Sewell would have almost certainly have been aware of Steve Job's email at that time, and not of the collusion between publishers.
Apple was absolutely aware of the "collusion between publishers' as they were the ones keeping each of then apprised of what each of the others agreed to.
Apple devised a Most Favored Nation (MFN) clause in its contracts with publishers which "guaranteed that the e-books in Apple’s e-bookstore would be sold for the lowest retail price available in the marketplace," Cote wrote. For the publishers to charge up to $14.99 for e-books on Apple's iBooks store, they had to raise prices on Amazon's Kindle store as well by collectively forcing Amazon to accept the agency model.
As Cue acknowledged at trial, “I just wanted to assure them that they weren’t going to be alone, so that I would take the fear away of the Amazon retribution that they were all afraid of.” By acting in concert, enabled by Apple being the coordinator between them, they removed Amazon as a problem.
I don't think Sewell would have signed off on it had he known all the communication details and he now suggests that's exactly what he would have done, recommended against it It doesn't make Apple the corporation "bad", more a rare error in judgement by executive management.
You are awfully confident for a guy who lacks understanding of the basic facts of the case.
1. "Apple was absolutely aware of the "collusion between publishers' as they were the ones keeping each of then apprised of what each of the others agreed to."
First you got the collusion bit wrong. The only collusion that occurred was between the publishers on their dealings with Amazon. Apple had nothing to do with it.
Apple sharing information with multiple publishers on it's own plan is neither illegal nor unethical. This is normal practice when dealing with business partners who are not direct competitors (To dumb it down for you - publishers are not 'direct competitors', because each one has exclusive rights to certain works. By definition, they cannot illegally collude to alter the market price of Tom Clancy's latest book, because only one publisher has the rights to it).
2. "Apple devised a Most Favored Nation (MFN) clause in its contracts with publishers which "guaranteed that the e-books in Apple’s e-bookstore would be sold for the lowest retail price available in the marketplace," Cote wrote. For the publishers to charge up to $14.99 for e-books on Apple's iBooks store, they had to raise prices on Amazon's Kindle store as well by collectively forcing Amazon to accept the agency model."
How clueless can one person be?!! Apple did not 'devise the MFN clause' - it has been in use for many decades in multiple industries, and has been found valid by many courts. Given that Amazon has been 'dumping' eBooks on the market (selling below cost to disrupt normal free-market forces and artificially lower their value) for many years, publishers 'banding' together to deal with Amazon was perfectly legal and ethical. The Justice Department's misreading of anti-trust law as 'anything goes if it lowers the cost to consumers' ignores the predictable and real danger of a monopoly (Amazon) raising costs once the competition is eliminated.
3. As for Coates, her pre-trial bias against Apple is a matter of public record. Her unilateral dismissal of Cue's testimony, and illogical interpretation of Job's email to fit her predetermined notions were extra-legal. The only reason her decisions was not overturned by an Appellate Court was our system's almost-religious belief in a Judge's autonomy and the absurdly technical standards for reversal. Her 'collusion' with her 'friend' the 'no-experience anti-trust lawyer' to defraud Apple out of millions was finally stopped by a superior court.
In short, you are full of it.
The Judges name was Cote, not Coates.
So for you to be correct that means the Justice Department must also have been "full of it". Their attorneys too. The State's Attorneys who brought suit were "full of it" as well, right? The US District Court for New York and the Honorable Judge Denise Cote was full of it. The panel of judges from the US 2nd Court of Appeals who upheld her ruling 2-1 must also have been full of it. SCOTUS too must have been full of it not finding anything worthy enough legally in Apple's argument to take up the court's time. So many highly educated and long-time legal experts and professionals all full of it. What's the chances of that "full of it group" all getting together by happenstance eh?
In essence EVERYONE who heard testimony and considered the preponderance of evidence must be full of it. You on the other hand who was not privy to either the evidentiary record of emails and messages, testimony including that of Apple's own executives, various filings and counters, and the supporting legal justification of it all is totally confident that everyone else is "full of it" based on, well something, even if it's not actually facts (including the Judge's name). Did I get all that correct?
...Book writers are the one who are going to get screwed by Apple loosing this case.
Exactly right. As an author, and someone who knows a lot of authors, that's the biggest complaint I hear. Amazon's tactics have driven royalties to the bottom. Nobody can make a living writing. Hell half the time you can't get paid at all. Unless you get a deal to write for a series, become famous you've got no chance.
For the record I don't buy from Amazon. I don't just because I don't like what they've done to publishing, and a lot of other fields. It's a hopeless protest but at least my money isn't feeding the monster.
I help, in my own small way. I buy an average of two books a month. Exclusively from Apple. I’ve never bought anything from Amazon, and I’ve yet to see any good reason to change that stance.
Jeff Bezos has all the idiosyncrasies of a snake oil salesmen. With a host of employees working for starvation wages, and a veritable scorched earth in his company wake.
And because of this we are left with a virtual Amazon monopoly in the book market. How Barnes and Noble stays in business is beyond my comprehension.
They just got bought up by a vulture capitalist, so they won’t be in business for too many more years (see also Borders, Sears, Toys R Us and other brand names ruined by vulture capitalists).
They got bought up BECAUSE the business is in a lot of trouble. First, Barnes & Noble killed a lot of smaller stores and chains. Now Amazon is killing them. I doubt anything is going to save them. Don’t blame the folks who bought them. By the time a lot of businesses that are doing poorly are bought up, it’s too late.
with book chains, it’s too late, because no matter what they do, their business model is no longer viable. They tried the Nook, and I have the app on my iPad, and use it. But it’s always been a long bet for them. Blockbuster went out for the same reason. GameStop is going out for that reason as well.
every business you mentioned went out because of online shopping. Make no mistake about it, others are going to go out too. Online is just too convenient for most people. If a retailer can’t make the experience something special, to lure customers into a store, profitably, then it will fail.
As Apple fanboy believing in the ethical Apple, this shakes me a bit, I must admit.. They are not into illegal stuff, but into 'barely legal' stuff.. I don't like it..
