Department of Justice Proposes Remedy to Address Apple’s Price Fixing

FOR IMMEDIATE RELEASE

Friday, August 2, 2013

http://www.justice.gov/opa/pr/department-justice-proposes-remedy-address-apple-s-price-fixing

The Department of Justice and 33 State Attorneys General today submitted to the court a proposed remedy to address Apple Inc.’s illegal conduct, following the July 10, 2013, U.S. District Court for the Southern District of New York decision finding that Apple conspired to fix the prices of e-books in the United States.  The proposed relief is intended to halt Apple’s anticompetitive conduct, restore lost competition and prevent a recurrence of the illegal activities. 

 “The court found that Apple’s illegal conduct deprived consumers of the benefits of e-book price competition and forced them to pay substantially higher prices,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.  “Under the department’s proposed order, Apple’s illegal conduct will cease and Apple and its senior executives will be prevented from conspiring to thwart competition in the future.”

 The department’s proposal, if approved by the court, will require Apple to terminate its existing agreements with the five major publishers with which it conspired – Hachette Book Group (USA), HarperCollins Publishers L.L.C., Holtzbrinck Publishers LLC, which does business as Macmillan, Penguin Group (USA) Inc. and Simon & Schuster Inc. – and to refrain for five years from entering new e-book distribution contracts which would restrain Apple from competing on price.  Under the department’s proposed remedy, Apple will be prohibited from again serving as a conduit of information among the conspiring publishers or from retaliating against publishers for refusing to sell e-books on agency terms.  Apple will also be prohibited from entering into agreements with suppliers of e-books, music, movies, television shows or other content that are likely to increase the prices at which Apple’s competitor retailers may sell that content.  To reset competition to the conditions that existed before the conspiracy, Apple must also for two years allow other e-book retailers like Amazon and Barnes & Noble to provide links from their e-book apps to their e-bookstores, allowing consumers who purchase and read e-books on their iPads and iPhones easily to compare Apple’s prices with those of its competitors.

 Additionally, the Department of Justice is asking the court to appoint an external monitor to ensure that Apple’s internal antitrust compliance policies are sufficient to catch anticompetitive activities before they result in harm to consumers.  The monitor, whose salary and expenses will be paid by Apple, will work with an internal antitrust compliance officer who will be hired by and report exclusively to the outside directors comprising Apple’s audit committee.   The antitrust compliance officer will be responsible for training Apple’s senior executives and other employees about the antitrust laws and ensuring that Apple abides by the relief ordered by the court.

 On April 11, 2012, the department filed a civil antitrust lawsuit in the U.S. District Court for the Southern District of New York against Apple, Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster, for conspiring to end e-book retailers' freedom to compete on price by taking control of pricing from e-book retailers and substantially increasing the prices that consumers paid for e-books.

 At the same time that it filed the lawsuit, the department reached settlements with three of the publishers – Hachette, HarperCollins and Simon & Schuster. Those settlements were approved by the court in September 2012.  The department settled with Penguin on Dec. 18, 2012, and with Macmillan on Feb. 8, 2013.  The Penguin settlement was approved by the court in May 2013.  Final approval of the Macmillan settlement is pending before the court.  Under the settlements, each publisher was required to terminate agreements that prevented e-book retailers from lowering the prices at which they sell e-books to consumers and to allow for retail price competition in renegotiated e-book distribution agreements.

 The department’s trial against Apple, which was overseen by Judge Denise Cote, began on June 3, 2013. The trial lasted for three weeks, with closing arguments taking place on June 20, 2013.  The court issued its opinion that Apple Inc. violated Section 1 of the Sherman Act on July 10, 2013.  The court will hold a hearing on remedies on Aug. 9, 2013.

http://www.justice.gov/opa/pr/department-justice-proposes-remedy-address-apple-s-price-fixing

Amazon Is Not a Monopoly

http://nymag.com/daily/intelligencer/2014/10/amazon-is-not-a-monopoly.html

Franklin Foer has an interesting new essay at New Republic arguing that Amazon is a monopoly trampling the public good and necessitating a vigorous public response, à la Ma Bell or U.S. Steel before it. There’s just one problem with his argument: Amazon is not a monopoly.

