Apple case appeals, judges query Amazon role

The US judges hearing Apple's appeal against its price-fixing conviction have asked questions about the role of Amazon in the e-book market, giving hope for the appeal, it has been reported.

In 2013, district judge Denise Cote ruled that Apple conspired with five publishers – Penguin, Macmillan, HarperCollins, Simon & Schuster and Hachette – to raise the retail prices of e-books. After Apple entered the e-book market, several publishers changed their relationships with other retailers, including Amazon, to the agency model, which forced consumers to incur higher costs for e-books, it was ruled. The five publishers settled with the US Department of Justice though without admitting guilt.

But Apple has appealed against Cote’s decision and at a 90-minute appeals hearing yesterday (15th December), the three judges on the Second Circuit Court in Manhattan were reported to have asked why the government’s focus has not been on Amazon, and suggested that Cote may have been too quick to conclude that Apple’s pricing arrangements violated antitrust laws, it has been reported.

US circuit judge Dennis Jacobs told the Justice Department’s lawyer, Malcolm Stewart: “Would it not matter that all those people got together to defeat a monopolist? It’s like the mice that got together to put a bell on a cat.” Apple’s lawyer Theodore Boutros urged the court to regard the pricing tactic as a legitimate business arrangement used to “come into a market dominated by a monopolist.”

Gigaom reported that “the judges appeared to give weight to this suggestion, and to accept Boutros’ contention that a brief price spike, which damned Apple and the publishers before Judge Cote, should not result in an automatic finding of illegal price-fixing”.

At yesterday’s hearing lawyers from Simon & Schuster and Macmillan also objected to a part of Cote’s ruling, which stops Apple from enforcing most favoured nation clauses in its contracts with all publishers for five years and means it can only and engage in only arms-length negotiations with the five publishers.

Gigaom said: “The publishers claim this five-year provision is unfair since they are this month coming to the end of their own two-year settlements with the government. They claim that the Justice Department is, in essence, reneging on its earlier agreement with them since the five-year arrangement with Apple will have knock-on effects in their negotiations with other e-book retailers.”

A ruling by the appeals court is likely to be made in 2015.