The Apple e-book decision reaction roundup: Schadenfreude a go-go!
July 12, 2013 | 4:55 am
It’s been pretty fun, not to mention instructive, to read the various reactions to the e-book verdict over the last day or so. Sometimes it feels like I’ve wandered into a production of Rashomon. For example, AllThingsD summarizes the thoughts of anti-trust lawyers it asked for comment:
Apple argued that the facts show no conspiracy in restraint of trade. But Cote found that the company’s actions were a per se violation of antitrust law. In other words, they were inherently illegal, so there was no need to prove that they had any anticompetitive effect on the e-books market. And Cote’s opinion relies so heavily on facts that it leaves very little room for an appellate court reversal.
The lawyers who talked to AllThingsD were doubtful that the Supreme Court would even find much to consider in the matter after the appeals court has had its say, given that the case relied so heavily on the facts rather than a new question of law.
On the other hand, in Forbes we have:
While there’s abundant documentation showing that the publishers coordinated with one another on pricing and other strategic decisions, there’s no proof that Apple acted as their go-between, says [antitrust lawyer Ankur] Kapoor. The closest the government got to proving that is conversations in which Apple executive Eddy Cue shuttled between the publishers urging them to agree to impose agency pricing across the board, including with Amazon. But “getting the publishers to move to a different model of distribution is not in itself an agreement on what pricing should be,” he says.
And Fortune’s Philip Elmer-DeWitt, whose coverage has been otherwise decent but who’s made no pretense of the fact that he’s been an Apple partisan all along, scoffs at Cote’s conclusions and wonders “[w]hy the Justice Department chose to prosecute the new entrant in the e-book market, and not the monopolist.” (I’ll tell you why, Phil: Amazon didn’t actually engage in predatory pricing!)
Looking from one set of articles to the other, I’m left wondering if these people even read the same legal opinion.
Then there are the articles (paidContent, Salon) that suggest with an air of practiced nonchalance, “Oh, not much will change for the consumer, ‘cuz prices already went down when the publishers settled.” No big deal, ho hum, nothing to see, move along, yawn.
Okay, so maybe nothing will immediately change (unless you’re talking about buying books from Penguin, which suddenly started discounting some of its books yesterday). But on the other hand, this means that the rationale behind the publisher settlements doesn’t come undone, giving the publishers cause to challenge their necessity and perhaps back out to MFN agency pricing again. So, in this case, no change is actually a good thing.
I will give Salon this, though:
Publishers were also ordered to issue e-book credits to consumers, and it’s possible Apple will be obliged to do the same. This, according to [Andrew Albanese, author of The Battle of $9.99], amounts to a “court-ordered promotion,” since the money can only be spent on more e-books. The bizarre irony is, despite having to settle the case and even despite the defeat of Apple, the publishers got more or less what they wanted, which is a sales arrangement that [starting in 2014] allows them to control the prices at which their books are sold.
It’s worth considering just how pretty the publishers are sitting right now. They’ve really got to be congratulating themselves (though probably not each other, given how careful they’re having to be to avoid the appearance of antitrust these days) on getting thrown into that briar patch. So they pay out some pocket change that can only be used to buy more books from them. So they give up price controls for a while. They still get to re-impose it, individually, in a year or so. Can you doubt that they will, or at least they’ll try?
And they get to avoid being prosecuted for what they did, which is where it becomes clear they really dodged a bullet. Remember how gung-ho Macmillan’s John Sargent was about fighting the suit, because “I had an old fashioned belief that you should not settle if you have done no wrong,” right up until Macmillan did settle after all?
Judge Cote had a number of choice things to say about Sargent’s credibility as a witness: “Neither Sargent nor [Apple’s Eddie] Cue was credible during the trial when they denied that Cue had explained at dinner that Macmillan was required to put Amazon on the agency model.” (She also cast aspersions on a couple of other Apple execs and Carol Reidy of Simon & Schuster.) That’s basically the restrained legalese equivalent of calling them big fat liars.
