been done in the normal course of business without a conspiracy, then the court MUST conclude no illegal conspiracy existed! That is a MUST, and Cote, choosing to ignore the clear instructions laid down not just in one case by the US Supreme Court, but also by TWO cases of here immediate Appellate Court, found Apple guilty on mere inferences she built AGAINST evidence and fact as presented in her own court, excluding and striking anything she didn’t like! The record is clear.

    1. I’ve read the evidence, and the evidence shows clearly that Apple did nothing wrong, and is being victimised by the legal system.
      The fact that you use the term ‘fanboy’ shows you have no interest in the truth, just like the legal system.

  4. Cote has an ax to grind and without any doubt, as Zeke suggests, has much to gain politically and most probably financially from her bias and corruption.

    President Obama has lost all due respect for fairness and justice by allowing his DOJ dogs and favorites to shamelessly convict an innocent model corporate citizen like Apple. This alone is a mark of shame for him either way: whether he partakes in oversight of the DOJ shenanigans or not.

  5. The situation is easily explained without resorting to conspiracy theory. (1) The owner of a good can legally sell it at any price desired, even below its cost. Except, however, it is illegal to sell products below cost for the purpose of driving other companies out of business. (2) The publishers sold e-books to Amazon on the same basis they had traditionally sold their hard copy books, on the “wholesaler basis”. Accordingly, Amazon could legally resell those books at any price they wished. This was a mistake on the part of publishers. (3) The publishers did not anticipate Amazon would resell their “new & best-selling titles” below their purchase price. Obviously, any money Amazon lost on these e-book sales, they expected would be made up by selling Kindles or even through their emergent “publishing” business in direct competition with publishers. Amazon sold publishers’ e-books below Amazon’s cost. This caused economic harm to the publishers, who found they could not sell as many hard copy books as intended. (4) The publishers failed to anticipate the pricing & economic risk they let themselves in for by selling e-books outright to Amazon on the wholesaler basis, the same basis publishers sold hard copy books sold to bricks-and-mortar wholesalers. (5) Still, stupidity is not a crime. The publishers eventually realized they SHOULD HAVE sold their ebooks to Amazon on an agency basis; this would allow the publishers to retain pricing control over their ebooks (with the agent receiving an appropriate commission for sales). (6) IT IS CLEARLY IN THE PUBLISHER’S INDIVIDUAL BEST-INTERESTS TO SELL THEIR E-BOOKS TO AMAZON ON AN AGENCY BASIS — the fact they saw this (after Amazon undercut prices for their crown jewels (new & best-selling titles)! is not evidence of conspiracy. In fact, their desire to switch to the agency model is logical from a business perspective.

    1. TomH:

      No. No. No. This all came out in the trial. You people need to read the god damn court documents.

      Amazon lost money on only a few, and I mean a few, of the eBooks they sold. The publishers themselves are quoted as saying this. Amazon did NOT sell these most all of the books at a loss. It just didn’t happen. So stop perpetuating this BS.

      And if you want to charge back and argue otherwise, name at least 10 titles that Amazon sold as eBooks that were new releases or best sellers where Amazon ended up losing money on those titles.

      1. The number of titles sold at a loss by Amazon is irrelevant; the important thing is their value. Amazon was discounting the publishers’ most valuable “new & best-selling” titles. These are the titles that generate the majority of the publishers’ revenue. Here is the third sentence of Ken Auletta’s article, Paper Trail, from The New Yorker magazine: “In the effort to gain even greater market share, it [Amazon] was selling books at a loss: while publishers typically sold e-books to Amazon for about fifteen dollars apiece, Amazon was selling many of them for $9.99.” Here is the link to the full article: http://www.newyorker.com/reporting/2012/06/25/120625fa_fact_auletta

        My main point was this, however: There is no reason a business must stand by a poor, previous business decision. Once publishers realized Amazon was willing to sell the publishers’ best titles at discounts, to the detriment of the publishers’ business, each publisher would have concluded it was in their own individual best-interest to sell e-books on the agency model (where publishers retain pricing of their titles and the sellers earn a commission). Publishers are not required to cede pricing control of their titles to Amazon or anyone else, if they don’t want to. And they are allowed to change their made if they got it wrong.

