United States v. Apple, Inc.

non- then searched and years, half subsequently ato pursuant files responsive America, of STATES UNITED warrant; and issued Appellee, factors, all (2) relevant Considering v. in this agents government whether GANIAS, Defendant- faith good in reasonably M. and Stavros case acted

Appellant. obtained the files such sup- not be should drives hard cloned 12-240-cr. No. Docket pressed. Appeals, of Court States United issues to the restricted Briefing is not Circuit. Second original presented arguments and briefs amicus curiae invite We panel. 2015. June brief Appellant’s parties. from interested King, Glover, E. Anastasia Slack Sandra briefs curiae any amicus appendix, for Attorney’s Office States Esq., United July filed thereof, shall be support Haven, Connecticut, New of District appendix, brief Appellee’s States Vidya Nagala, United CT, Sarala support curiae briefs amicus any of Con- the District Office for Attorney’s 28, 2015. by August thereof, filed be shall Hartford, CT, Appellee. for necticut, be filed shall brief reply Appellant’s The Jr., Day Pit- Esq., Twardy, A. Stanley 11, 2015. by September Cer- Stamford, CT, John W. LLP, for ney Septem- on will be held argument Oral Wenner, Pitney Day reta, Daniel Esq., Thurgood 30, 2015, p.m. at 3:30 ber Defendant-Appel- Hartford, CT, LLP, Courthouse, 40 Fo- States Marshall United lant. York, York. New New ley Square, ORDER appeal of this disposition

Following of the Court judge an active

June to rehear on whether poll

requested conduct- been poll having A Banc.

case en of judges the active majority of

ed and rehear- favor of having voted the Court America, of of State STATES UNITED Banc, HEREBY IT IS en ing appeal this Connecticut, of Texas, State of State en be heard appeal ORDERED Alaska, of State Alabama, of State 35(a). en P. R.App. Fed. Banc. See Arkansas, of Arizona, State of State judges active consist panel will Banc Delaware, of Colorado, of State State 46(c). § U.S.C. See 28 the Court. of Illinois, of Idaho, State of State all to brief are instructed parties Iowa, Kan of Indiana, of State State including: appeal, relevant issues Louisiana, Ma of State sas, of State Massachu of ryland, Commonwealth Amendment (1) the Fourth Whether Michigan, of State setts, warrant, State of when, pursuant violated Nebraska, of Missouri, State State three and cloned seized government York, New Mexico, State New re- containing both hard drives computer Ohio, Dakota, State North files, State retained non-responsive sponsive and Pennsylvania, Commonwealth some two-and-a- hard drives cloned Dakota, State South State of Ten

nessee, Utah, State of State of Ver

mont, Virginia, Commonwealth Virginia,

State of West State of Wis

consin, Commonwealth of Puerto

Rico, Columbia, District

Plaintiffs-Appellees,

v.

APPLE, INC., Schuster, Inc., & Simon

Verlagsgruppe Georg Von Holtz GmbH,

brinck Holtzbrinck Publish

ers, LLC, Macmillan, DBA Simon & Digital Sales, Inc.,

Schuster Defen

dants-Appellants, Group, Inc.,

Hachette HarperCol Book L.L.C.,

lins Publishers The Penguin

Group, a PLC, Division of Pearson

Penguin Group (USA), Inc., Defen

dants. 13-3741-cv, 13-3748-cv,

Nos. 13-3783-cv,

13-3857-cv, 13-3864-cv, 13-3867-cv.

United States Court Appeals,

Second Circuit.

Argued: Dec. 2014.

Decided: June Stewart,

Malcolm L. Deputy Solicitor General, Department U.S. Justice, DC, Washington, Baer, William J. Assis- Nicholson, tant Seidman, David Finnuala Tessier, K. Buterman, Lawrence B. Attor- neys, U.S. Department of Justice Antitrust Division, Washington, DC, for the United States.

