In an appeal filing with the Second Circuit, Apple attorneys pressed their argument that Judge Denise Cote blew it when she found Apple liable for its role in an alleged conspiracy to fix e-book prices, and pleaded for a reversal.
Calling the DoJ’s e-book price-fixing case an “incoherent attack on supposed collusion,” Apple stressed the unprecedented nature of Cote's 2013 decision.
“Never before has a court found a company liable under the antitrust laws for entry into a market dominated by a single company, through admittedly vertical and lawful distribution agreements, to launch an enterprise that the court admitted benefited consumers and competition, where the company did not desire higher prices and the agreements did not specify prices to be charged, and which resulted in more competition, lower market prices, and increased market output,” Apple attorneys argued. “Plaintiffs do not cite a single analogous case, and there is none. The district court’s decision finding Apple per se liable under the antitrust laws was therefore reversible error.”
The brief is Apple’s reply to the DoJ’s May filing in support of Cote's 2013 verdict, and potentially hundreds of millions of dollars in damages could be riding on the outcome of Apple's appeal. Last month Apple and the state and consumer classes reached a proposed settlement on monetary damages, terms of which are due to be filed this week with Judge Cote. But, according to a letter filed with the court, any damages payment under the settlement would be contingent upon the outcome of Apple’s appeal.
In its first appeal brief, filed in February, Apple attorneys argued that Cote simply botched the case, an argument they doubled down on in their latest broadside, claiming again that Cote relied on too many inferences drawn from “highly ambiguous” evidence, and that Apple’s entry into the e-book market was undeniably "pro-competitive."
“Apple’s entry led to a fundamental shift from a market dominated by a single retail price-setter to a market with thousands of independent price-setters in competition with one another,” the brief states. And while Apple concedes that some e-book prices did rise as a result of the agency switch they helped to orchestrate, overall, their entry “dramatically increased competition" in the trade e-book market.
In its version of events, Apple admits that it used the publishers’ concerns over Amazon to its advantage, but denies any collusion, or conspiracy.
“Apple knew that the publishers were unhappy with Amazon and its $9.99 loss-leader prices. It knew that the publishers thought Amazon’s prices were too low and threatened the publishing industry. It knew that the publishers wanted higher prices for new releases. And it knew that they tended to act in parallel fashion,” the brief acknowledges. “That Apple used the leverage created by market dynamics and the publishers’ well-publicized antipathy toward Amazon to enter the market is quintessential competition, not conspiracy.”
In an interesting footnote, Apple attorneys refer to Amazon’s current terms dispute with Hachette, noting that “in the wake of the injunction restricting Apple’s lawful activities, Amazon reportedly continues to exert market power over the publishers by refusing to sell books if they do not agree to its terms.” (Of course, Apple reportedly did the same thing to Random House, alllegedly threatening to reject Random House apps from the App Store if Random House did not agree to sign an agency deal for e-books, which it eventually did, in 2011.)
In its telling of events, however, DoJ attorneys argue that Apple entered into the conspiracy because it wanted an e-book retail platform for the iPad, but did not want to compete with Amazon on price. And in her July 10, 2013 verdict, Judge Denise Cote found Apple liable for "facilitating and encouraging the Publisher Defendants’ collective, illegal restraint of trade." Although she acknowledged Apple’s "independent business reasons for creating an e-bookstore and for adopting an agency model,” she found that "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.”
By now the Second Circuit must be getting familiar with the price-fixing case: Apple has already lost two minor appeals related to the case, and late last month, two publishers filed an appeal with the Second Circuit arguing that Judge Denise Cote’s 2013 final order against Apple illegally amended their e-book price-fixing settlements from 2012, and made a timely return to a straight “no-discount” agency model all but impossible.