Naivety will just get you nowhere. But to respond to you, top 100 fortune companies are all taking risks with barely legal stuff every single days. It's nothing new here.
It’s not “barely legal” either it is, or it isn’t.
An examp,e is taxes. You could be like my parents were. They would not only pay every penny they owed, but they wouldn’t take advantage of perfectly legal schemes to limit those payments. If you do, that’s fine. I do. Then there are legal schemes that require a bit of finagling g to get them to work. They’re also legal, but require you to go to some effort to make sure you keep them legal. That riding on the edge. It’s also perfectly legal, if you do it properly. I don’t bother, because it’s too much work.
but then there are the schemes that some g]very wealth individuals take, which is to move you money around in not quite ethical, and maybe not entirely legal ways. I certainly don’t do that!
Apple is pretty conservative in their practices. I find it frustrating when a company is accused of doing something wrong when it’s perfectly legal. If it’s allowed by law, then a company has a fiduciary responsibility to seek out the best rates possible, as long as it’s legal. Instead of accusing them of doing something wrong, when it isn’t, just because you’re losing out, such as the European tax questions, then change the laws, and THEN, if the companies continue to do what they were doing, fine them, or whatever.
I'm not so sure your point is valid: it seems like many app developers are quite happy to build for iOS only, because the Apple ecosystem contains a much higher percentage of people willing to spend for what they perceive as quality items. It was the same back in the 1990s when it was possible to build a business selling only Mac software even though Windows accounted for >90% of the supposed market.
Content and apps don't have the same basic economics or purchasing paradigms behind them, however. Content is expected to be portable. Apps, you can find functional equivalents when you change platform (those that aren't cross-platform) - but functional equivalence doesn't really apply to content - what's unique and specific about a work is its value.
Books are the anomaly in Apple's ecosystem - everything else in their content library is multi-platform / cross platform and portable if you change platforms. But even DRM-Free books from Apple Books, even in EPUB format - there's no way to purchase them outside of an Apple device, and effectively no way to read them outside of an Apple device.
Since when can’t you read an ePub document elsewhere? I can. So should everyone else.
...Book writers are the one who are going to get screwed by Apple loosing this case.
Exactly right. As an author, and someone who knows a lot of authors, that's the biggest complaint I hear. Amazon's tactics have driven royalties to the bottom. Nobody can make a living writing. Hell half the time you can't get paid at all. Unless you get a deal to write for a series, become famous you've got no chance.
For the record I don't buy from Amazon. I don't just because I don't like what they've done to publishing, and a lot of other fields. It's a hopeless protest but at least my money isn't feeding the monster.
I don't either. I've found that Ebay has at least as much to offer product wise (probably a LOT more), I like their user reviews of the sellers, and I tend to get better deals there.
But, I don't mind Amazon's ruthless competition. Despite being a hopeless Libtard, I recognize that eventually the free market always wins out eventually, and the better mouse trap always rises to the top (well it SHOULD anyway!).
Actually, many, if not most, sellers are on both Amazon and eBay. I buy a lot on eBay. But often, I get the shipment in an Amazon Prime package. At first, I don’t recognize it, because I didn’t order something from Amazon (confession I buy a lot from Amazon as well), and the name is the seller is different.
but it’s the same seller. Their name on eBay may be something like “Sammy’s Industrial Surplus”. But the same seller may be named “Venus beauty products” on Amazon. That’s because so many sellers use third party companies to supply them, and they have very large numbers of what seems to be totally unrelated items, so they can name themselves anything, and not be wrong.
Yeh, I've found the same... But where (I think) EBay excels is in scope: I just ordered a docking station for my 13 year old ThinkPad T60P (Yeh! it runs like the day it was new!). Or, prior to that I ordered a throttle for a hand-me-down Mantis Tiller that is probably 25-30 years old. I doubt I could have obtained those parts anywhere else.
But mostly what I like about EBay is that I just feel more comfortable ordering from them -- knowing that if the seller misrepresents something that I have them behind me and the fact that I've had generally good experiences there. And plus: that I only have to pay shipping if I want to. I hate buying a $5.00 item and then paying $4.00 to ship it (and I'm not about to pay Amazon for the privilege of buying their stuff!)
I find Amazon easy to deal with. Recently I bought a torque wrench from a company I never bought from before, because a guy I watch on You Tube who does this work said that the company was pretty good, so I thought I’d try them. I bought if from Amazon. I checked a couple of days after it was supposed to be delivered to check my orders. It said that it was left in my mailbox two days earlier. Well, I don’t have a mailbox. I have a an 11” slot in my outer door that I installed many years ago. Smaller soft packages can get in, but not boxes. I waited about a week before calling Amazon. Why? Because we have road, street and avenue. All with the same addresses, and sometimes we get other’s mail and packages and reverse. We all give it to the proper person if something gets delivered to the wrong person.
so I told this to the Amazon rep. She immediately gave me a credit. She said not to worry if the first one came, just to keep it. I then tapped the “buy another” button, and two days later, it arrived. Of course, I have a perfect record with them so she knew I wasn’t trying to scam them.
i don’t know what you mean that you only have to pay shipping if you want to. I’ve been on eBay since 2002, and I’ve bought thousands of items there. If they charge shipping, you pay shipping. Some vendors don’t charge, but the prices are higher. I’ve never been given a choice.
I agree that EBay would be very unlikely to have responded the same way in such a situation.
As for a choice of whether or not to pay shipping: You generally have the option choosing which vendors charge a shipping fee or not. You don't get that choice on Amazon.
As I said, vendors who don’t charge shipping almost always charge a higher price for the item itself. So one guy may charge $50 for the item, and $8 shipping, and another will charge $58, with no shipping. Sometimes it comes out a bit more, sometimes a bit less, but it averages out over time. Different vendors are the same, some charge shipping, and some don’t. Prices also vary
Book writers are getting screwed, primarily, by Apple not offering Apple Books on platforms other than their own. The key to iTunes and Apple Music, is its availability on Windows and Android - it provides a service to the content providers by getting their work in front of, effectively, 100% of customers.
