Sagers - United States v. Apple: competition in America

THE DANIEL PATRICK MOYNIHAN United States Courthouse is a mostly unadorned granite tower in lower Manhattan. It is short as big-city buildings go, but it seems taller and more imposing among the low-slung judiciary buildings of Foley Square. An important federal trial unfolded within one of its ornate courtrooms during the very hot July of 2013, which brought to a head several long-simmering tensions, impacting three separate industries, and by some accounts, reshaping the future of the written word. But from outward appearances, United States v. Apple should have been mundane as antitrust cases go. The Department of Justice charged the Apple computer corporation and several publishing houses with fixing the prices of electronic books, or eBooks, in violation of federal antitrust laws. It was plainly enough a big case in some respects, because Apple was one of the worlds largest and most admired companies, and because the figure of the companys legendary founder, recently deceased, loomed over it. Before this death, Steve Jobs had made several damaging statements that had gotten much attention in the press and would later prove important to the governments case. The publisher defendants, too, added their drama. Each of them was a subsidiary of one of the massive conglomerates that dominate the worlds media, and by the time of the trial their conspiracy affected the vast majority of general-interest publishing in English. Their executives piled up a trove of exceptionally damaging, embarrassing evidence through clandestine meetings in extremely swank restaurants, frenzied, secret communications, and telling efforts to cover their own tracks.

Apple, strictly speaking, was just a price-fixing case, with straightforward facts and legal issues. Of the eight or nine hundred antitrust cases filed each year, most of them are price-fixing cases, because price-fixing is taken as an important and serious violation. It is also the simplest antitrust claim to prove. Price-fixing is subject to a special rule in antitrust called per se liability, and it is the plaintiffs surest route to victory. These cases usually have simple facts and straightforward legal issues, and most of them look more or less like Apple. Even the harshest critics of the aggressive bookseller Amazonagainst which the Apple defendants claimed they needed their conspiracy to surviveadmitted that the conduct challenged in the case was in blatant disregard of the law.

And yet, in so many ways, United States v. Apple would prove unusual, and much more philosophically significant than its circumstances suggested. It was not because the defendants were big companies or had celebrity CEOs. It was not because the case involved new-economy technology, or because it involved a seemingly special productbooksor even because it involved a substantial, perhaps industry-shaping technological transition. Those were all significant matters in their own way, but antitrust cases often involve sectoral change and the potential for lost jobs and investments. What was remarkable about the caseremarkable enough to justify writing this bookwas the publics reaction.

On Wednesday, July 10, after the close of a three-week trial, a well-regarded federal judge named Denise Cote issued her final judgment in the matter. It was surprising that the case had even made it that farthat it went through a full trial and called for Judge Cotes final judgment. Almost all antitrust cases are dismissed or settle, even more often than other federal lawsuits. In that regard, the material nature of the Moynihan Courthouse and the many federal buildings like itlarge, capacious, often lavishly appointed facilitiessays something about our legal system and especially our faltering, little-used system of antitrust rules. These extravagant buildings contain hundreds of courtrooms richly appointed at taxpayers expense, but they mostly sit empty, waiting for people to use them. In the Apple case, all five of Apples codefendants settled before trial. Exactly why Apple stuck it out so long will probably always remain between the company and its lawyers, but there were plenty of reasons to expect it to settle as quickly as the other defendants did.