Ondrej Holzman Members of the US government had a difficult time in front of the appeals court on Monday, who had to answer questions from three judges from the appeals panel. It examines a previous court ruling that Apple colluded with book publishers in 2010 to raise the price of e-books across the board. Apple is now in an appeals court to have that verdict overturned.
Although he never directly participated in the whole case, Amazon also played a significant role in the Manhattan appeals court, which is directly affected by the whole matter. One of the three judges on the appeals panel suggested on Monday that Apple's negotiations with publishers fostered competition and broke Amazon's then-monopoly position. "It's like all the mice coming together to hang a bell around the cat's neck," said Judge Dennis Jacobs.
The appeals panel leaned more in favor of Apple
His other colleagues also seemed to be open to Apple's arguments and, on the contrary, leaned quite hard on government officials. Judge Debra Livingston called it "disturbing" that Apple's deals with publishers, which would normally be "entirely legal", have become the subject of conspiracy charges.
Amazon controlled 80 to 90 percent of the market at the time Apple entered the e-book field. At the time, Amazon was also charging very aggressive prices — $9,99 for most bestsellers — which government officials said was good for users, said Malcom Stewart, a senior attorney for the U.S. Department of Justice.
Another of the three judges, Raymond J. Lohier, asked Stewart how Apple could destroy Amazon's monopoly without violating antitrust laws as interpreted by the Justice Department. Stewart responded that Apple could have persuaded publishers to sell books at lower wholesale prices, or the California company could have filed an antitrust complaint against Amazon.
“Are you saying that the Justice Department didn't notice that there was a new industry dominated by a monopoly?” Judge Jacobs responded. “We registered a price level of $9,99, but we thought it was good for customers,” Stewart replied.
Was Judge Cote wrong?
It was the Department of Justice that sued Apple in 2012, accusing it of violating antitrust laws. After a three-week trial, Judge Denise Cote finally ruled last year that Apple had helped publishers end Amazon's disadvantageous pricing and reshaped the market. Agreements with Apple allowed publishers to set their own prices in the iBookstore, with Apple always taking a 30 percent commission on them.
Key in the agreements with Apple was the condition that the publishers would sell e-books in the iBookstore for at least the same low prices as they are offered anywhere else. This allowed publishers to pressure Amazon to change its business model. If he didn't do so, they would suffer huge losses, because they would also have to offer books in the iBookstore for the aforementioned $10. With the opening of the iBookstore, the prices of electronic books immediately increased across the board, which did not please Judge Cote, who was deciding the case.
However, the appeals court will now decide whether Cote had a duty to more carefully consider the economic impact of Apple's entry into the market. His lawyer, Theodore Boutrous Jr. stated that Apple increased competition by reducing Amazon's power. Some e-book prices have actually gone up, but their average price across the entire market has gone down. The number of available titles has also increased dramatically.
If the California company is unsuccessful at the appeals court, it will pay the $450 million it has already agreed to with the plaintiffs. Most of this amount would go to customers, 50 million would go to court costs. Unlike Apple, the publishing houses did not want to go to court and after an out-of-court settlement, they paid about 160 million dollars. If the appeals court returns the case to Judge Cote, Apple will pay 50 million to customers and 20 million in court costs. If the court overturns the original decision, Apple will not pay anything.
Monday's hearing lasted only 80 minutes, but the judges' decision could take up to six months.
It's weird from the start. As you write, it was normal business negotiation practices and I don't see anything "piggy" about it.