Washington Lawyer - October 2019 - 36

WORTH READING

APPLE ANTITRUST CASE
Self-Preservation or Connivance?
Review by Don Allen Resnikoff
retained ownership of published works, set retail
prices, and made sellers like Amazon mere sales
agents. The scheme was called the agency model.

Courtesy of Harvard University Press

Antitrust officials soon took notice of what on
its face looked like a simple price-fixing scheme.
In a letter to Apple dated July 29, 2010, the
attorney general of Connecticut expressed
concern about Apple's requirement that "in
exchange for Apple agreeing to the agency
pricing model, the largest ebook publishers must
agree not to permit Apple's competitors to sell
any ebooks for less than what price is listed in
Apple's iBooks store."
Sagers further notes that as plain as the antitrust
concerns may have seemed to antitrust enforcers,
who proceeded to prosecute Apple and the book
publishers, the public's enthusiasm for enforcement
was decidedly mixed. What bothered people in
2010 was roughly the same as what bothered the
appellate judge who dissented years later, in 2015,
when the U.S. Court of Appeals for the Second
Circuit affirmed a judgment against Apple and
several nonsettling publishers.

I

n January 2010, Apple Inc.'s Steve Jobs announced
to a large audience that Apple would soon open
the iBooks store to market electronic books
readable on the Apple iPad, challenging Amazon's
ebook offerings and the Kindle reader.
According to the New Yorker magazine's Ken
Auletta, Jobs told the crowd that five of the "big
six" publishers - Macmillan, Simon & Schuster,
Hachette, HarperCollins, and Penguin - agreed to
sell their ebooks through iBooks. (Random House
did not agree until later.)
Auletta reported that after the presentation, Walt
Mossberg, the Wall Street Journal personal technology columnist, asked Jobs why people would
pay Apple $14.99 when they could spend $9.99 on
Amazon for the same book. Jobs reportedly told
Mossberg, "The price will be the same . . . Publishers
may withhold their books from Amazon. They're
unhappy."
In his book United States v. Apple: Competition in
America, Chris Sagers says that Jobs all but acknowledged that the publishers would raise ebook prices.
Over time, all six major U.S. book publishers joined
in a strategy orchestrated by Apple: The publishers
36 WASHINGTON LAWYER

*

OCTOBER 2019

Dissenting Judge Dennis Jacobs complained that
the court and his majority appellate judge colleagues got things backwards. He argued that
banding together to control retail price was a legitimate way for the publishers to protect their interests when entering the market against Amazon,
which had a 90 percent share of ebook sales. Judge
Jacobs saw below-cost Amazon book pricing as
harming the interests of book publishers and the
reading public.
Fascinated by the confusion about what was
arguably a simple price-fixing case, Sagers realized
that the Apple case seems simple only from a
narrow enforcer's perspective that ignores the
vagaries of political history and both public and
expert opinions on antitrust law's purpose.
There is, I think, great wisdom in Sagers's decision to
look at antitrust history and policy from the perspective of a particular antitrust case that has generated a lot of public discussion. One great benefit
of Sagers's approach is that his writing is likely to be
accessible to nonexpert readers.
Sagers regrets the ambivalence that surrounds antitrust thinking because he is a strong supporter of
the antitrust rationale that drove the prosecutors

who challenged the price-fixing behavior of the
book publishers and Apple's connivance with them.
His book pulls some interesting and important
threads from antitrust history. Sagers tells us about
instances of advocacy by industry people who
believed, in the manner of the modern book publishers, that the special circumstances of their industry's competition could be ruinous, so self-help to
avoid competition was justified.
An early antitrust case addressing these concerns
is the famous 1890s price-fixing case United States
v. Addyston Pipe & Steel Co. The case dealt with cast
iron pipe manufacturers that had set up a pricefixing conspiracy covering much of the United
States. They fixed prices because they wanted protection from price competition, which they said
would be "ruinous."
Sagers explains that the ruinous competition
argument may have seemed plausible to Addyston
counsel at the time, but to Judge William Howard
Taft it was an argument that needed to be
squelched. Sagers writes: "Judge Taft was unmoved.
In effect, he'd been asked to decide whether the
actual prices the defendants had charged were
'reasonable' or appropriate in light of their need to
protect themselves from ruinous competition."
In some of the most famous words in all of antitrust
law, Taft wrote that inquiring "how much restraint of
competition is in the public interest, and how much
is not," would be to "set sail on a sea of doubt." So,
the U.S. Supreme Court held that a horizontal price
cartel is illegal no matter how "reasonable the prices
they fixed, however great the competition they had
to encounter, and however great the necessity for
curbing themselves by joint agreement from committing financial suicide by ill-advised competition."
Sagers points out that the Taft opinion implied faith
in both the model of healthy competition and its
generalizability across markets. However, the
Addyston Pipe case set the stage for many further
iterations of the same issues about the value of
competition. For one example among many, Sagers
finds echoes of the Addyston Pipe discussion in
recent debates about whether "platform" industries
have unique characteristics that suggest usual antitrust strictures should not apply. He writes:
And so one might question whether digital platforms are so different from the "platforms" that



