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)

UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
__________________________________________
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UNITED STATES OF AMERICA,
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Plaintiff,
) Civil Action No. 12-CV-2826 (DLC)
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v.
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) ECF Case
APPLE, INC., et al.,
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Defendants.
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__________________________________________)
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.

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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.

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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
[phone]
[e-mail]

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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
[phone]
[e-mail]

For Hachette:
Walter B. Stuart, IV
Freshfields Bruckhaus Deringer LLP
601 Lexington Avenue
New York, NY 10022
[phone]
[e-mail]

For Macmillan and Verlagsgruppe Georg
Von Holtzbrinck GMBH:
Joel M. Mitnick
Sidley Austin LLP
787 Seventh Avenue
New York, NY 10019
[phone]
[e-mail]

For HarperCollins:
Paul Madison Eckles
Skadden, Arps, Slate, Meagher & Flom
Four Times Square, 42nd Floor
New York, NY 10036
[phone]
[e-mail]

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
[phone]
[e-mail]

For Simon & Schuster:
Yehudah Lev Buchweitz
Weil, Gotshal & Manges LLP (NYC)
767 Fifth Avenue, 25th Fl.
New York, NY 10153
[phone] x8256
[e-mail]

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
[phone]
[e-mail]

For the State of Connecticut:
W. Joseph Nielsen
Assistant Attorney General
Antitrust Division
Office of the Attorney General
55 Elm Street
Hartford, CT 06106
[phone]
[e-mail]
For the Private Plaintiffs:
Jeff D. Friedman
Hagens Berman
715 Hearst Ave., Suite 202
Berkeley, CA 94710
[phone]
[e-mail]

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
[phone]
stephen.fairchild @usdoj.gov

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