Publishing on Apple Books, you're limited to only iOS / Mac users, so you still have to publish on Google Books and an Amazon-owned platform, so you still get screwed by those companies, but now you also have to cover the costs of developing for multiple platforms, and spread your revenue over multiple vendors, so it's harder to meet minimum payout levels.
Effectively, Apple is using Book content as a leverage / lockin for their own device sales - there's nothing magnanimous about their efforts.
The worst thing about it is, Apple's platform is really a lot better than anyone else's - to give an example for Comics / Graphic Novels:
With Apple:
you get ~70% of the coverprice.
you have total control over the file you make, Apple doesn't re-author your file.
Apple Books is a great reading experience, because it's WebKit, you can use JQuery to build rich interactivity (eg use an off-the-shelf lightbox to remake ComiXology's "patented" panel-by-panel view).
~24hour turnaround from submission to live.
With Google:
you get as little as 50% of the coverprice if they sell through an affiliate
their EPUB reader has no support for javascript.
With ComiXology (Amazon):
You get (IIRC) 50% of the 70% Apple left ComiXology keep when it sells through the ComiXology App (so 35% overall).
You have no control over the authored file - ComiXology takes your high resolution .pdf and remakes it manually into their format - all that frame by frame stuff is done by hand.
turnaround from submissions and corrections can be months.
With Kindle:
you get 30% of the coverprice.
If you want 70%, you have to agree to pay download fees per sale. So for each $5 comic book, you'd have to pay Amazon ~$25 in download fees.
Thanks for the insight on this. When i read Apple screws people by not offering ibook on other platform my though it does not matter, since everything we read is just plain text type book no real graphics in our house we have ipad and a kindle and we get a book in one format and I have converter which converts it to another format, its not that difficult. I never bought a book which had a high level of graphics in the book. I would be curious what percentage of ebooks are plain text verses visual graphics which are important to content of the book.
Understand that all online vendors of electronic books have some way of keeping authors within their system. Amazon won’t so-market your book if you sell on iBooks, or the Nook, or anywhere else. They also take a bigger chunk if you do. Many of the books on iBooks are DRM-free. More so than on Amazon. Most book pricing is within 10% of each other’s platform, with most being exactly the same.
amazon has been very predatory with publishers, often paying them too little to make a profit. Apple’s error was in deciding g to let the vendor determine the pricing, rather than Apple. Generally, Amazon has priced the books, not the publisher.
Most books on iBooks are available on every other platform. I see that all the time, to the point that sometimes I forget which platform I’m buying an authors books on. I like to buy all of an authors books from one place as it’s easier to manage them that way. Sometimes a book isn’t on iBooks, but is available elsewhere, and visa versa.
dont let anyone tell you otherwise, because it’s not true.
It wouldn't have made much sense to blame Mr. Sewell and Apple's legal team for the ultimate result in the ebooks case. Apple should have prevailed. It was on the right side of the law, both when it came to the spirit of the law (i.e. its actions were intended to and likely did increase, rather than decrease, competition in the ebooks market) and when it came to the technicalities of how the law was, according to precedent, supposed to be interpreted (i.e. vertical pricing agreements are not per se illegal, they require the application of the rule of reason). Even accepting the findings of fact which Judge Cote made (other than those relating to the application of the rule of reason - and with regard to that consideration she wasn't upheld by the 2nd Circuit), an objective and precedent-versed observer should have expected Apple to ultimately win. I think it's reasonable to conclude that Apple ultimately lost only because Justice Scalia died in February 2016, just before the conference at which Apple's petition for cert was scheduled to be considered. I think that twist of fate, and the role it likely played in the ultimate resolution of the case, is lost on many.
I'm going to leave out a lot of nuance in my run through of what happened in the case and the important legal issue involved. If I didn't this post would run on far too long.
Apple was, as is relevant here, essentially accused of engaging in an illegal vertical pricing agreement - a violation of §1 of the Sherman Act. A vertical pricing agreement would be one between, e.g., a manufacturer and a retailer of that manufacturer's products. A horizontal pricing agreement would be one between, e.g., manufacturers whose products compete with each others. Under Supreme Court precedent, a horizontal pricing agreement is per se illegal as a violation of the Sherman Act. At one time the same could be said of vertical pricing agreements.
The Supreme Court in effect decided in 1911, in Dr. Miles Medical v John D. Park & Sons, that vertical pricing agreements were per se illegal. But over the years the Court cast doubt on the veracity of that principle, owing in part to a more developed understanding of market realities and the potential procompetitive effects of such pricing agreements. Then, in 2007 in Leegin Creative Leather Products v PSKS, the Court expressly overruled Dr. Miles Medical. It decided that vertical pricing agreements weren't per se illegal. If a court found there to be a vertical pricing agreement, it needed to apply the rule of reason to determine whether that agreement was a violation of the Sherman Act. The rule of reason basically means a consideration and balancing of the anticompetitive and procompetitive effects of certain conduct or agreements. The lineup of the 5-4 Leegin decision is important here, so I'll return to that in a minute.
The application of the rule of reason would have been important in the Apple ebooks case. Even when the 2nd Circuit upheld Judge Cote's decision, only one of the three judges on the panel agreed with Judge Cote that, even if the rule of reason needed to be applied, Apple would be found to have violated the Sherman Act. It upheld her decision because two of the three judges agreed that the rule of reason didn't need to be applied, that Apple's actions were per se illegal. In order to reach that conclusion those judges had to do a bit of pretzel twisting with the reasoning. Somehow Apple was involved in the agreements, which would have made them vertical pricing agreements and meant that, under Leegin, the rule of reason needed to be applied. But Apple wasn't actually party to the agreements, it just facilitated them - so they were actually horizontal agreements and per se illegal. The 2nd Circuit, in effect, created this new kind of violation - orchestrating, but not actually being part of, an illegal horizontal pricing agreement. Frankly, the 2nd Circuit's reasoning was in substantial conflict with the Supreme Court's decision in Leegin. At best it represented a novel - and somewhat suspect - legal theory of anti-trust law.