Foer starts off with a compelling insight: that monopolies act differently in the digital age. They do not corner a market and then start raising prices, to the detriment of the consumer. (Nobody expects that Google will start charging for searches, for instance.) Rather, they corner a market and put a vice on their suppliers.

“In its pursuit of bigness, Amazon has left a trail of destruction – competitors undercut, suppliers squeezed – some of it necessary, and some of it highly worrisome,” Foer writes. “In its confrontation with the publisher Hachette, it has entered a phase of heightened aggression.”..............................................................

http://nymag.com/daily/intelligencer/2014/10/amazon-is-not-a-monopoly.html

Amazon’s Monopsony Is Not O.K.

Amazon.com, the giant online retailer, has too much power, and it uses that power in ways that hurt America.

O.K., I know that was kind of abrupt. But I wanted to get the central point out there right away, because discussions of Amazon tend, all too often, to get lost in side issues.

For example, critics of the company sometimes portray it as amonster about to take over the whole economy. Such claims are over the top — Amazon doesn’t dominate overall online sales, let alone retailing as a whole, and probably never will. But so what? Amazon is still playing a troubling role................................................

http://www.nytimes.com/2014/10/20/opinion/paul-krugman-amazons-monopsony-is-not-ok.html?_r=1

Amazon is doing the world a favor by crushing book publishers

Updated by Matthew Yglesias on October 22, 2014

Here's a little real talk about the book publishing industry — it adds almost no value, it is going to be wiped off the face of the earth soon, and writers and readers will be better off for it.

The fundamental uselessness of book publishers is why I thought it was dumb of the Department of Justice to even bother prosecuting them for their flagrantly illegal cartel behavior a couple of years back, and it's why I'm deaf to the argument that Amazon's ongoing efforts to crush Hachette are evidence of a public policy problem that needs remedy. Franklin Foer's recent efforts to label Amazon a monopolist are unconvincing, and Paul Krugman's narrower argument that they have some form of monopsony power in the book industry is equally wrongheaded.

What is indisputably true is that Amazon is on track to destroy the businesses of incumbent book publishers. But the many authors and intellectuals who've been convinced that their interests — or the interests of literary culture writ large — are identical with those of the publishers are simply mistaken....................

http://www.vox.com/2014/10/22/7016827/amazon-hachette-monopoly

Top literary agent  calls Amazon ‘Isis-like distribution channel’

Wylie calls for fellow publishers to stand firm and ‘not to blink’ during negotiations over ebook royalties with digital retailer

He is the sinister “jackal” of the literary world who counts Salman Rushdie, Philip Roth and Martin Amis among his formidable roster of clients.

Andrew Wylie, arguably the most powerful literary agent in the world – who once described himself as a “ravenous dog” – has now sunk his teeth into Amazon, describing the online retailer as a “sort of Isis-like distribution channel”.

In a keynote speech to the international festival of authors in Toronto, Wylie condemned the “brutality” of Amazon’s tactics and made a call for fellow publishers to stand firm and “not to blink” during negotiations over royalties with the digital retailer.

Amazon, Wylie said, had “taken the business and distorted it radically”. In his speech, entitled the State of the Industry: What Matters for Writers, Wylie said he believed Amazon’s digital monopoly could be weakened.

“I believe with the restored health of the publishing industry and having some sense of where this sort of Isis-like distribution channel, Amazon, is going to be buried and in which plot of sand they will be stuck, [publishers] will be able to raise the author’s digital royalty to 40% or 50%,” he said. “Writers will begin to make enough money to live.”............................

http://www.theguardian.com/books/2014/oct/30/andrew-wylie-amazon-isis-like-distribution-channel