Rare Book Monthly

Articles - January - 2016 Issue

Apple is Going to the Supreme Court to Argue They Did Not Fix E-Book Prices

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All the way to the Supreme Court.

In a strange continuation of the long-running Department of Justice antitrust claim against Apple and five book publishers for e-book price fixing, Apple has filed an appeal all the way to the Supreme Court. The publishers long ago settled their cases. Actually, Apple did too. It had agreed upon a substantial payment to purchasers of e-books if the Appeals Court decision went against them. It did. Apple appealed to the Supreme Court anyway. It will not reduce their obligations to e-book buyers if they win. That part is over. They are only fighting for the principle now. Only a company like Apple, with its hundreds of billions of dollars in the bank, can take on the expenses of a Supreme Court case just for the principle.

 

The Department of Justice sued Apple and book publishers Hachette, HarperCollins, MacMillan, Penguin, and Simon & Schuster 3 ½ years ago for a conspiracy to fix prices. Briefly, Apple wanted to begin selling e-books to be used with its new iPad tablets, but did not want to compete on price against Amazon. Amazon was willing to sell books for little if any profit to obtain market share. The strategy was very successful. They dominated the e-book market.

 

Apple, however, wanted to make a profit. So, it informed the publishers that they would only sell their e-books if the publishers set retail prices at a level higher than those for which Amazon was selling. The exact nature of those discussions is in dispute, but the lower court determined that Apple was the "ringleader" in the process that resulted in more vendors selling e-books to the public, but at higher prices. The lower court determined this was an antitrust violation, and the Appeals Court more recently affirmed that opinion.

 

After the lower court ruled against Apple, but before the Appeals Court affirmed that ruling, Apple made a deal with representatives of the e-book buyers. Apple agreed to pay them $450 million if the Appeals Court ruled against them. If the Appeals Court ruled in their favor, Apple would pay nothing. Apple lost in the Appeals Court so they owe $450 million. That won't be undone, regardless of how the Supreme Court rules. It is now a battle over principle, or reputation from Apple's standpoint. My guess is no one else cares. Those who believe Apple is a soulless, dominating behemoth will not feel any different if Apple wins in the Supreme Court. Those who think the same of Amazon will likely continue to approve of Apple's behavior if the Appeals Court decision is upheld. A change in the court judgment now may have an impact on the thinking of legal scholars, but probably no one else.

 

Apple's appeal is based on distinctions between horizontal and vertical relationships, per se rules and a "rule of reason." Here is a brief guidebook. Horizontal relationships are between equals, competitors. Each of the five publishers was in a horizontal relationship with the other four competitors. Vertical relationship are between entities on different levels. Apple was a customer, the publishers vendors. That's a vertical relationship.

 

A per se ruling is where the basic activity is such that guilt is presumed. If horizontal entities, such as the publishers, get together, and at the end, they all agree to raise prices, a court will find per se they conspired to fix prices. They won't acquit on the basis they don't have testimony of what exactly transpired in that backroom. They know darn well.

 

However, a previous Supreme Court ruling said that, at least in some cases, a "rule of reason" needs to be applied for discussions between vertical players. It's not so obvious that a price-fixing conspiracy is taking place when non-competitors' discussions, such as those between Apple and the publishers, take place. This is true even if the various horizontal parties (the publishers) together raise prices. There may be a per se conclusion of a price-fixing conspiracy among the publishers, but not one between Apple and the publishers.

 

Two things happened as a result of whatever occurred here. One can be viewed as anti-competitive, the other as pro-competition. All of the publishers raised their prices to the same level. That sounds anti-competitive. On the other hand, more companies began selling e-books. Amazon's market share dropped from roughly 90% to 60%. That sounds pro-competitive. I think Apple may have a shot at this one, even though they are 0-2 so far. The Supreme Court sometimes sees things differently than lower courts that are dealing more with the personal side, witnesses and all, than simply legal arguments. Apple may yet win the case, but the e-book buyers, beneficiaries of the earlier agreed upon settlement, have already won their money.