So when Apple asked the Supreme Court to hear the case in October of 2015, I think a reasonable observer familiar with the Leegin decision should have considered it likely that the 2nd Circuit's decision would be overturned - either summarily or after the Court heard the case. Apple wasn't asking for a finding that it hadn't violated the Sherman Act, just a finding that the rule of reason needed to be applied - essentially a reiteration of the Court's finding in Leegin just 8 years prior. Apple likely was, and should have been, confident that it would prevail if the procompetitive effects of its actions were weighed against their anticompetitive effects.
Notably, a number of amici filed briefs in support of granting Apple's petition (i.e. in favor of the Supreme Court hearing the case) while none filed in support of the U.S. and states' opposition to Apple's petition. Among amici filing in support of Apple were authors, economists, legal scholars, and software associations. And they all cited Leegin. This really should have been a simple decision. You point at Leegin and ask the Court... does this decision, which you made less than a decade ago, still represent the law of the land?
In late January Apple's petition was scheduled to be considered at the Justices' conference on February 19th. As I consider the situation now, I think the most likely result would have been a cert grant and summary reversal of the per se finding, and a remand with instructions for the 2nd Circuit to reconsider its findings in light of the Court's Leegin decision. We see those kinds of summary decisions from the Supreme Court from time to time, when it's already made a decision which should have controlled a lower courts' reasoning but which, for whatever reason, wasn't followed by that lower court. It's, in effect, a scolding by the Supreme Court. It would have represented the Court telling the 2nd Circuit that it screwed up and instructing it to go back and apply the rule of reason to Apple's actions. Even if the Court didn't summarily reverse the 2nd Circuit, I think it likely that it would have granted cert and heard the case.
But then, on February 13th, Justice Scalia died. Here's where the line up from the Leegin decision becomes important. The 5 Justice majority consisted of Chief Justice Roberts and Justices Scalia, Kennedy, Thomas, and Alito. Those same 5 Justices were, as of February 12th, still on the Court. I don't have any reason to believe that they would have made a materially different finding than they had made in Leegin or even seen fit to weaken the principle they laid down in that case.
The 4 more liberal Justices - Justices Stevens, Souter, Ginsburg and Breyer - had voted in Leegin not to overrule Dr. Miles Medical. They would have had a vertical pricing agreement be considered per se illegal where the rule of reason need not be applied. Justices Stevens and Souter had since been replaced by Justices Sotomayor and Kagan. But I don't have reason to believe the new Justices felt materially different on the question.
With Justice Scalia's death there likely were no longer 5 votes to summarily reverse the 2nd Circuit and vindicate the principle laid down in Leegin. The 4 more conservative Justices could still have voted to grant cert (that takes only 4 votes), but what would have been the point? At best an 8-Justice Court would have heard the case and been split 4-4, meaning that the 2nd Circuit would be affirmed by an equally divided court. At worst a new Justice - one appointed by President Obama - would have been seated by the time the case was heard and there would have been a 5-Justice majority ready, and perhaps willing, to effectively overturn the Leegin holding - or, at least, to chip away at its import.
So... I think it's reasonable to conclude that Apple lost the ebooks case not because Mr. Sewell and Apple's legal team did a poor job, and not because Apple colored outside the (then-existing) legal lines, but rather because of a death that occurred in Texas in early February 2016 and which they couldn't have anticipated. I expect that many among Apple's legal team realized, when they got news of Justice Scalia's death, that they were suddenly more likely to ultimately lose the ebooks case. Up until that point, they had good reason to expect they'd ultimately prevail.
It wouldn't have made much sense to blame Mr. Sewell and Apple's legal team for the ultimate result in the ebooks case. Apple should have prevailed. It was on the right side of the law, both when it came to the spirit of the law (i.e. its actions were intended to and likely did increase, rather than decrease, competition in the ebooks market) and when it came to the technicalities of how the law was, according to precedent, supposed to be interpreted (i.e. vertical pricing agreements are not per se illegal, they require the application of the rule of reason). Even accepting the findings of fact which Judge Cote made (other than those relating to the application of the rule of reason - and with regard to that consideration she wasn't upheld by the 2nd Circuit), an objective and precedent-versed observer should have expected Apple to ultimately win. I think it's reasonable to conclude that Apple ultimately lost only because Justice Scalia died in February 2016, just before the conference at which Apple's petition for cert was scheduled to be considered. I think that twist of fate, and the role it likely played in the ultimate resolution of the case, is lost on many.
I'm going to leave out a lot of nuance in my run through of what happened in the case and the important legal issue involved. If I didn't this post would run on far too long.
Apple was, as is relevant here, essentially accused of engaging in an illegal vertical pricing agreement - a violation of §1 of the Sherman Act. A vertical pricing agreement would be one between, e.g., a manufacturer and a retailer of that manufacturer's products. A horizontal pricing agreement would be one between, e.g., manufacturers whose products compete with each others. Under Supreme Court precedent, a horizontal pricing agreement is per se illegal as a violation of the Sherman Act. At one time the same could be said of vertical pricing agreements.
The Supreme Court in effect decided in 1911, in Dr. Miles Medical v John D. Park & Sons, that vertical pricing agreements were per se illegal. But over the years the Court cast doubt on the veracity of that principle, owing in part to a more developed understanding of market realities and the potential procompetitive effects of such pricing agreements. Then, in 2007 in Leegin Creative Leather Products v PSKS, the Court expressly overruled Dr. Miles Medical. It decided that vertical pricing agreements weren't per se illegal. If a court found there to be a vertical pricing agreement, it needed to apply the rule of reason to determine whether that agreement was a violation of the Sherman Act. The rule of reason basically means a consideration and balancing of the anticompetitive and procompetitive effects of certain conduct or agreements. The lineup of the 5-4 Leegin decision is important here, so I'll return to that in a minute.
