Less than a month ago, Judge Cote found Apple liable for knowingly participating in an illegal price-fixing conspiracy with five book publishers to raise e-book prices and eliminate price competition in violation of the antitrust laws. This morning, the Department of Justice, joined by thirty-three state attorneys general, filed a brief in support of their proposed remedial injunction which would require Apple “to take proactive steps to ameliorate the harm its conspiracy caused to competition and consumers” including by permitting any e-book retailer offering e-books through Apple’s App Store “include in its e-book app a hyperlink to its own e-bookstore, without paying any fee or commission to Apple.” A hearing on remedies is set for August 9.
In addition to several proposed provisions that would prohibit specific conduct similar to the anti-competitive conduct for which Apple was found liable, the Justice Department also proposed that the court enjoin Apple from entering into any agreement with any content supplier or publisher that is “likely” to increase the price at which other retailers can acquire or sell the content. Anticipating Apple’s response to that proposal, the Justice Department defended that provision “is sufficiently detailed to allow Apple to know what conduct is prohibited” and is appropriate in the antitrust context:
Apple may protest that Section III.F is unduly burdensome and likely to chill procompetitive activity because it requires Apple to refrain from entering or maintaining agreements that are “likely” to raise its rivals’ costs or prices without offering Apple sufficient guidance as to exactly what is forbidden. But the purpose of Section III.F is to prevent anticompetitive behavior rather than merely ameliorate it after the fact—a prospective and probabilistic test is thus required. Such tests are commonplace and appropriate in antitrust law, where some uncertainty is inevitable and where the United States bears the burden of establishing the violation. For instance, when the United States sues to block a merger, it need not prove that anticompetitive effects are certain to flow from the challenged combination. Rather, it meets its burden by showing that those effects are reasonably likely. United States v. H & R Block, Inc., 833 F. Supp. 2d 36, 49 (D.D.C. 2011); see also United States v. Rockford Mem’l Corp., 898 F.2d 1278, 1283 (7th Cir. 1990) (Posner, J.) (“The defendants’ argument that section 7 prevents probable restraints and section 1 actual ones is word play. Both statutes as currently understood prevent transactions likely to reduce competition substantially.”) (emphases in original). Similarly, the Supreme Court has rejected the argument that the failure to find that a practice actually resulted in anticompetitive effects is a barrier to liability under Section One of the Sherman Act. See FTC v. Ind. Fed’n of Dentists, 476 U.S. 447, 461-62 (1986) (holding a concerted effort to withhold information from consumers “is likely enough to disrupt the proper functioning of the price-setting mechanism of the market that it may be condemned even absent proof that it resulted in higher prices or, as here, the purchase of higher priced services, than would occur in its absence”). Here, in addition to showing the clear adverse effect of Defendants’ agreement on trade e-book prices (Opinion at 94-95), the evidence at trial established that Apple aided the Publisher Defendants in presenting the agency model as an ultimatum to Amazon (Opinion at 90-91 & n.52). Section III.F accordingly is an entirely appropriate restraint on Apple’s ability to orchestrate similar anticompetitive results in the future.
The Justice Department also proposed that the court appoint an external monitor to ” to oversee Apple’s compliance with the other terms of the [Proposed Injunction], including Apple’s antitrust compliance programs” Previous posts on the case are here.