Apple Faces Difficult Odds in Petition for Supreme Court Review of E-books Case
Apple’s petition for a writ of certiorari with the Supreme Court last week seeking a review of the U.S. Court of Appeals for the 2nd Circuit’s ruling that the company violated antitrust laws in its e-book pricing case has a limited likelihood of being granted, legal experts said in Friday interviews. The 2nd Circuit ruled in late June that Apple was guilty of violating antitrust laws by conspiring with five major book publishers to eliminate price competition and raise e-book prices, affirming the U.S. District Court in New York’s 2013 decision in the case (see 1506300067). Apple’s $450 million settlement with consumers and state attorneys general (see report in the June 18, 2014, issue) was contingent on the 2nd Circuit’s ruling.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
Apple has “always acted in the best interest of customers and content creators of all sizes," the company said in a statement. "We did nothing wrong, and stand by our principles. At this point, our only recourse is to take this to the Supreme Court.”
Apple claimed in its petition that the Supreme Court should review the 2nd Circuit decision because the ruling “will harm competition and the national economy” via reduced innovation if allowed to stand. Apple said a review is needed to resolve “whether vertical conduct by a disruptive market entrant, aimed at securing suppliers for a new retail platform, should be condemned as per se illegal under Section 1 of the Sherman Act, rather than analyzed under the rule of reason, because such vertical activity also had the alleged effect of facilitating horizontal collusion among the suppliers.” Apple has claimed Judge Denise Cote’s decision was incorrect in considering the “per se” argument since precedent has weighed in favor of a tighter “rule of reason” argument. The Supreme Court should “confirm that vertical activity, undertaken for bona fide, potentially pro-competitive purposes, is not transformed into per se illegal conduct merely because it also has been found to facilitate horizontal collusion,” Apple said.
The chance that Apple would win a Supreme Court appeal on the merits is “clearly stronger” than its chance of getting such a review in the first place, said University of Michigan Law School Associate Dean Daniel Crane, who specializes in antitrust law. “The Supreme Court takes relatively few antitrust cases -- one a year on average,” he said. “Oftentimes, they take cases where there’s a circuit split … but in the Apple case there’s not really an obvious division among the courts on the issue.” It’s “not impossible, I just wouldn’t hold my breath that the court will grant cert,” Crane said.
The Supreme Court could be a little likelier to take the Apple case “because this is a high-profile issue and Apple’s a prominent company,” Crane said. Judge Dennis Jacobs’ “strong” dissent in the 2nd Circuit ruling could also influence the Supreme Court’s decision, Crane said. Jacobs said in his dissent that Apple couldn’t be culpable for the publishers’ conspiracy to fix the price of e-books because in the “horizontal plane that matters to Apple’s e-book business, Apple was in competition and never in collusion.”
Authors Guild General Counsel Jan Constantine told us the group’s planned amicus brief to the Supreme Court supporting Apple is likely to emphasize Jacobs’ dissent. The Authors Guild also plans to say the 2nd Circuit and Cote’s 2013 ruling “failed to consider the positive impact that the introduction of the iBook store had on the supply of books, the incentive for creating books, diversity of books and competition,” Constantine said. “We feel that a rule of reason [framework] would have taken those considerations together and it shouldn’t be a per se rule." The Authors Guild may also broaden the scope of its amicus brief to bring in support from retailers, she said.
If the Supreme Court grants certiorari, “I think there’s a reasonable likelihood that Apple could prevail,” Crane said. “There are lots of interesting questions about how to characterize the facts in this case." It would depend on whether the Supreme Court shares the 2nd Circuit’s view that Apple was the "central hub” of price-fixing activities or if Apple’s a “central player but a new entrant that is trying to change an industry practice that’s not favorable to consumers,” he said.