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)
UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
__________________________________________
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UNITED STATES OF AMERICA,
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Plaintiff,
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v.
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APPLE, INC.,
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Civil Action No. 12-CV-2826 (DLC)
HACHETTE BOOK GROUP, INC.,
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HARPERCOLLINS PUBLISHERS L.L.C.,
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VERLAGSGRUPPE GEORG VON
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HOLTZBRINCK GMBH,
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HOLTZBRINCK PUBLISHERS, LLC
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d/b/a MACMILLAN,
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THE PENGUIN GROUP,
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A DIVISION OF PEARSON PLC,
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PENGUIN GROUP (USA), INC., and
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SIMON & SCHUSTER, INC.,
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Defendants.
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__________________________________________)
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.”).
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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
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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.
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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.
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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).
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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
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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
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