Rare Book Monthly

  • <b>Swann Auction Galleries Mar 10:</b> Francis Scott Key, <i>Star Spangled Banner,</i> first printing, c. 1814-16. $8,000 to $12,000.
    <b>Swann Auction Galleries Mar 10:</b> William Sydney Porter, a.k.a. “O. Henry,” archive of drawings made to illustrate a lost mining memoir, c. 1883-84. $30,000 to $40,000.
    <b>Swann Auction Galleries Mar 10:</b> [Bay Psalm Book], printed for Hezekiah Usher of Boston, Cambridge, c. 1648-65. $50,000 to $75,000.
    <b>Swann Auction Galleries Mar 10:</b> Book of Mormon, first edition, Palmyra, 1830. $40,000 to $60,000.
    <b>Swann Auction Galleries Mar 10:</b> <i>Noticia estraordinario,</i> probable first announcement in Mexico City of the fall of the Alamo, 1836. $40,000 to $60,000.
    <b>Swann Auction Galleries Mar 10:</b> Patrick Gass, first edition of earliest first-hand account of the Lewis and Clarke expedition, Pittsburgh, 1807. $6,000 to $9,000.
    <b>Swann Auction Galleries Mar 10:</b> Diploma from the Princeton Class of 1783, commencement attended by Washington & Continental Congress. $10,000 to $15,000.
    <b>Swann Auction Galleries Mar 10:</b> <i>Sprague Light Cavalry!</i> color-printed broadside, NY, 1863. $5,000 to $7,500.
    <b>Swann Auction Galleries Mar 10:</b> <i>The Lincoln & Johnson Union Campaign Songster,</i> Philadelphia, 1864. $3,000 to $4,000.
    <b>Swann Auction Galleries Mar 10:</b> Lucy Parsons, labor organizer, albumen cabinet card, New York, 1886. $800 to $1,200.
    <b>Swann Auction Galleries Mar 10:</b> Daniel L.F. Swift, journal as third mate on a Pacific Whaling voyage, 1848-1850. $3,000 to $4,0000.
    <b>Swann Auction Galleries Mar 10:</b> Two photos of Thomas Moran, Grand Canyon, silver prints, 1901. $1,500 to $2,500.
  • <b>Bonhams, Mar. 6:</b> Helvelius. Two Autograph Letters Signed to Francis Aston, Royal Society Secretary, noting his feud with Robert Hooke, 5 pp total, 1685. $70,000 to $100,000.
    <b>Bonhams, Mar. 6:</b> Newton, Isaac. Autograph manuscript on God, 4 pp, c.1710, "In the beginning was the Word...."?$100,000 to $150,000.
    <b>Bonhams, Mar. 6:</b> Beethoven's Ninth Symphony. First edition, first issue. Untrimmed copy in contemporary boards. $30,000 to $50,000.
    <b>Bonhams, Mar. 6:</b> Lincoln, Abraham. Signed photograph, beardless portrait with Civil War provenance. $80,000 to $120,000.
    <b>Bonhams, Mar. 6:</b> IMPEACHMENT. Original engrossed copy of the first Andrew Johnson impeachment resolution vote. $120,000 to $180,000.
    <b>Bonhams, Mar. 6:</b> Mucha, Alphonse. 11 original pencil drawings for?<i>Andelicek z Baroku,</i> "Litte Baroque Angel," Prague, 1929. $10,000 to $15,000.
    <b>Bonhams, Mar. 6:</b> Einstein, Albert. Annotated Galley Proofs for <i>The Meaning of Relativity.</i> 1921. $25,000 to $35,000.
    <b>Bonhams, Mar. 6:</b> Silverstein, Shel. Original maquette for <i>The Giving Tree,</i> 34 original drawings. $10,000 to $15,000.
    <b>Bonhams, Mar. 6:</b> Roth, Philip. Typed Manuscript with substantial autograph corrections for an unpublished sequel to <i>The Breast.</i> $10,000 to $15,000.
    <b>Bonhams, Mar. 6:</b> Taupin, Bernie. Autograph Manuscript, the original draft of lyrics for Elton John's "Candle in the Wind," 2 pp, 1973. $100,000 to $150,000.
    <b>Bonhams, Mar. 6:</b> HARVEY, WILLIAM. <i>De Motu Cordis et Sanguinis in Animalibus Anatomica Exercitatio.</i> Padua: 1643. $12,000 to $18,000.
    <b>Bonhams, Mar. 6:</b> CESALPINO, ANDREA. <i>Peripateticarum Quaestionum Libri Quinque.</i> Venice: 1571. $30,000 to $40,000.
  • <b>ALDE, Feb. 26:</b> Leon TOLSTOÏ. <i>Anna Karenina.</i> Moscou, 1878. First and full edition of the Russian novel, in the author’s language.<br>Est. 3 000 / 4 000 €
    <b>ALDE, Feb. 26:</b> Mark TWAIN. <i>Adventures of Huckleberry Finn (Tom Sawyer's comrade).</i> New York, 1885. First American edition.<br>Est. 5 000 / 6 000 €
    <b>ALDE, Feb. 26:</b> Walt WHITMAN. <i>Leaves of Grass.</i> Brooklyn, New York, 1856. Second edition gathering 32 poems. Est. 3 000 / 4 000 €
    <b>ALDE, Feb. 26:</b> Karen BLIXEN. <i>Out of Africa.</i> Londres, 1937. First edition in the UK, before Danish translation and American release.<br>Est. 1 500 / 2 000 €
    <b>ALDE, Feb. 26:</b> Ernest HEMINGWAY. <i>A Farewell to Arms.</i> New York, 1929. First edition with $2.50 on the dust and A on the copyright page.<br>Est. 2 000 / 3 000 €
    <b>ALDE, Feb. 26:</b> James JOYCE. <i>Ulysses.</i> Paris, Shakespeare and Company, 1922. First edition published by Sylvia Beach. Est. 3 000 / 4 000 €
    <b>ALDE, Feb. 26:</b> James JOYCE. <i>Dubliners.</i> Londres, 1914. First edition. Nice copy in publisher’s cardboard. Est. 2 000 / 3 000 €
    <b>ALDE, Feb. 26:</b> Franz KAFKA. 8 novels in German first edition, published in München, Leipzig and Berlin 1916-1931. Est. from 300 / 400 to 2 000 / 3 000 €
    <b>ALDE, Feb. 26:</b> David Herbert LAWRENCE. <i>Lady Chatterley's Lover.</i> Florence, 1928. Privately printed first edition. Est. 4 000 / 5 000 €
    John STEINBECK. <i>The Grapes of Wrath.</i> New York, 1939. First edition. Nice copy with $2.75 on the cover. Est. 1 000 / 1 200 €

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