As the only remaining defendant in the U.S. government's e-books
antitrust case, Apple Inc appears headed for a high-stakes trial that
could significantly increase the personal computer company's liability
in related litigation.
Apple faces a June 3 trial date over civil
allegations by the U.S. Department of Justice that it conspired with
five publishers to raise the price of e-books and to fight the dominance
of Amazon.com Inc.
On Friday, Macmillan became the fifth and
final publisher to settle with the government. The Justice Department
alleges that Apple came to agreements with each of the publishers meant
to ensure that e-book prices at its iBookstore and other retailers would
remain higher than those offered by Amazon.com.
At the Apple
trial, to be overseen by U.S. District Judge Denise Cote in Manhattan,
the Justice Department will seek not monetary damages but a judicial
decree that Apple violated antitrust law, court papers said.
Among
other things, government lawyers want the judge to issue an order
enjoining Apple from engaging in any conduct similar to that alleged in
the case. Such a judgment could make Apple vulnerable to steep damages
in related litigation.
Apple and the publishers also face a
class-action suit filed on behalf of consumers and a similar suit filed
by dozens of state attorneys general. Neither suit puts a figure on the
exact amount of damages sought.
The Consumer Federation of America
estimated in a letter last year to the Senate antitrust subcommittee
that e-book price fixing would likely cost consumers more than $200
million in 2012. State and federal antitrust laws allow plaintiffs to
recover triple the amount of actual damages established at trial.
If
Apple loses against the Justice Department, those plaintiffs would be
in a "powerful position" to win their cases, according to Harry First, a
professor at New York University School of Law specializing in
antitrust.
Under the Clayton Act, an antitrust statute, plaintiffs
can use judgments obtained by the U.S. government as evidence against
defendants.
If Apple loses, it is unclear whether both the states
and the private plaintiffs will be able to seek and recover damages for
the same conduct.
By contrast, if Apple were to prevail, it would cause "a lot more trouble" for the plaintiffs in the other cases, First said.
Apple declined to comment. It still may settle with the U.S. government.
In
December, Apple and four publishers came to an agreement with European
Union regulators over their antitrust probe into e-books. The fifth
publisher, Pearson Plc's Penguin group, also under investigation, was
not part of the European deal announced in December.
Little to gain
Apple may have little to gain by going to trial in the United States, according to some legal experts.
Under
settlements with the Justice Department, the five publishers were
required to terminate or not renew deals with Apple and other retailers
that the government claimed were anti-competitive.
Apple and the
government have less to argue over since those deals have been undone,
Daniel Crane, a law professor at the University of Michigan Law School,
said.
"What are they fighting over?" he said.
Crane added
that Apple may be interested in going to trial to establish an antitrust
principle that might help other aspects of its business such as content
deals with entertainment companies.
The trial would be a big test
for the Justice Department's Antitrust Division, which has sought to
enhance its reputation for its trial capabilities under the Obama
administration.
The government has been represented by Mark Ryan,
who is director of litigation, a new position in the Antitrust Division.
Ryan, who began in January 2012, was hired by Joseph Wayland, the
former acting assistant attorney general for the Antitrust Division.
Last
year Wayland cited Ryan in a speech about the Antitrust Division's
focus on enhancing its litigation capabilities. Under the Obama
administration, the Antitrust Division has scored a number of
high-profile trial victories, including a criminal price-fixing case
against Taiwan-based AU Optronics Corp last year and a successful
challenge of H&R Block Inc's acquisition of 2SS Holdings Inc,
developer of the TaxACT digital tax preparation business, in 2011.
Apple
is represented by lawyers at Gibson, Dunn & Crutcher. One of the
law firm's attorneys who recently made an appearance in the case, Orin
Snyder, won a favorable settlement last year for Voom HD Holdings, once a
unit of Cablevision, following a trial against Dish Network.
Voom
sued Dish for $2.4 billion alleging it violated a 15-year contract to
carry a suite of high-definition channels, including those devoted to
Kung Fu and video games. Under the settlement, Dish agreed to pay $700
million to Cablevision and AMC Networks, which Cablevision spun off last
year.
The case is United States v. Apple Inc et al, U.S. District Court, Southern District of New York, No. 12-02826.
© Thomson Reuters 2013