The application of the rule of reason would have been important in the Apple ebooks case. Even when the 2nd Circuit upheld Judge Cote's decision, only one of the three judges on the panel agreed with Judge Cote that, even if the rule of reason needed to be applied, Apple would be found to have violated the Sherman Act. It upheld her decision because two of the three judges agreed that the rule of reason didn't need to be applied, that Apple's actions were per se illegal. In order to reach that conclusion those judges had to do a bit of pretzel twisting with the reasoning. Somehow Apple was involved in the agreements, which would have made them vertical pricing agreements and meant that, under Leegin, the rule of reason needed to be applied. But Apple wasn't actually party to the agreements, it just facilitated them - so they were actually horizontal agreements and per se illegal. The 2nd Circuit, in effect, created this new kind of violation - orchestrating, but not actually being part of, an illegal horizontal pricing agreement. Frankly, the 2nd Circuit's reasoning was in substantial conflict with the Supreme Court's decision in Leegin. At best it represented a novel - and somewhat suspect - legal theory of anti-trust law.
So when Apple asked the Supreme Court to hear the case in October of 2015, I think a reasonable observer familiar with the Leegin decision should have considered it likely that the 2nd Circuit's decision would be overturned - either summarily or after the Court heard the case. Apple wasn't asking for a finding that it hadn't violated the Sherman Act, just a finding that the rule of reason needed to be applied - essentially a reiteration of the Court's finding in Leegin just 8 years prior. Apple likely was, and should have been, confident that it would prevail if the procompetitive effects of its actions were weighed against their anticompetitive effects.
Notably, a number of amici filed briefs in support of granting Apple's petition (i.e. in favor of the Supreme Court hearing the case) while none filed in support of the U.S. and states' opposition to Apple's petition. Among amici filing in support of Apple were authors, economists, legal scholars, and software associations. And they all cited Leegin. This really should have been a simple decision. You point at Leegin and ask the Court... does this decision, which you made less than a decade ago, still represent the law of the land?
In late January Apple's petition was scheduled to be considered at the Justices' conference on February 19th. As I consider the situation now, I think the most likely result would have been a cert grant and summary reversal of the per se finding, and a remand with instructions for the 2nd Circuit to reconsider its findings in light of the Court's Leegin decision. We see those kinds of summary decisions from the Supreme Court from time to time, when it's already made a decision which should have controlled a lower courts' reasoning but which, for whatever reason, wasn't followed by that lower court. It's, in effect, a scolding by the Supreme Court. It would have represented the Court telling the 2nd Circuit that it screwed up and instructing it to go back and apply the rule of reason to Apple's actions. Even if the Court didn't summarily reverse the 2nd Circuit, I think it likely that it would have granted cert and heard the case.
But then, on February 13th, Justice Scalia died. Here's where the line up from the Leegin decision becomes important. The 5 Justice majority consisted of Chief Justice Roberts and Justices Scalia, Kennedy, Thomas, and Alito. Those same 5 Justices were, as of February 12th, still on the Court. I don't have any reason to believe that they would have made a materially different finding than they had made in Leegin or even seen fit to weaken the principle they laid down in that case.
The 4 more liberal Justices - Justices Stevens, Souter, Ginsburg and Breyer - had voted in Leegin not to overrule Dr. Miles Medical. They would have had a vertical pricing agreement be considered per se illegal where the rule of reason need not be applied. Justices Stevens and Souter had since been replaced by Justices Sotomayor and Kagan. But I don't have reason to believe the new Justices felt materially different on the question.
With Justice Scalia's death there likely were no longer 5 votes to summarily reverse the 2nd Circuit and vindicate the principle laid down in Leegin. The 4 more conservative Justices could still have voted to grant cert (that takes only 4 votes), but what would have been the point? At best an 8-Justice Court would have heard the case and been split 4-4, meaning that the 2nd Circuit would be affirmed by an equally divided court. At worst a new Justice - one appointed by President Obama - would have been seated by the time the case was heard and there would have been a 5-Justice majority ready, and perhaps willing, to effectively overturn the Leegin holding - or, at least, to chip away at its import.
So... I think it's reasonable to conclude that Apple lost the ebooks case not because Mr. Sewell and Apple's legal team did a poor job, and not because Apple colored outside the (then-existing) legal lines, but rather because of a death that occurred in Texas in early February 2016 and which they couldn't have anticipated. I expect that many among Apple's legal team realized, when they got news of Justice Scalia's death, that they were suddenly more likely to ultimately lose the ebooks case. Up until that point, they had good reason to expect they'd ultimately prevail.
Excellent post! One of the best explanations I’ve read.
Apple was, as is relevant here, essentially accused of engaging in an illegal vertical pricing agreement - a violation of §1 of the Sherman Act. A vertical pricing agreement would be one between, e.g., a manufacturer and a retailer of that manufacturer's products. A horizontal pricing agreement would be one between, e.g., manufacturers whose products compete with each others. Under Supreme Court precedent, a horizontal pricing agreement is per se illegal as a violation of the Sherman Act. At one time the same could be said of vertical pricing agreements.
From the Cote decision (Page 120): "In sum, the Plaintiffs have shown not just by a preponderance of the evidence, but through compelling direct and circumstantial evidence that Apple participated in and facilitated a HORIZONTAL price-fixing conspiracy. As a result, they have proven a per se violation of the Sherman Act. If it were necessary to analyze this evidence under the rule of reason, however, the Plaintiffs would also prevail."
As an aside Mr Jobs did Apple no favors to its defense with a couple of his quotes, this one at the iBooks launch event (Page 86):
"When asked by a reporter later that day why people would pay $14.99 in the iBookstore to purchase an e-book that was selling at Amazon for $9.99, Jobs told a reporter, “Well, that won’t be the case.” When the reporter sought to clarify, “You mean you won’t be 14.99 or they won’t be 9.99?” Jobs paused, and with a knowing nod responded, “The price will be the same,” and explained that “Publishers are actually withholding their books from Amazon because they are not happy.” With that statement, Jobs acknowledged his understanding that the Publisher Defendants would now wrest control of pricing from Amazon and raise e-book prices, and that Apple would not have to face any competition from Amazon on price.
The import of Jobs’s statement was obvious. On January 29, the General Counsel of [Simon & Schuster] wrote to [the CEO of S&S, Carolyn] Reidy that she “cannot believe that Jobs made the statement” and considered it “[i]ncredibly stupid.”