George Jepsen, Attorney General of Connecticut, Nielsen, Joseph W. Assistant Attorney General, Office of Attorney Gen- Connecticut, Hartford, eral of CT, Greg Abbott, Attorney Texas, General of Daniel T. Hodge, First Assistant Attorney Gener- Texas, al of Scott, John Deputy Attorney Texas, General of Mitchell, Jonathan F. Solicitor Texas, General Andrew Old- ham, Deputy Texas, Solicitor General of Prud’homme, John T. Winkle, Kim van Lipman, Eric General, Assistant Attorneys Attorney Office of Texas, General of Aus- tin, TX, for Plaintiff-States. Schneiderman, Eric T. Attorney General York, of the State Chin, of New Won S. General, Assistant Solicitor Office of Attor- ney York, General York, of New New N.Y., for the of New York. State Boutros, Jr., Theodore J. Daniel G. Swanson, Evanson, Gibson, Blaine H. LLP, Dunn & CA, Angeles, Crutcher Los Cynthia Richman, Gibson, E. Dunn & ebooks, particularly Amazon’s try, saw DC, S. Orin LLP, Washington, Crutcher way of to their as a threat pricing, LLP, its $9.99 Gibson, Dunn & Crutcher Snyder, doing business. N.Y., Apple, Inc. for York, New (“Ap- Inc. Apple, November By Mitnick, Mark M. Joel Joyce, P. Eamon tablet a new release plans ple”) had York, LLP, New Taticchi, Sidley Austin D. com- at the Executives the iPad. computer, Holtz- Georg von Verlagsgruppe N.Y., for on sell ebooks opportunity saw pany Publishers, GmbH, Holtzbrinck brinck marketplace a creating virtual iPad LLC, Macmillan. d/b/a as known device, to be came which on Buchweitz, L. Silbert, Yehuda Gregory “¡Bookstore.” tight a Working within Manges Weil, & Gotshal Quinn, W. James negoti- into directly timeframe, went N.Y., & York, Schus- Simon LLP, New major publishing six ations .with Digital & Schuster Simon ter, Inc. and In two States. United companies Sales, Inc. those five of months, it announced HarperCollins, companies Hachette, LIVINGSTON, and — JACOBS, Before: Schus- & Macmillan, and Simon Penguin, Judges. LOHIER, Circuit Defen- “Publisher (collectively, the ter (Circuit on the Judge) ebooks dants”) agreed sell J. LOHIER RAYMOND —had whereby the joining opinion, arrangements concurring under separate iPad a files authority prices, majority set in the had the judgment releases of new prices II.B.2. set the except Part and could opinion high as as bestsellers York Times and New (Circuit files Judge) DENNIS JACOBS Each of $14.99, respectively. $19.99 dissenting opinion. separate terms, by virtue agreements, these re- Defendant in each Publisher LIVINGSTON, Circuit resulted ANN DEBRA via ebook sold per less ceiving Judge: higher Amazon, given the even opposed press, printing the invention Since after months a few Just prices. consumer involved books has distribution ¡Bookstore however, every one opened, com- process: fundamentally consistent taken had Defendants the Publisher it into bind print and manuscript, pose Amazon and pricing control over sell volumes, ship and and then physical ebooks, of their many raised the In late public. to the the volumes and bestsellers. releases notably most new (“Amazon”) introduced Amazon.com, Inc. of Jus- Department States The United that Kindle, device carries portable and (“DOJ” Department”) or “Justice tice books, as “ebooks.” of known copies digital (collectively, territories and states change to potential innovation had This “Plaintiffs”) States in the United filed suit producing process the centuries-old District the Southern District Court print, need to eliminating the books launch- Apple, York, alleging New began Amazon them. bind, and store ship, ¡Bookstore, conspired with read, ing the way to the new popularize to raise Defendants Kindle Publisher buy encouraged consumers This market. ebook nascent across the releases desirable books—new by offering § 1 of violated they argued, agreement, York Times bestsellers —for New Act, § 1 15 U.S.C. Antitrust the Sherman which companies, Publishing $9.99. Act”), state anti- (“Sherman seq. of the et center at the traditionally stood Defendants All Publisher five trust laws. indus- book-producing dollar multi-billion decrees, signed settled and consent which § strained trade in violation of 1 of the them, prohibited period, for a from re- Sherman Act. alsoWe conclude that the stricting ability ebook retailers’ js to set injunction district court’s lawful and con- Then, prices. after a three-week bench sistent with preventing future anticompeti- J.) trial, (Cote, the district court concluded tive harms. that, in order to induce the Publisher De- Significantly, agrees the dissent Ap- participate fendants to in the iBookstore ple intentionally organized a conspiracy and to avoid the necessity compet- of itself among the Publisher Defendants to raise ing with price Amazon over the retail prices. Nonetheless, ebook it contends ebooks, Apple orchestrated a conspiracy was entitled to do so because among the Publisher Defendants to raise the conspiracy helped it become an ebook particularly re- new ebooks— retailer. In arriving at this startling con- leases and New York Times bestsellers. in large clusion—based measure an ar- Inc., United v. Apple F.Supp.2d States gument that Apple itself did not assert— (S.D.N.Y.2013). 638, 647 The district the dissent makes two fundamental errors. court found that the constituted The first is to insist that the vertical orga- per and, se violation of the Sherman Act nizer of a horizontal price-fixing conspiracy alternative, in the unreasonably restrained may escape application df per se rule. trade under the rule of reason. See id. at This conclusion is based on a misreading of 5, 2013, September 694. On the district Supreme precedent, Court which estab- court judgment entered final on the liabili- precisely lishes the opposite. The dissent ty finding injunctive and issued an order fails to apprehend that the Sherman Act that, alia, prevents inter Apple from en- agreements outlaws that unreasonably re- tering agreements into with the Publisher strain trade and requires therefore evalu- set, ability Defendants that restrict ating restraint, the nature of the rather alter, ebooks, or reduce than identity party joins of each who requires Apple apply the same terms it, to impose determining whether the and conditions to applications ebook sold per se rule properly Finally invoked. on its devices as it does to applica- other (and fundamentally) most the dissent’s tions. conclusion premise: rests on an erroneous appeal, Apple On contends that the dis- organizes that one who price- horizontal liability trict court’s finding was erroneous fixing conspiracy “supreme evil an- —the and that provisions injunction of the titrust,” Verizon Commc’ns Inc. v. Law related to its pricing authority and ebook Trinko, LLP, Curtis V. Offices of applications are necessary protect 398, 408, 124 S.Ct. 157 L.Ed.2d 823 the public. Two of the Publisher Defen- (2004) among competing those at a differ- — dants —Macmillan and Simon & Schus- ent level of the market has somehow done join appeal, arguing por-

