17 September 2013
In July 2013, District Court Judge Denise Cote handed down a detailed judgment finding that Apple had conspired with five publishers (Penguin, Simon & Schuster, HarperCollins, Macmillan and Hachette) to raise the retail price of e-books in the US in breach of section 1 of the Sherman Act.
Apple is appealing the judgment, which has given rise to significant controversy. The circumstances of the case were unusual, involving: a new market entrant which initially had no market share; ‘hub-and-spoke’ style collusion; most favoured nation clauses (MFNs) and a nascent and fast evolving industry, which was apparently oblivious to antitrust norms. The judgment is a major victory for the Department of Justice; the parallel European proceedings culminated in commitments decisions but no findings of liability.
However, beyond condemning Apple’s specific conduct, the judgment provides little guidance as to what behaviour will give rise to antitrust concern. In particular, businesses may need to think carefully about whether MFN provisions – which ostensibly bring about lower prices – might impede competition. On this side of the Atlantic, the OFT’s September 2012 research paper on price relationship agreements, “Can ‘Fair’ Prices be Unfair?”, makes it clear that this issue is complex.
Given the defeat in the US, it seems Apple did well to settle the parallel European Commission investigation through commitments. The saga demonstrates the difficulty of applying conventional antitrust theories of harm and analytical frameworks to the continuously evolving online universe. Both the US judgment and the EU commitments are a gentle reminder that many of the practices which are prevalent in the digital content world (agency models, MFNs, price caps, pricing tiers and any information exchange among players) must all continue to be considered carefully in the digital context. Guidance is particularly sparse in the EU given that Commission did not proceed to a formal infringement decision. Only time, litigation and investigation will tell which practices, individual or combined, may give rise to genuine antitrust concern...
See full article: US eBooks judgment: a view from across the Atlantic, CLI, September 2013
Osman Zafar and David George