Another was this one, made to his biographer (Page 103 of Cote's decision):
Amazon screwed it up. It paid the wholesale price for some books, but started selling them below cost at $9.99. The publishers hated that — they thought it would trash their ability to sell hardcover books at $28. So before Apple even got on the scene, some booksellers were starting to withhold books from Amazon. So we told the publishers, “We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway.” But we also asked for a guarantee that if anybody else is selling the books cheaper than we are, then we can sell them at the lower price too. So they went to Amazon and said, “You’re going to sign an agency contract or we’re not going to give you the books.”
I don't think things were as cleanly all in the clear as you're presenting it Carnegie. You're absolutely correct Apple could almost as easily escaped with a wrist-slap. Going so far as to say with certainly Apple was not complicit in a scheme that minimally bordered on illegal, and in fact deemed as crossing that border by multiple judges, is too far IMHO.
But with all that said you've written a very compelling opinion of why it failed. Very well done sir as we would expect.
Apple was, as is relevant here, essentially accused of engaging in an illegal vertical pricing agreement - a violation of §1 of the Sherman Act. A vertical pricing agreement would be one between, e.g., a manufacturer and a retailer of that manufacturer's products. A horizontal pricing agreement would be one between, e.g., manufacturers whose products compete with each others. Under Supreme Court precedent, a horizontal pricing agreement is per se illegal as a violation of the Sherman Act. At one time the same could be said of vertical pricing agreements.
From the Cote decision (Page 120): "In sum, the Plaintiffs have shown not just by a preponderance of the evidence, but through compelling direct and circumstantial evidence that Apple participated in and facilitated a HORIZONTAL price-fixing conspiracy. As a result, they have proven a per se violation of the Sherman Act. If it were necessary to analyze this evidence under the rule of reason, however, the Plaintiffs would also prevail."
As an aside Mr Jobs did Apple no favors to its defense with a couple of his quotes, this one at the iBooks launch event (Page 86):
"When asked by a reporter later that day why people would pay $14.99 in the iBookstore to purchase an e-book that was selling at Amazon for $9.99, Jobs told a reporter, “Well, that won’t be the case.” When the reporter sought to clarify, “You mean you won’t be 14.99 or they won’t be 9.99?” Jobs paused, and with a knowing nod responded, “The price will be the same,” and explained that “Publishers are actually withholding their books from Amazon because they are not happy.” With that statement, Jobs acknowledged his understanding that the Publisher Defendants would now wrest control of pricing from Amazon and raise e-book prices, and that Apple would not have to face any competition from Amazon on price.
The import of Jobs’s statement was obvious. On January 29, the General Counsel of [Simon & Schuster] wrote to [the CEO of S&S, Carolyn] Reidy that she “cannot believe that Jobs made the statement” and considered it “[i]ncredibly stupid.”
Another was this one, made to his biographer (Page 103 of Cote's decision):
Amazon screwed it up. It paid the wholesale price for some books, but started selling them below cost at $9.99. The publishers hated that — they thought it would trash their ability to sell hardcover books at $28. So before Apple even got on the scene, some booksellers were starting to withhold books from Amazon. So we told the publishers, “We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway.” But we also asked for a guarantee that if anybody else is selling the books cheaper than we are, then we can sell them at the lower price too. So they went to Amazon and said, “You’re going to sign an agency contract or we’re not going to give you the books.”
I don't think things were as cleanly all in the clear as you're presenting it Carnegie. You're absolutely correct Apple could almost as easily escaped with a wrist-slap. Going so far as to say with certainly Apple was not complicit in a scheme that minimally bordered on illegal, and in fact deemed as crossing that border by multiple judges, is too far IMHO.
But with all that said you've written a very compelling opinion of why it failed. Very well done sir as we would expect.
The reality is that it was a bad decision. Period. There’s really nothing there that proves anything. Jobs’s statement simply showed that publishers were unhappy with what Amazon was doing, and were taking steps that preceded Apple’s attempts with iBooks. There’s nothing inherently illegal with the agency model, which was being said at the time. A number of industries use the agency model without a problem. There was far more inference in this trial than actual evidence.
its interesting that knowledge of horizontal price fixing isn’t itself illegal. It’s perfectly ok to tell companies to let you know what they want. This is also common.
now, if publishers go to Amazon with demands because Apple gave them a choice they wanted, Apple has no responsibility for that. Overall, the legal community sided with Apple, both before, and after the verdict. This was more of a political case than anything else.
Since when can’t you read an ePub document elsewhere? I can. So should everyone else.
Fixed Layout EPUB, which is used for comics, photo books, realistically anything that isn't just text, isn't widely supported outside of Apple's reading apps. There are some opensource efforts at creating reading apps, but they're largely moribund.
The you also have the problem of whether other EPUB reader apps will provide the same rich support for javascript, that Apple's apps provide.
Since when can’t you read an ePub document elsewhere? I can. So should everyone else.
Fixed Layout EPUB, which is used for comics, photo books, realistically anything that isn't just text, isn't widely supported outside of Apple's reading apps. There are some opensource efforts at creating reading apps, but they're largely moribund.
The you also have the problem of whether other EPUB reader apps will provide the same rich support for javascript, that Apple's apps provide.
Ok, but who’s fault is that? Certainly not Apple’s. But books are never a problem.
Ok, but who’s fault is that? Certainly not Apple’s. But books are never a problem.
Apple is a convicted anti-competitive company. The problem with their behaviour in the market, is that they're using their ownership of the hardware platform, to limit the competitiveness of other platforms that compete with their own books platform (through blocking their ability to have their own storefronts in their apps), which limits the incentive of those other platforms to support the sort of content Apple supports.
If Apple were required to offer, for example, a web-based front end to the Apple books store, so that non-Apple hardware could make purchases or DRM-Free books, or if they were required to make their reader app available on Android and Windows, while that would potentially increase the market penetration of their Books store, it would disarm the potential for market abuse that comes from the two being tied together.
Comments
So for you to be correct that means the Justice Department must also have been "full of it". Their attorneys too. The State's Attorneys who brought suit were "full of it" as well, right? The US District Court for New York and the Honorable Judge Denise Cote was full of it. The panel of judges from the US 2nd Court of Appeals who upheld her ruling 2-1 must also have been full of it. SCOTUS too must have been full of it not finding anything worthy enough legally in Apple's argument to take up the court's time. So many highly educated and long-time legal experts and professionals all full of it. What's the chances of that "full of it group" all getting together by happenstance eh?
