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Kolasky (2) on the Apple e-books case: Coordination, even horizontal coordination, isn’t per se illegal

TOTM Jon Jacobson in his initial posting claims that it would be “hard to find an easier case” than Apple e-Books, and David Balto and Chris Sagers seem to agree. I suppose that would . . .

Jon Jacobson in his initial posting claims that it would be “hard to find an easier case” than Apple e-Books, and David Balto and Chris Sagers seem to agree. I suppose that would be true if, as Richard Epstein claims, “the general view is that horizontal arrangements are per se unlawful.”

That, however, is not the law, and has not been since William Howard Taft’s 1898 opinion in Addyston PipeIn his opinion, borrowing from an earlier dissenting opinion by Justice Edward Douglas White in Trans-Missouri Freight Ass’n, Taft surveyed the common law of restraints of trade. He showed that it was already well established in 1898 that even horizontal restraints of trade were not necessarily unlawful if they were ancillary to some legitimate business transaction or arrangement.

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Antitrust & Consumer Protection

Reed on the Apple e-books case: “We can remember it for you wholesale” – why the model matters in Apple e-books

TOTM In Philip K. Dick’s famous short story that inspired the Total Recall movies, a company called REKAL could implant “extra-factual memories” into the minds of anyone. That technology may . . .

In Philip K. Dick’s famous short story that inspired the Total Recall movies, a company called REKAL could implant “extra-factual memories” into the minds of anyone. That technology may be fictional, but the Apple eBooks case suggests that the ability to insert extra-factual memories into the courts already exists.

The Department of Justice, the Second Circuit majority, and even the Solicitor General’s most recent filing opposing cert. all assert that the large publishing houses invented a new “agency” business model as a way to provide leverage to raise prices, and then pushed it on Apple.

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Antitrust & Consumer Protection

Sagers on the Apple e-books case: Why does everybody hate competition so much?

TOTM United States v. Apple has fascinated me continually ever since the instantly-sensational complaint was made public, more than three years ago. Just one small, recent manifestation . . .

United States v. Apple has fascinated me continually ever since the instantly-sensational complaint was made public, more than three years ago. Just one small, recent manifestation of the larger theme that makes it so interesting is the improbable range of folks who apparently consider certiorari rather likely—not least some commenters here, and even SCOTUSblog, which listed the case on their “Petitions We’re Watching.” It seems improbable, I say, not because reasonable people couldn’t differ on the policy issues. In this day and age somebody pops up to doubt every antitrust case brought against anybody no matter what. Rather, on the traditional criteria, the case just seems really ill-suited for cert.

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Antitrust & Consumer Protection

Hazlett on the Apple e-books case: The Apple case is a throwback to Dr. Miles, and that’s not a good thing

TOTM The Apple e-books case is throwback to Dr. Miles, the 1911 Supreme Court decision that managed to misinterpret the economics of competition and so thwart productive . . .

The Apple e-books case is throwback to Dr. Miles, the 1911 Supreme Court decision that managed to misinterpret the economics of competition and so thwart productive activity for over a century. The active debate here at TOTM reveals why.

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Antitrust & Consumer Protection

Jacobson on the Apple ebooks case: It is hard to find an easier antitrust case than United States v. Apple

TOTM Try as one may, it is hard to find an easier antitrust case than United States v. Apple. Consider: The six leading publishers all wanted to . . .

Try as one may, it is hard to find an easier antitrust case than United States v. Apple.

Consider: The six leading publishers all wanted to prevent Amazon and others from offering best seller e-books at $9.99 (or other similar low prices). The problem, however, was that they had no mechanism for accomplishing that result. Then came Apple. Apple figured out that the “Amazon problem” could be fixed if the publishers changed their customer relationships from sale/resale to “agency,” all subject to an MFN with Apple that would prohibit any of the publishers – and, through the MFN, Amazon – from underselling the (higher) prices on Apple’s iBookstore. Loving this “aikido move” (in Steve Jobs’ words), all the publishers but Random House happily agreed. Prices for best seller e-books increased 30% almost overnight.

