Unites States of America v. Apple, Inc. et al

Filing 111

SUPPLEMENTAL REPLY MEMORANDUM OF LAW in Support re: 88 MOTION for Entry of Judgment under Rule 54(b) and §15 U.S.C. 16(b)-(h).. Document filed by Unites States of America. (Buterman, Lawrence)

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  UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK __________________________________________ ) UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) ) APPLE, INC., ) Civil Action No. 12-CV-2826 (DLC) HACHETTE BOOK GROUP, INC., ) HARPERCOLLINS PUBLISHERS L.L.C., ) VERLAGSGRUPPE GEORG VON ) HOLTZBRINCK GMBH, ) HOLTZBRINCK PUBLISHERS, LLC ) d/b/a MACMILLAN, ) THE PENGUIN GROUP, ) A DIVISION OF PEARSON PLC, ) PENGUIN GROUP (USA), INC., and ) SIMON & SCHUSTER, INC., ) ) Defendants. ) __________________________________________) SUPPLEMENTAL REPLY MEMORANDUM IN SUPPORT OF THE UNITED STATES’ MOTION FOR ENTRY OF FINAL JUDGMENT       The United States of America respectfully submits this supplemental reply memorandum in order to address the amicus submissions of the Authors Guild and Mr. Bob Kohn. I. THE AUTHORS GUILD The Authors Guild opposes entry of the proposed Final Judgment because it believes that the settlement will result in a return to low-cost pricing for e-books that “will drive trade out of traditional bookstores and into the proprietary world of the Kindle.” The Authors Guild (Docket No. 101-1) at 2. The Authors Guild suggests that this result is “destructive” because traditional booksellers serve as “critical showrooms for work done by new or lesser-known authors and for entire categories of books, such as children’s picture books.” Id. at 2-3. This essentially is the same argument the Authors Guild made in its public comment. See The Authors Guild (ATC0214) at 1-2. The Authors Guild’s concern that Amazon’s e-book discounting will harm print book distribution is nothing new. As set forth in the Complaint, it was the publishers’ fears of the effect that Amazon’s low prices would have on their traditional business model that motivated the publishers’ price-fixing conspiracy. See Compl. (Docket No. 1) ¶ 4. But just as fear of competition is not a defense to price fixing, see U.S. Response (Docket No. 81) at 22-23; U.S. Reply (Docket No. 105) at 1-2, it also has no place in determining whether a government consent decree is in the “public interest.” To hold otherwise would allow Tunney Act proceedings to be a vehicle for inhibiting the very conduct that the antitrust laws are meant to encourage, and thereby “turn the Sherman Act on its head.” Wallace v. Int’l Bus. Machs. Corp., 467 F.3d 1104, 1107 (7th Cir. 2006) (“[T]he goal of antitrust law is to use rivalry to keep prices low for consumers’ benefit.”). 1     The cases cited by the Authors Guild do not suggest a different result. In both Microsoft and SBC Communications, courts declined to make any changes to government decrees, despite third-party speculations about anticompetitive conduct in other markets. In Microsoft, the court flatly rejected amici concerns that the decree was insufficient because it failed to end other practices that amici — not the government — concluded were anticompetitive. United States v. Microsoft Corp., 56 F.3d 1448, 1455, 1459 (D.C. Cir. 1995). And in SBC Communications, the court, relying on Microsoft, made clear that it “cannot reject the proposed settlements merely because the government failed to address antitrust issues not raised in its complaints.”1 United States v. SBC Commc’ns, Inc., 489 F. Supp. 2d 1, 17 (D.D.C. 2007). In short, the Authors Guild offers no authority for its insistence that the Court undertake an assessment of the entire “literary marketplace” before it determines that undoing the effects of price collusion in the sale of ebooks is in the public interest. II. BOB KOHN Mr. Kohn’s submission (Docket No. 110) is largely focused on (1) criticizing the merits of the United States’ Complaint and (2) expressing frustration with the Court’s Order that amicus filings be limited to five pages. Mr. Kohn’s assertion that “if the government’s conclusions are not reasonable, the Court cannot hold the settlement to be in the public interest,” Kohn at 5, is just his way of saying