In essence EVERYONE who heard testimony and considered the preponderance of evidence must be full of it. You on the other hand who was not privy to either the evidentiary record of emails and messages, testimony including that of Apple's own executives, various filings and counters, and the supporting legal justification of it all is totally confident that everyone else is "full of it" based on, well something, even if it's not actually facts (including the Judge's name). Did I get all that correct?
Jeff Bezos has all the idiosyncrasies of a snake oil salesmen. With a host of employees working for starvation wages, and a veritable scorched earth in his company wake.
with book chains, it’s too late, because no matter what they do, their business model is no longer viable. They tried the Nook, and I have the app on my iPad, and use it. But it’s always been a long bet for them. Blockbuster went out for the same reason. GameStop is going out for that reason as well.
every business you mentioned went out because of online shopping. Make no mistake about it, others are going to go out too. Online is just too convenient for most people. If a retailer can’t make the experience something special, to lure customers into a store, profitably, then it will fail.
An examp,e is taxes. You could be like my parents were. They would not only pay every penny they owed, but they wouldn’t take advantage of perfectly legal schemes to limit those payments. If you do, that’s fine. I do. Then there are legal schemes that require a bit of finagling g to get them to work. They’re also legal, but require you to go to some effort to make sure you keep them legal. That riding on the edge. It’s also perfectly legal, if you do it properly. I don’t bother, because it’s too much work.
but then there are the schemes that some g]very wealth individuals take, which is to move you money around in not quite ethical, and maybe not entirely legal ways. I certainly don’t do that!
Apple is pretty conservative in their practices. I find it frustrating when a company is accused of doing something wrong when it’s perfectly legal. If it’s allowed by law, then a company has a fiduciary responsibility to seek out the best rates possible, as long as it’s legal. Instead of accusing them of doing something wrong, when it isn’t, just because you’re losing out, such as the European tax questions, then change the laws, and THEN, if the companies continue to do what they were doing, fine them, or whatever.
As I said, vendors who don’t charge shipping almost always charge a higher price for the item itself. So one guy may charge $50 for the item, and $8 shipping, and another will charge $58, with no shipping. Sometimes it comes out a bit more, sometimes a bit less, but it averages out over time. Different vendors are the same, some charge shipping, and some don’t. Prices also vary
Understand that all online vendors of electronic books have some way of keeping authors within their system. Amazon won’t so-market your book if you sell on iBooks, or the Nook, or anywhere else. They also take a bigger chunk if you do. Many of the books on iBooks are DRM-free. More so than on Amazon. Most book pricing is within 10% of each other’s platform, with most being exactly the same.
amazon has been very predatory with publishers, often paying them too little to make a profit. Apple’s error was in deciding g to let the vendor determine the pricing, rather than Apple. Generally, Amazon has priced the books, not the publisher.
Most books on iBooks are available on every other platform. I see that all the time, to the point that sometimes I forget which platform I’m buying an authors books on. I like to buy all of an authors books from one place as it’s easier to manage them that way. Sometimes a book isn’t on iBooks, but is available elsewhere, and visa versa.
dont let anyone tell you otherwise, because it’s not true.
I'm going to leave out a lot of nuance in my run through of what happened in the case and the important legal issue involved. If I didn't this post would run on far too long.
Apple was, as is relevant here, essentially accused of engaging in an illegal vertical pricing agreement - a violation of §1 of the Sherman Act. A vertical pricing agreement would be one between, e.g., a manufacturer and a retailer of that manufacturer's products. A horizontal pricing agreement would be one between, e.g., manufacturers whose products compete with each others. Under Supreme Court precedent, a horizontal pricing agreement is per se illegal as a violation of the Sherman Act. At one time the same could be said of vertical pricing agreements.
The Supreme Court in effect decided in 1911, in Dr. Miles Medical v John D. Park & Sons, that vertical pricing agreements were per se illegal. But over the years the Court cast doubt on the veracity of that principle, owing in part to a more developed understanding of market realities and the potential procompetitive effects of such pricing agreements. Then, in 2007 in Leegin Creative Leather Products v PSKS, the Court expressly overruled Dr. Miles Medical. It decided that vertical pricing agreements weren't per se illegal. If a court found there to be a vertical pricing agreement, it needed to apply the rule of reason to determine whether that agreement was a violation of the Sherman Act. The rule of reason basically means a consideration and balancing of the anticompetitive and procompetitive effects of certain conduct or agreements. The lineup of the 5-4 Leegin decision is important here, so I'll return to that in a minute.
The application of the rule of reason would have been important in the Apple ebooks case. Even when the 2nd Circuit upheld Judge Cote's decision, only one of the three judges on the panel agreed with Judge Cote that, even if the rule of reason needed to be applied, Apple would be found to have violated the Sherman Act. It upheld her decision because two of the three judges agreed that the rule of reason didn't need to be applied, that Apple's actions were per se illegal. In order to reach that conclusion those judges had to do a bit of pretzel twisting with the reasoning. Somehow Apple was involved in the agreements, which would have made them vertical pricing agreements and meant that, under Leegin, the rule of reason needed to be applied. But Apple wasn't actually party to the agreements, it just facilitated them - so they were actually horizontal agreements and per se illegal. The 2nd Circuit, in effect, created this new kind of violation - orchestrating, but not actually being part of, an illegal horizontal pricing agreement. Frankly, the 2nd Circuit's reasoning was in substantial conflict with the Supreme Court's decision in Leegin. At best it represented a novel - and somewhat suspect - legal theory of anti-trust law.
So when Apple asked the Supreme Court to hear the case in October of 2015, I think a reasonable observer familiar with the Leegin decision should have considered it likely that the 2nd Circuit's decision would be overturned - either summarily or after the Court heard the case. Apple wasn't asking for a finding that it hadn't violated the Sherman Act, just a finding that the rule of reason needed to be applied - essentially a reiteration of the Court's finding in Leegin just 8 years prior. Apple likely was, and should have been, confident that it would prevail if the procompetitive effects of its actions were weighed against their anticompetitive effects.