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Antitrust & Consumer Protection

Albanese on the Apple e-books case: Apple’s Anticlimactic Appeal

TOTM In October of last year, I had the chance to interview Hachette CEO Arnaud Nourry from the stage at the Frankfurt Book Fair, and I asked . . .

In October of last year, I had the chance to interview Hachette CEO Arnaud Nourry from the stage at the Frankfurt Book Fair, and I asked him whether his 2009 concerns that low e-book prices would devalue the book—the driving factor behind the alleged e-book price-fixing conspiracy—were in the the past. After all, much has changed over the last six years.

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Antitrust & Consumer Protection

Abbott on the Apple e-books case: Apple v. United States and antitrust error cost analysis

TOTM As Judge (and Professor) Frank Easterbrook famously explained over three decades ago (in his seminal article The Limits of Antitrust), antitrust is an inherently limited body . . .

As Judge (and Professor) Frank Easterbrook famously explained over three decades ago (in his seminal article The Limits of Antitrust), antitrust is an inherently limited body of law. In crafting and enforcing liability rules to combat market power and encourage competition, courts and regulators may err in two directions: they may wrongly forbid output-enhancing behavior or wrongly fail to condemn output-reducing conduct. The social losses from false convictions and false acquittals, taken together, comprise antitrust’s “error costs.” While it may be possible to reduce error costs by making liability rules more nuanced, added complexity raises the “decision costs” incurred by business planners (ex ante) and adjudicators (ex post). In light of all these costs, Easterbrook advocated an approach that would optimize antitrust’s effectiveness: interpret and enforce the antitrust laws so as to minimize the sum of error and decision costs.

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Antitrust & Consumer Protection

Balto on the Apple e-books case: Skip the (Apple) appetizer and get to the (McWane) main course

TOTM The “magic” of Washington can only go so far. Whether it is political consultants trying to create controversy where there is basic consensus, such as . . .

The “magic” of Washington can only go so far. Whether it is political consultants trying to create controversy where there is basic consensus, such as in parts of the political campaign, or the earnest effort to create a controversy over the Apple decision, there may be lots of words exchanged and animated discussion by political and antitrust pundits, but at the end of the day it’s much ado about not much. For the Apple case, even though this blog has attracted some of the keenest creative antitrust thinkers, a simple truth remains – there was overwhelming evidence that there was a horizontal agreement among suppliers and that Apple participated or even led the agreement as a seller. This is, by definition, a hub-and-spoke conspiracy that resulted in horizontal price fixing among ebook suppliers – an activity worthy of per se treatment.

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Antitrust & Consumer Protection

Kolasky on the Apple e-books case: Another reminder that “easy labels do not always supply ready answers”

TOTM In my view, the Second Circuit’s decision in Apple e-Books, if not reversed by the Supreme Court, threatens to undo a half century of progress in reforming antitrust . . .

In my view, the Second Circuit’s decision in Apple e-Books, if not reversed by the Supreme Court, threatens to undo a half century of progress in reforming antitrust doctrine. In decision after decision, from White Motors through Leegin and Actavis, the Supreme Court has repeatedly held—in cases involving both horizontal and vertical restraints—that the only test for whether an agreement can be found per se unlawful under Section 1 is whether it is “a naked [restraint] of trade with no purpose except stifling competition,” or whether it is instead “ancillary to the legitimate and competitive purposes” of a business association. DagherThe cases in which the Court has consistently applied this test read like a litany of antitrust decisions we all now study in law school: White Motors, TopcoGTE SylvaniaProfessional EngineersBMIMaricopaNCAABusiness ElectronicsARCOCalifornia Dental, Dagher, Leegin, American Needleand, most recently, Actavis. Significantly, more than two-thirds of these cases involved horizontal, not vertical restraints.

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Antitrust & Consumer Protection