the United States has to prove its case before it can settle it. But it is well                                                         1 The Authors Guild alternatively suggests that the Court can consider the effects of the settlement on the entire literary market because “the limited nature of the complaint makes a mockery of judicial power.” Authors Guild at 3 (quoting SBC Commc’ns, 489 F. Supp. 2d at 13). But the “mockery standard” applies only where a complaint and proposed settlement are gerrymandered beyond reason, e.g., focused on the impact of a violation on “a single household residence, but none other in the entire country.” SBC Commc’ns, 489 F. Supp. 2d at 13. That obviously is not the case here. 2     established that the United States “need not prove its underlying allegations in a Tunney Act proceeding.” SBC Commc’ns, 489 F. Supp. 2d at 20; see also U.S. Response at 6-8. Mr. Kohn’s view of the world “would fatally undermine the practice of settling cases and would violate the intent of the Tunney Act.”2 SBC Commc’ns, 489 F. Supp. 2d at 20. CONCLUSION For the reasons set forth in this Memorandum, the United States’ Reply, and the United States’ Response to Comments, the United States respectfully requests that the Court enter the proposed Final Judgment without further hearing.                                                         2 Mr. Kohn is well wide of the mark in asserting that FTC v. Indiana Federation of Dentists, 476 U.S. 447 (1986) stands for the proposition that horizontal price fixing is permitted where there is a countervailing pro-competitive virtue. See Kohn at 2. Indiana Federation of Dentists addressed whether an agreement among dentists not to submit x-rays to insurers was subject to Rule of Reason analysis. 476 U.S. at 457-58. The Court held that while the agreement was not horizontal conduct subject to per se condemnation, “no elaborate industry analysis is required to demonstrate the anticompetitive character of such an agreement.” Id. at 459 (citation omitted). Here, the claim is horizontal price-fixing, which the Supreme Court has “consistently and without deviation” viewed as unlawful per se under the Sherman Act, such that “no showing of so-called competitive abuses or evils which those agreements were designed to eliminate or alleviate may be interposed as a defense.” United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 218 (1940). 3     Dated: September 5, 2012 Respectfully submitted, /s/ Mark W. Ryan Mark W. Ryan Stephanie A. Fleming Lawrence E. Buterman Laura B. Collins United States Department of Justice Antitrust Division 450 Fifth Street, N.W., Suite 4000 Washington, DC 20530 (202) 532-4753 Mark.W.Ryan@usdoj.gov Attorneys for Plaintiff United States of America 4     CERTIFICATE OF SERVICE I, Lawrence Edward Buterman, hereby certify that on September 5, 2012, I caused a copy of the Supplemental Reply Memorandum in Support of the United States’ Motion for Entry of Final Judgment to be served by the Electronic Case Filing System on all parties to this action. Copies also were served electronically on the following individuals: Jan Friedman Levien (Constantine) jconstantine@authorsguild.org Paul D. Aiken paiken@authorsguild.org Bob Kohn 140 E. 28th Street New York, NY 10016 (408) 602-5646 bob@bobkohn.com The Authors Guild, Inc. 31 East 32nd Street, 7th Floor New York, NY 10016-5509 Additionally, courtesy copies were provided electronically to the following individuals: For the State of Connecticut: W. Joseph Nielsen Assistant Attorney General Antitrust Division Office of the Attorney General 55 Elm Street Hartford, CT 06106 (860) 808-5040 Joseph.Nielsen@ct.gov For the State of Texas: Gabriel R. Gervey Assistant Attorney General Antitrust Division Office of the Attorney General of Texas 300 W. 15th Street Austin, TX 78701 (512) 463-1262 gabriel.gervey@oag.state.tx.us For the Private Plaintiffs: Jeff D. Friedman Hagens Berman 715 Hearst Ave., Suite 202 Berkeley, CA 94710 (510) 725-3000 jefff@hbsslaw.com /s/ Lawrence Edward Buterman Lawrence Edward Buterman United States Department of Justice 450 Fifth Street, N.W., Suite 4000 Washington, DC 20530 (202) 532-4575 lawrence.buterman@usdoj.gov Attorney for Plaintiff United States of America 5