        1. Good old TomH:

          You ready?

          The wholesale model IS about paying a set price for books and selling them for whatever you want. Revenues for the publishers don’t change based on someone selling it cheaper than someone else.

          This has been going on as a model in retail for years. Go ahead and call out and “sue” every major retailer in the world for having “lossleaders” and whatever else you want to call it.

          But here’s where you’re really confused. This case with Apple was about EBOOKS. EBOOKS.

          Let me repeat that. EBOOKS. EBOOKS are different than BOOKS. Books are paper, eBooks are digital.

          This ALL came out in the trial. All of it. Go and read the court documents and stop pretending like you know what you’re talking about. It came out that Amazon never really lost even a dime selling eBooks. In other words, they didn’t sell them at a loss.

          1. Yes, publishers receive the same e-book revenues from Amazon regardless of the prices at which Amazon re-sells them. But publishers are interested in their total business, which includes sales of both paper books and e-books. These are substitute products and, therefore, related markets. They interact. Prices and sales levels of a title sold in e-book format will affect the prices and sales levels of the same title sold in paper book format. Publishers saw the potential for Amazon’s low e-book prices to undermine their overall business. This is what motivated them to switch e-book sales to the agency basis (away from the “wholesaler” model traditionally used for brick-and-mortar sales of paper books).

            Under the “wholesale model”, retailers can legally sell books for whatever price they wish because under this distribution arrangement, retailers own the product outright. No one is arguing this point. But there are also many products sold on the “agency” model in which the manufacturer — not the seller — retains the rights of ownership, including the right to establish selling price. My point is that e-books are better suited to be sold by publishers under the agency model. Once the publishers figured out what was going on, they should not be prevented from doing what is in their own individual best business interests, which is to move e-book sales distribution via Amazon to the agency basis. As for Amazon, this is not a big deal. If you look at their website, this is how they set up most of their business. The seller sets their price, and Amazon takes a commission.

            The DOJ has asserted that no individual publisher had the “clout” to effect this change on their own (Is the DOJ essentially saying that Amazon had monopoly power here ? ) which was the basic motivation for publishers to collectively engage in an illegal conspiracy to do so. But the principles of Game Theory do not support the DOJ position. The logical outcome, after any one refused to do business with Amazon on anything but an agency basis, would be for all others to follow suit. Common sense does not require a conspiracy.

      2. Excuse me, but Amazon sold all of the New York Times best seller list eBooks below cost.. . at $9.99. . . Several dollars below cost. That has been proved. In addition, according to the testimony of the publishers themselves, Amazon sold 80% of their New Releases at $9.99 as well. So, without having to name titles, Amazon lost money on ALL of those books they sold below cost.

        Now, adfd, the theory is they were “loss leaders” sold with the intent that profit would be made when the buyers of those best sellers and other “A List” books bought older back list books that were profitable or bought Kindle readers. That’s a Crock of Bull! First of all the Bill of Materials for the Kindle readers at the time showed that Amazon was selling them at or below cost. No profit there. The back list books at 50% margin had to make up the rest then. . . people who buy best sellers and new releases are not buyers of remainder books. . . But even if they were, how many $6 books with $3 margins of which all the overhead costs have to be deducted do you have to sell before you make up the loss leader losses of millions of best sellers being pumped out the door? Book sellers will tell you that better than 60% of their profits come from best sellers and new releases. . . that’s why they’re placed prominently by the front of the store. Why would a BOOK STORE, even an online ebook store, turn their PROFIT ENGINE into a massive LOSS ENGINE to attract buyers to their low margin junk books??? It makes no economic or business sense UNLESS you were using it as a weapon. BINGO!

  6. Does anyone recall the early days of this case? I vaguely recall that Apple and the DOJ wanted to define the case slightly differently. Perhaps Apple wanted to define the case over a longer period than the DOJ? At the time, I thought the narrow case definition by the DOJ conveniently disallowed Apple and entire line of logical reasoning to argue in its defense. If anyone remembers, please post. The issue is important because economic tests of antitrust exist, but they must be conducted over an appropriate reference period to be relevant.

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.