In re Electronic Books Antitrust Litigation
859 F. Supp. 2d 671
S.D.N.Y.2012Background
- Plaintiffs allege Apple and five publishers conspired (2009–2010) to raise eBook prices in violation of the Sherman Act and related state laws.
- Publishers historically sold books via a wholesale model; retailers set retail prices, with eBooks initially discounted by Amazon to $9.99, pressuring publishers.
- By December 2009–January 2010, publishers windowed certain eBooks and entered agency agreements with Apple to sell eBooks through iBookstore at fixed prices.
- Agency agreements grant Apple 30% commission, MFN pricing guarantees, and price-setting by publishers, moving sales to the agency model starting April 2010.
- Following the agency shift, eBook prices rose and retailers like Amazon faced reduced access; Random House later joined the agency model; authorities (DOJ and state AGs) pursued related actions.
- The CAC seeks relief for claims under Section 1 of the Sherman Act, California Cartwright Act, other state antitrust laws, and unjust enrichment; defendants moved to dismiss under Rule 12(b)(6), and the court denied the motions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the CAC plausibly alleges a Section 1 conspiracy | Plaintiffs allege direct and circumstantial evidence of a conscious union. | Defendants urge parallel conduct with independent motives; no explicit agreement. | Plausible conspiracy; survives 12(b)(6) |
| Hub-and-spoke theory viability | Apple as hub with publishers as spokes plausibly together restrain price. | Hub-and-spoke claims require limiting, not essential to the pleaded theory. | Plausible hub-and-spoke component; main theory remains horizontal conspiracy |
| Per se vs. rule-of-reason applicability | Horizontal price restraint is per se unlawful; agency agreements facilitate price fixing. | Vertical agency agreements could be governed by the rule of reason. | Horizontal price-fixing aspect treated as per se unlawful; rule-of-reason analysis not required for core claim |
| Plausibility of a horizontal conspiracy despite separate motives | Divergent motives converge on price-fixing; parallel conduct supported by timing and actions. | Independent interests and MFN clauses suggest independent actions. | Allegations plausibly show a concerted price-fixing scheme |
| Impact of agency agreements on market competition | Agency model and MFN terms eliminated price competition; raised retail prices. | Agency agreements could be procompetitive or neutral with price growth accompanying demand. | Conspiracy plausibly harmed competition; not dismissed on this basis |
Key Cases Cited
- Twombly v. Bell Atl. Corp., 550 U.S. 544 (U.S. 2007) (plausibility standard; parallel conduct insufficient without suggestive evidence of agreement)
- Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752 (U.S. 1984) (requires showing a conscious commitment to a common scheme to restrain trade)
- American Tobacco Co. v. United States, 328 U.S. 781 (U.S. 1946) (no formal agreement needed if evidence shows coordinated action)
- Interstate Circuit, Inc. v. United States, 306 U.S. 208 (U.S. 1939) (upheld injunction where distributors knowingly adhered to a plan restraining competition)
- Toys “R” Us, Inc. v. FTC, 221 F.3d 928 (7th Cir. 2000) (hub-and-spoke-like coordination among manufacturers can support conspiracy finding)
- Arizona v. Maricopa County Med. Soc., 457 U.S. 332 (U.S. 1982) (per se illegality of certain price-rigging carts; horizontal restraints)
- Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (U.S. 2007) (horizontal restraints subject to per se or rule-of-reason depending on context)
- AD/SAT v. Associated Press, 181 F.3d 216 (2d Cir. 1999) (outline pleading standards for conspiracy in antitrust)
- Atlantic Nat’l Bank v. Am. Online, Inc., - (-) (not used (placeholder if omitted))