Appeals Court Upholds Verdict Against Apple, with Notable Dissent

Publishers Lunch

The Second Circuit Court of Appeals ruled on Apple's appeal of the verdict finding them guilty of antitrust violations in launching the iBookstore, upholding District Court Judge Denise Cote's initial finding. Judge Debra Ann Livingston writes the majority opinion in the 2-1 ruling: "We conclude that the district court's decision that Apple orchestrated a horizontal conspiracy among the Publisher Defendants to raise ebook prices is amply supported and well‐reasoned, and that the agreement unreasonably restrained trade in violation of § 1 of the Sherman Act."

As expected by court observers, Judge Dennis Jacobs files a dissenting opinion. While agreeing with Judge Cote's findings of fact, Judge Jacobs disagrees that Apple is guilty on a per se basis, and believes the rule of reason should be applied -- under which he believes Apple acted lawfully: "Apple's conduct, assessed under the rule of reason on the horizontal plane of retail competition, was unambiguously and overwhelmingly pro-competitive. Apple was a major potential competitor in a market dominated by a 90 percent monopoly, and was justifiably unwilling to enter a market on terms that would assure a loss on sales or exact a toll on its reputation. In that connection, the district court erroneously deemed the monopolist's $9.99 price as categorically good for competition because it was lower than cost, and because e-book prices rose after the monopoly was broken."

Judge Jacobs adds, "A further and pervasive error (by the district court and by my colleagues on this appeal) is the implicit assumption that competition should be genteel, lawyer-designed, and fair under sporting rules, and that antitrust law is offended by gloves-off competition."