Washington Lawyer - October 2019

Table of Contents for the Digital Edition of Washington Lawyer - October 2019

Digital Extras
Your Voice
From Our President
Practice Management
Calendar of Events
Coding Out Implicit Bias With Ai
Rewriting the Rules on Data Privacy
Compromised Devices: Hardware Hacking Dangers
Taking the Stand
Member Spotlight
Global & Domestic Outlook
Worth Reading
Media Bytes
Attorney Briefs
Ask the Ethics Experts
Disciplinary Summaries
The Pro Bono Effect
Community & Connections
Last Word
Washington Lawyer - October 2019 - Cover1
Washington Lawyer - October 2019 - Cover2
Washington Lawyer - October 2019 - 1
Washington Lawyer - October 2019 - 2
Washington Lawyer - October 2019 - 3
Washington Lawyer - October 2019 - Digital Extras
Washington Lawyer - October 2019 - Your Voice
Washington Lawyer - October 2019 - From Our President
Washington Lawyer - October 2019 - 7
Washington Lawyer - October 2019 - Practice Management
Washington Lawyer - October 2019 - 9
Washington Lawyer - October 2019 - Calendar of Events
Washington Lawyer - October 2019 - 11
Washington Lawyer - October 2019 - Coding Out Implicit Bias With Ai
Washington Lawyer - October 2019 - 13
Washington Lawyer - October 2019 - 14
Washington Lawyer - October 2019 - 15
Washington Lawyer - October 2019 - 16
Washington Lawyer - October 2019 - 17
Washington Lawyer - October 2019 - Rewriting the Rules on Data Privacy
Washington Lawyer - October 2019 - 19
Washington Lawyer - October 2019 - 20
Washington Lawyer - October 2019 - 21
Washington Lawyer - October 2019 - 22
Washington Lawyer - October 2019 - 23
Washington Lawyer - October 2019 - Compromised Devices: Hardware Hacking Dangers
Washington Lawyer - October 2019 - 25
Washington Lawyer - October 2019 - 26
Washington Lawyer - October 2019 - 27
Washington Lawyer - October 2019 - Taking the Stand
Washington Lawyer - October 2019 - 29
Washington Lawyer - October 2019 - Member Spotlight
Washington Lawyer - October 2019 - 31
Washington Lawyer - October 2019 - 32
Washington Lawyer - October 2019 - 33
Washington Lawyer - October 2019 - Global & Domestic Outlook
Washington Lawyer - October 2019 - 35
Washington Lawyer - October 2019 - Worth Reading
Washington Lawyer - October 2019 - 37
Washington Lawyer - October 2019 - Media Bytes
Washington Lawyer - October 2019 - Attorney Briefs
Washington Lawyer - October 2019 - Ask the Ethics Experts
Washington Lawyer - October 2019 - 41
Washington Lawyer - October 2019 - Disciplinary Summaries
Washington Lawyer - October 2019 - 43
Washington Lawyer - October 2019 - The Pro Bono Effect
Washington Lawyer - October 2019 - 45
Washington Lawyer - October 2019 - Community & Connections
Washington Lawyer - October 2019 - 47
Washington Lawyer - October 2019 - Last Word
Washington Lawyer - October 2019 - Cover3
Washington Lawyer - October 2019 - Cover4
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