Publishers and Apple want delay in settlement agreements

Publishers and Apple want delay in settlement agreements

Publishers and Apple fighting the US' Department of Justice over agency pricing have hit back, with new filings submitted to the Southern District of New York on Wednesday afternoon (15th August) calling on the trial judge to deny the government's efforts to ratify the settlement agreements, or defer ruling on them until after trial.

Though it is not clear how much these latest briefs will sway Judge Denise Cote's decision-making, the submissions do add new colour to the proceedings, with Penguin's response beginning: "The Emperor has no clothes."  Interestingly, though Judge Cote had previously asked the parties to set out their opposition to the settlement agreements during the public comments period, they have done so in these new submissions in response to the government's request for the court to wave through consent.

Most serious is Apple's assertion that its agency agreements with the settling publishers— Simon & Schuster, Hachette Book Group USA, and HarperCollins—cannot be terminated without a trial: “The government is seeking to impose a remedy on Apple before there has been any finding of an antitrust violation.”

But Penguin and Macmillan also argued against "consent" being given, claiming that the new deals were not in the "public interest". Penguin said the settlement agreements were "far from typical and reach beyond its claims against the Settling Defendants to impose a regulatory scheme on industry participants who have nothing whatsoever to do with the claims in this litigation". Macmillan argued that the DOJ's analysis was faulty, suggesting that the "DOJ's cavalier assumption that its settlement terms will not result in re-monopolization is also mere 'speculation'".

Central to their arguments was the view, as put forward by Penguin, that the DOJ was "cherry-picking" e-book pricing data to support its case and ignoring wider market data. Macmillan argued that the government had "Failed to Consider the Negative Consequences of the Proposed Final Judgment" [sic].

Both Penguin and Macmillan maintained that there was no evidence that e-book prices rose during the period that agency existed, as had been the DOJ's contention. Macmillan said that the government had not provided "a single economic study or analysis showing why its mandated pricing scheme is necessary to undo the effects of the alleged collusion, or why it is in 'the public interest'."

Continuing its 'Emperor'-based analogy, Penguin argued that this "claim of an agency-caused increase in e-book prices is thus the cornerstone of DOJ’s argument that its attack on the agency model is in the public interest. Yet the government has offered no empirical proof to clothe this claim." It added: "Indeed, at least two commenters provided empirical studies demonstrating overall e-book price decreases."

Macmillan argued that the "size of Amazon's market share is at the centre of this proceeding regardless of whose narrative the court accepts", taking issue with the  government's argument that Amazon's monopoly was "achieved by superior competition".

Macmillan instead argued that the reality, and in fact the "narrative of the overwhelming number" of the public comments asked for by the court, was that "Amazon's below-cost pricing [was] a means by which Amazon 'willfully maintained' its monopoly; foreclosed competition with other potential distributors in the e-book market and hindered competition in the markets for related products and services".

Judge Cote previously set a strict five-page limit on the parties to the ligitation for any responses to the government's filings following the public consultation. But clearly their frustration at the government's refusal to take notice of the broad range of complaints about the settlement agreements and its wider case got the better of them.

According to Publishers Marketplace, the court received 868 comments in all, 92% of which opposed the settlement. But despite this, the DOJ was unmoved, claiming that "after carefully considering the comments received, the United States has concluded the settlements meet "the test of "whether the proposed Final Judgment provides effective and appropriate remedies for the antitrust violations alleged in the complaint".

In a footnote appended to its latest filing, Apple said many had "expressed concerns about the possibility that the government has unwittingly placed a thumb on the scales in favour of Amazon, the industry monopolist". Apple argued that Amazon was the driving force behind the government’s investigation, and it told a story to the government that has yet to be scrutinized.

The filing read: "Amazon talked with the government repeatedly throughout the investigation, even hosting a two-day meeting at its Seattle headquarters. In all, the government met with at least fourteen Amazon employees—yet not once under oath. The government required that Amazon turn over a mere 4,500 documents, a fraction of what was required of others."