Antitrust suit update: DoJ wants discovery from settling publishers; court date set for those who did not settle

Here are a couple of updates on the DoJ vs. publishers + Apple antitrust suit.

From CNet comes the story of a small legal tiff between the DoJ and the publishers who did agree to settle. Hachette, HarperCollins, and Simon & Schuster—publishers who accepted the DoJ’s proposed terms—have filed papers asking a court to declare them “non parties” to the upcoming lawsuit. This would mean they wouldn’t be obligated to provide discovery—that is, turn over documents and other evidence to lawyers for the DoJ and the publishers plus Apple who are being sued—unless some other party to the case could give “good cause.”

Not so fast, says the DoJ—the settlement agreement didn’t include any terms entitling the three publishers to “special treatment,” and those publishers could still have information the DoJ wants.

"This is, after all, a conspiracy case in which the settling defendants are alleged co-conspirators," DOJ lawyers said in their documents. "There is, therefore, no remotely plausible argument that they are not likely to be sources of highly relevant evidence."

There’s still some dispute over when the discovery process will even end; Apple wants it to end 12/7 but everyone else in the case says they need more time; the DoJ wants it to carry on until March 22.

Meanwhile, Reuters reports that we’re going to have to wait almost a year for those parties to have their day in court. U.S. District Judge Denise Cote has set a trial date of June 3, 2013 for the first courtroom session.

Well, at least we’ll have plenty of time to discuss it to death in the meantime.

2 Comments on Antitrust suit update: DoJ wants discovery from settling publishers; court date set for those who did not settle

  1. Patriotism, some say, is the last refuge of a scoundrel. In law I suspect that conspiracy allegations are the last refuge of prosecutors with a weak case. That’s particularly true when they’re desperate to use discovery to find something. To prosecute, you should already have serious evidence of a crime. They don’t.

    Conspiracy mongering in law works this way: What you did wasn’t wrong–in this case, trying to keep Amazon, with a 90% market share, from dominating ebook sales–but how you did it was. (Or so they say.) You talked, gasp, with one another, as if Manhattan publishers should never talk about their common interests. This guys should have gotten together and knitted shawls or something.

    Note too that attempting to keep their company profitable is here being criminalized. Are we going to be consistent and criminalize DOJ lawyers who network with colleagues in an effort to raise their salaries? That’s also a conspiracy with intent to make more money. Unlike anything the Big Six is doing, that money comes from taxes ‘we the people’ are forced to pay. Like I said, conspiracy allegations are often little more than efforts to make talk itself a crime.

    In contested matters where all the information hasn’t been made public, it’s sensible to ask “Who benefits” from this prosecution and particularly the chilling effect that conspiracy allegations will have on cooperation within the publishing industry to create a healthy ebook market.

    The answer is that only Amazon benefits. As a single and huge corporate entity, it need not engage in a conspiracy with others. And the most obvious matter for the DOJ to look into–whether Amazon was selling ebooks below cost to turn that 90% market dominance into something like 98%–is apparently the subject of no DOJ investigation. Very suspicious to say the least. The current DOJ would have never gone after John Rockefeller’s Standard Oil for price fixing.

    The discovery investigation the DOJ should be doing is one exploring whether Amazon was engaging in what is the classic monopolist move, temporarily selling below cost to destroy competitors. As long as the DOJ isn’t doing that, there’s little reason to think that what they’re doing serves the public interest.

    Note too the DOJ’s efforts to win by bullying. In my legal experience that’s a good indication they know they have a weak case. Even a large publisher doesn’t have the sort of deep pockets for legal expenses that the DOJ has. And settling hasn’t ended the DOJ’s bullying. The publishers that settled have now found that their troubles and expenses (discovery can be expensive) aren’t over. They must now spend vast sums digging up and copying documents for DOJ’s lawyers still looking for that smoking gun they don’t have.

    More and more, this DOJ investigation is looking like Chicago-machine politics. It’s mean. It’s nasty. It’s an effort to reward a friend (Amazon) at the expense of its foes.

    Of course, it’s certainly not as foul as Fast and Furious (Holder’s DOJ-sanctioned gun running to Mexican drug cartels) is shaping up to be. No one has died in Bookgate and, as yet, the DOJ isn’t invoking executive privilege to block any exposure of their motivations. But what is happening is foul none the less, and it could be very bad for the ebook market over the next decade or so. We need conversations and we need a lot of cooperation to work out a set of standards on which all can agree. Absent that, all the benefits go to the largest entity in the ebook market–Amazon.

    No market dominated by a single retailer is a healthy market. These DOJ lawyers either don’t know that or, more likely, they don’t care.

  2. Michael, I never purchased ebooks from Amazon prior to the agency marketing agreements, I purchased from the B&N subsidiary Fictionwise because of their loyalty program. I know that if I were to buy the same ebooks from the agency 6 publishers today, I would be paying at least 4-6 times as much as I did at Fictionwise (maybe more because I didn’t include most of the ebooks I purchased with the micropay rebates in my calculations). Even comparing ebook list prices (with 2008/2009 new releases repriced to current prices because I would have waited for the price drops had there been no loyalty program discounts), the ebook list prices are up about 30% from then.

    From my perspective, it sure looks like the publishers and Apple conspired to raise prices across the board, and it doesn’t seem like they were particularly effective at diminishing Amazon’s dominance. If they really wanted to do that, they should have dictated the format of ebooks to only be formats not controlled by Amazon (e.g., epub, pdf). Amazon’s got a walled garden with the Kindle, and you’ll never see the market share change as long as Kindle owners can’t buy DRMed ebooks from other retailers, and the BPH require DRMed ebooks.

    I’m not a lawyer, but from what I’ve seen, it’s at least as hard to win a lawsuit against a company maintaining a monopoly through illegal means than it is to prove a conspiracy case. At least with the publishers, you’ve got things like publishers admitting collusion and the late former CEO of Apple making comments to the effect that the agency pricing was a done-deal before it was sprung on Amazon.

    I look at the DOJ not allowing the publishers to be “non-parties” so they don’t have to respond to discovery requests to be like the DA telling someone in a criminal case that because they plea bargained it doesn’t mean they no longer have to testify against the other people accused of being involved in the crime.

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