The same group of authors, book publishers and booksellers that urged the Department of Justice (DOJ) to investigate Amazon for antitrust violations last summer recently voiced its support for Apple in its attempt to overturn the adverse verdict against it entered by a New York federal judge in connection with the DOJ’s civil prosecution of it for harming competition with—you guessed it—Amazon.
As we have previously discussed, the literary community has been at odds with Amazon in recent years; claiming that Amazon used its dominance of the e-book retail market to control the flow of information to the general public. Following a very public pricing dispute with publisher Hachette, writers formed the group “Authors United” to protest Amazon’s “corporate bullying.” Last year, the group both wrote letters to Amazon board members and filed a position paper with the DOJ encouraging it to investigate Amazon for antitrust violations—although the writers’ arguments to the DOJ focused as much on the cultural impact of Amazon’s actions as on their legality.
Authors United, along with The Authors Guild, Inc., American Booksellers Association and Barnes & Noble, has weighed in on the legal battle that the literary community has long watched attentively from the sidelines—namely, the DOJ’s prosecution of Apple for antitrust violations arising from its agreements with five of the six major book publishers.
According to Apple, it sought to enter the e-book business and disrupt Amazon’s 90% market share with the introduction of the iPad in 2010. To do so, Apple negotiated pricing deals with the five largest booksellers in the United States—Hachette, Simon & Schuster, HarperCollins, Penguin and MacMillan—that included (1) an agency model that allowed each publisher to set the retail prices at which its e-books were sold through Apple’s iBookstore, (2) caps on e-book retail prices, and (3) a most-favored-nation clause requiring each publisher to price its iBookstore offering no higher than the price offered by any other e-book retailer. This allowed the publishers to force Amazon, who had been selling e-books for less than what it paid (much to the chagrin of the publishers), to raise its price of e-books.
At Amazon’s urging, the DOJ and 33 states pursued Apple and all five publishers for antitrust violations. The publishers settled, while Apple proceeded to trial before Judge Denise Cote in the U.S. District Court for the Southern District of New York and lost. The judge found that Apple participated in a horizontal conspiracy to raise prices, which is per se unlawful under the antitrust laws. The 2nd Circuit Court of Appeals affirmed the District Court’s decision, finding the notion “that the presence of a strong competitor [Amazon] justifies a horizontal price-fixing conspiracy . . . endorses a concept of market vigilantism that is wholly foreign in the antitrust laws.”
Apple sought a petition of certiorari from the United States Supreme Court in October 2015. It contends both that the 2nd Circuit Court’s application of the per se rule to Apple’s vertical conduct conflicts with the Supreme Court’s decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007) and creates a circuit split. Apple argues that, unless the decision is reversed, this interpretation will “sow uncertainty, discourage procompetitive business ventures, and chill innovation and risk taking to the benefit of entrenched incumbents and to the detriment of consumers.”
Authors United, The Authors Guild, Inc., American Booksellers Association and Barnes & Noble filed their amicus brief in support of Apple on Dec. 2, 2015. The brief echoes last summer’s position paper, leaving the legal arguments primarily to Apple and focusing instead on the positive impact of Apple’s entrance into the e-book marketplace. They contend that although Apple’s actions caused the average retail prices of e-books published by the original publisher defendants to increase, average retail prices across the entire e-book market decreased. As a result, both e-book sales and the number of e-book titles increased during this period. Because Apple’s entrance into the market increased competition, they argue, “the conduct condemned as per se unlawful [by the lower courts] promoted broad access to culture and competition in the marketplace of ideas.”
The authors, publishers and booksellers have continued to raise awareness about Amazon’s alleged detrimental impact on the marketplace of ideas since filing their brief: On January 27, they sponsored an afternoon-long event called “Amazon’s Book Monopoly – A Threat To Freedom of Expression?” at the New America Foundation in Washington, D.C. We will continue to monitor whether their advocacy ultimately yields any impact—either through a DOJ investigation of Amazon or through a petition of certiorari for Apple.