Notably, a number of amici filed briefs in support of granting Apple's petition (i.e. in favor of the Supreme Court hearing the case) while none filed in support of the U.S. and states' opposition to Apple's petition. Among amici filing in support of Apple were authors, economists, legal scholars, and software associations. And they all cited Leegin. This really should have been a simple decision. You point at Leegin and ask the Court... does this decision, which you made less than a decade ago, still represent the law of the land?
In late January Apple's petition was scheduled to be considered at the Justices' conference on February 19th. As I consider the situation now, I think the most likely result would have been a cert grant and summary reversal of the per se finding, and a remand with instructions for the 2nd Circuit to reconsider its findings in light of the Court's Leegin decision. We see those kinds of summary decisions from the Supreme Court from time to time, when it's already made a decision which should have controlled a lower courts' reasoning but which, for whatever reason, wasn't followed by that lower court. It's, in effect, a scolding by the Supreme Court. It would have represented the Court telling the 2nd Circuit that it screwed up and instructing it to go back and apply the rule of reason to Apple's actions. Even if the Court didn't summarily reverse the 2nd Circuit, I think it likely that it would have granted cert and heard the case.
But then, on February 13th, Justice Scalia died. Here's where the line up from the Leegin decision becomes important. The 5 Justice majority consisted of Chief Justice Roberts and Justices Scalia, Kennedy, Thomas, and Alito. Those same 5 Justices were, as of February 12th, still on the Court. I don't have any reason to believe that they would have made a materially different finding than they had made in Leegin or even seen fit to weaken the principle they laid down in that case.
The 4 more liberal Justices - Justices Stevens, Souter, Ginsburg and Breyer - had voted in Leegin not to overrule Dr. Miles Medical. They would have had a vertical pricing agreement be considered per se illegal where the rule of reason need not be applied. Justices Stevens and Souter had since been replaced by Justices Sotomayor and Kagan. But I don't have reason to believe the new Justices felt materially different on the question.
With Justice Scalia's death there likely were no longer 5 votes to summarily reverse the 2nd Circuit and vindicate the principle laid down in Leegin. The 4 more conservative Justices could still have voted to grant cert (that takes only 4 votes), but what would have been the point? At best an 8-Justice Court would have heard the case and been split 4-4, meaning that the 2nd Circuit would be affirmed by an equally divided court. At worst a new Justice - one appointed by President Obama - would have been seated by the time the case was heard and there would have been a 5-Justice majority ready, and perhaps willing, to effectively overturn the Leegin holding - or, at least, to chip away at its import.
So... I think it's reasonable to conclude that Apple lost the ebooks case not because Mr. Sewell and Apple's legal team did a poor job, and not because Apple colored outside the (then-existing) legal lines, but rather because of a death that occurred in Texas in early February 2016 and which they couldn't have anticipated. I expect that many among Apple's legal team realized, when they got news of Justice Scalia's death, that they were suddenly more likely to ultimately lose the ebooks case. Up until that point, they had good reason to expect they'd ultimately prevail.
"In sum, the Plaintiffs have shown not just by a preponderance of the evidence, but through compelling direct and circumstantial evidence that Apple participated in and facilitated a HORIZONTAL price-fixing conspiracy. As a result, they have proven a per se violation of the Sherman Act. If it were necessary to analyze this evidence under the rule of reason, however, the Plaintiffs would also prevail."
As an aside Mr Jobs did Apple no favors to its defense with a couple of his quotes, this one at the iBooks launch event (Page 86):
"When asked by a reporter later that day why people would pay $14.99 in the iBookstore to purchase an e-book that was selling at Amazon for $9.99, Jobs told a reporter, “Well, that won’t be the case.” When the reporter sought to clarify, “You mean you won’t be 14.99 or they won’t be 9.99?” Jobs paused, and with a knowing nod responded, “The price will be the same,” and explained that “Publishers are actually withholding their books from Amazon because they are not happy.” With that statement, Jobs acknowledged his understanding that the Publisher Defendants would now wrest control of pricing from Amazon and raise e-book prices, and that Apple would not have to face any competition from Amazon on price.
The import of Jobs’s statement was obvious. On January 29, the General Counsel of [Simon & Schuster] wrote to [the CEO of S&S, Carolyn] Reidy that she “cannot believe that Jobs made the statement” and considered it “[i]ncredibly stupid.”
Another was this one, made to his biographer (Page 103 of Cote's decision):
Amazon screwed it up. It paid the wholesale price for some books, but started selling them below cost at $9.99. The publishers hated that — they thought it would trash their ability to sell hardcover books at $28. So before Apple even got on the scene, some booksellers were starting to withhold books from Amazon. So we told the publishers, “We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway.” But we also asked for a guarantee that if anybody else is selling the books cheaper than we are, then we can sell them at the lower price too. So they went to Amazon and said, “You’re going to sign an agency contract or we’re not going to give you the books.”
I don't think things were as cleanly all in the clear as you're presenting it Carnegie. You're absolutely correct Apple could almost as easily escaped with a wrist-slap. Going so far as to say with certainly Apple was not complicit in a scheme that minimally bordered on illegal, and in fact deemed as crossing that border by multiple judges, is too far IMHO.
But with all that said you've written a very compelling opinion of why it failed. Very well done sir as we would expect.
its interesting that knowledge of horizontal price fixing isn’t itself illegal. It’s perfectly ok to tell companies to let you know what they want. This is also common.
now, if publishers go to Amazon with demands because Apple gave them a choice they wanted, Apple has no responsibility for that. Overall, the legal community sided with Apple, both before, and after the verdict. This was more of a political case than anything else.
The you also have the problem of whether other EPUB reader apps will provide the same rich support for javascript, that Apple's apps provide.
If Apple were required to offer, for example, a web-based front end to the Apple books store, so that non-Apple hardware could make purchases or DRM-Free books, or if they were required to make their reader app available on Android and Windows, while that would potentially increase the market penetration of their Books store, it would disarm the potential for market abuse that comes from the two being tied together.