I can almost see into an alternate universe where it did go to trial and not only did Macmillan and the other publishers get smacked down hard, the execs might have been jailed for their part in the role or perjuring themselves. Such a pity they got to weasel out. Oh well. I can still take joy in the schadenfreude of imagining how it must smart for Sargent to see himself described in such a way in public legal documents. (I’ve never forgiven him for ignoring consumers’ reactions for weeks after the imposition of agency pricing.)
Apple, for its sins, faces the prospect of triple damages, which could run into the hundreds of millions of dollars, since it has so adamantly refused to admit to any wrongdoing. Of course, the damage phase will probably be held until Apple can appeal its conviction. But given that the verdict was sufficient to reduce Apple to a response tantamount to Bart Simpson’s blanket denial, “Didn’t do it, nobody saw me do it, can’t prove anything,” I have a sneaking suspicion they won’t be too successful there.
Even hundreds of millions of dollars in damages is pocket change to Apple, but more worrying could be the prospect of the same sort of antitrust oversight the publishers are having to put up with. But paidContent notes that things may not be all bad:
If there is a silver lining for Apple, it is that the decision is unlikely (as some have suggested) to ripple far beyond the ebook market, which is a relative drop in the bucket in the larger tech industry.
According to David Balto, a Washington antitrust lawyer, the decision could embolden others who deal with Apple — app makers, publishers and so on — to bring class action suits of their own.
Barlow and other lawyers, however, say the decision is very specific to the ebook conspiracy and doesn’t provide legal grounds to attack Apple’s other business practices.
Judge Cote very specifically limits her ruling to e-book matters only:
This Opinion’s findings arise from the specific events that unfolded in the trade e-book market as 2009 became 2010. It does not seek to paint with a broader brush.
You hear that, Motley Fool? No, Virginia, the DoJ won’t come in and throw out Apple’s MFN or agency pricing on apps or music.
John R. Quain at Fox News, who “doesn’t even like e-books,” grumpily wonders if “consumers are the real losers” in the suit—not because Apple was right or anything, but because of Amazon’s restrictive ecosystem (which we most lately covered here).
Sure, there are hacks that can covert one e-book format into another, but they don’t work terribly well, you often have to go through several formats to convert a book to the desired destination, and it is an agonizingly tedious process. You’ll wish you’d bought the paperback.
Clearly he’s never heard of Calibre or Apprentice Alf.
In conclusion, we return to Philip Elmer-DeWitt, who ruefully wonders how he could have misread things in court so badly. He really thought Apple was winning the judge over with some of its arguments, and that Cue was a credible witness. Amusingly, he comes up with a number of possible reasons, but doesn’t address his own obvious pro-Apple bias. (He discusses “Amazon’s […] predatory pricing” as if it were a proven fact.) Well, maybe it’s only obvious from the outside. I think Elmer-DeWitt probably also put too much emphasis on the testimony he witnessed directly, rather than all the documentation on which Cote relied most in her decision.
Most hilariously to me, Elmer-Dewitt and people in the comments thread below this article suggest that the judge had been somehow polluted by overseeing the earlier proceedings relating to the Department of Justice settlement with the publishers. She’d already seen all the evidence involved in figuring out whether to let the settlements go through, the argument goes, therefore she’s biased.
(“The judge repeatedly slimed Cue,” a commenter going by the moniker “Vicious Cur” writes. “We’ll see if the appeals court is capable of setting her bias aside.” “Bias,” huh? So that’s what they call “taking exception to a witness’s testimony directly contradicting facts in evidence, not to mention common sense” these days?)
Never mind that it’s the exact same evidence she would have been shown if she’d been a brand new judge deciding this case from scratch! And it’s all part of the same case, anyway.
In the end, with the release of Judge Cote’s decision, the rock has temporarily been lifted from the world of publishing, and all the cockroaches are scurrying for the darkness again. Sure is entertaining to watch the little mites scamper, isn’t it?