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

Filing 225

REPLY MEMORANDUM OF LAW in Support re: 210 MOTION for Entry of Judgment under Rule 54(b) and 15 U.S.C. § 16(b)-(h).. Document filed by Unites States of America. (Fairchild, Stephen)

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UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK __________________________________________ ) UNITED STATES OF AMERICA, ) ) Plaintiff, ) Civil Action No. 12-CV-2826 (DLC) ) v. ) ) ECF Case APPLE, INC., et al., ) ) Defendants. ) __________________________________________) REPLY MEMORANDUM IN SUPPORT OF MOTION BY THE UNITED STATES FOR ENTRY OF THE PROPOSED PENGUIN FINAL JUDGMENT After certifying the parties’ completion of all requirements of the Antitrust Procedures and Penalties Act, 15 U.S.C. § 16(b)-(h) (“APPA” or “Tunney Act”), the United States moved this Court on April 18, 2013, for entry of the proposed Final Judgment as to Defendants The Penguin Group, a division of Pearson PLC, and Penguin Group (USA), Inc. (collectively, “Penguin”). Amicus Bob Kohn submitted a five-page memorandum in response to the United States’ motion, drawing on what Mr. Kohn regards to be an “admission” by the United States concerning Amazon’s e-book pricing practices to argue that entry of the proposed Penguin Final Judgment would not be in the public interest. Mr. Kohn’s submission largely repeats the arguments concerning Amazon’s alleged predatory pricing and monopolization he made in connection with the initial Tunney Act proceeding in this case, arguments this Court previously found to be unconvincing. See United States v. Apple, Inc., 889 F. Supp. 2d 623, 642 (S.D.N.Y. 2012) (“[E]ven if Amazon was engaged in predatory pricing, this is no excuse for unlawful price-fixing. Congress ‘has not permitted the age-old cry of ruinous competition and competitive evils to be a defense to price-fixing conspiracies.’”) (quoting United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 221 (1940)). Mr. Kohn, however, asserts that the United States admitted in its Response to Comments “that Amazon’s e-book prices as a whole were below marginal cost,” and that this “admission” necessitates a fresh look at these issues. Mr. Kohn’s view, however, rests on a misunderstanding of the United States’ statements. In its Response to Comments, the United States pointed out that the proposed Penguin Final Judgment permits Penguin to enter contracts with Amazon or other e-book retailers under which the total discounting of Penguin’s e-books can be no greater than the aggregate commissions the retailer earns in connection with its sale of Penguin’s ebooks. This provision allows Penguin to ensure that the retailer remains margin positive on the sale of its catalog of e-books. A retailer under such an agreement that engaged in price competition would sell e-books at a price that is closer to its marginal costs – “efficient” pricing in Mr. Kohn’s terminology – than would have been possible under the agency agreements produced through the conspiracy among Apple and the Publisher Defendants.1 Mr. Kohn’s amicus submission provides no grounds on which this Court should determine that entry of the proposed Penguin Final Judgment would not be in the public interest. 1 Mr. Kohn also takes issue with the failure by the United States to respond to his assertion, submitted through his public comment on the proposed Penguin Final Judgment, that this Court applied the incorrect standard of review in its initial Tunney Act proceeding. See United States v. Apple, Inc., 889 F. Supp. 2d 623, 630-32 (S.D.N.Y. 2012) (articulating the standard of review). Mr. Kohn asserts that United States v. American Cyanamid Co., 719 F.2d 558 (2d Cir. 1983), and United States v. International Business Machines Corporation, 163 F.3d 737 (2d Cir. 1998), require the Court to apply a more stringent standard. Those cases, however, involved petitions by the parties to terminate consent decrees. See American Cyanamid, 719 F.2d at 559; IBM, 163 F.3d at 738. Neither evaluated whether a proposed final judgment met the Tunney Act’s requirements. 2 Dated: May 10, 2013 Respectfully submitted, s/Mark W. Ryan Mark W. Ryan Lawrence E. Buterman Stephen T. Fairchild Attorneys for the United States United States Department of Justice Antitrust Division 450 Fifth Street, NW, Suite 4000 Washington, DC 20530 (202) 532-4753 Mark.W.Ryan@usdoj.gov 3 CERTIFICATE OF SERVICE I, Stephen T. Fairchild, hereby certify that on May 10, 2013, I caused a copy of the Reply Memorandum in Support of Motion of the United States for Entry of the Proposed Penguin Final Judgment to be served by the Electronic Case Filing System, which included the individuals listed below. For Apple: Daniel S. Floyd Gibson, Dunn & Crutcher LLP 333 S. Grand Avenue, Suite 4600 Los Angeles, CA 90070 (213) 229-7148 dfloyd@gibsondunn.com For Hachette: Walter B. Stuart, IV Freshfields Bruckhaus Deringer LLP 601 Lexington Avenue New York, NY 10022 (212) 277-4000 walter.stuart@freshfields.com For Macmillan and Verlagsgruppe Georg Von Holtzbrinck GMBH: Joel M. Mitnick Sidley Austin LLP 787 Seventh Avenue New York, NY 10019 (212) 839-5300 jmitnick@sidley.com For HarperCollins: Paul Madison Eckles Skadden, Arps, Slate, Meagher & Flom Four Times Square, 42nd Floor New York, NY 10036 (212) 735-2578 pmeckles@skadden.com For Penguin Group (USA) and the Penguin Group: Daniel F. McInnis Akin Gump Strauss Hauer & Feld, LLP 1333 New Hampshire Avenue NW Washington, DC 20036 (202) 887-4000 dmcinnis@akingump.com For Simon & Schuster: Yehudah Lev Buchweitz Weil, Gotshal & Manges LLP (NYC) 767 Fifth Avenue, 25th Fl. New York, NY 10153 (212) 310-8000 x8256 yehudah.buchweitz@weil.com Additionally, courtesy copies of this Reply Memorandum in Support of Motion of the United States for Entry of the Proposed Penguin Final Judgment have been provided to the following: 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, Texas 78701 (512) 463-1262 gabriel.gervey@oag.state.tx.us 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 Private Plaintiffs: Jeff D. Friedman Hagens Berman 715 Hearst Ave., Suite 202 Berkeley, CA 94710 (510) 725-3000 jefff@hbsslaw.com s/Stephen T. Fairchild Stephen T. Fairchild Attorney for the United States United States Department of Justice Antitrust Division 450 Fifth Street, NW, Suite 4000 Washington, DC 20530 (202) 532-4925 stephen.fairchild @usdoj.gov ii