ter — damage less than competition its co- tion injunction related to conspirators. pricing authority unlawfully either modi- assume, The dissent’s second error is to fies their consent or decrees should be effect, judicially that estopped. was entitled to enter We conclude that the terms, district the retail court’s decision that ebook market on its own Apple orches- a if conspiracy trated horizontal even these terms could be among the achieved Publisher Defendants to via its prices entry raise ebook orchestration of and into a well-reasoned, amply supported is price-fixing agreement and with the Publisher that the unreasonably story re- Défendants. The dissent a of tells Act, and be § the Sherman 1 of violated conspira- price-fixing this

Apple organizing from, district the conclude monop- a we also cause retailers ebook cy to rescue n and consis lawful power. injunctio retail was court’s insurmountable olist with any anticompetitive factual future spun from preventing is tale tent with But this And the court. harms, district of the we affirm. findings treats analysis wrongly armchair dissent’s any mo- retailers at ebook number of BACKGROUND and trans- of a new emergence in the ment Background1 Factual I. for book distribution technology formative iPads, not with Kindles begin We in the competition non of qua the sine books,” which are “trade printed but with ebooks.

market for trade and non-fiction” fiction interest “general theo- the dissent’s fundamentally, More readership. for a broad intended books strong a com- of presence ry—that In 648 n. 4. F.Supp.2d Apple, a horizontal justifies price-fixing petitor States, largest publishers the six United mar- concept a conspiracy-—endorses books, publishing world known in the trade wholly foreign that is vigilantism ketplace Hachette, Six,” HarperCol “Big are as the a By organizing antitrust laws. to the House, Macmillan, Random lins, Penguin, found an conspiracy, price-fixing Together, Big & Schuster. and Simon iBookstore, but opening its easy path to names in many biggest publish Six by ensuring that market-wide it did so non-fiction; their during fiction it, to a would rise level prices ebook of the New 90% titles accounted over Defendants, jointly and the Publisher in the United bestsellers York Times is not Plainly, competition agreed upon. n. 5. Id. at 648 States. entrant a market by permitting served a condi- competition as price eliminate decades, op- book For trade cold entry, and it is comfort tion of business fairly a consistent erated under ebook they gained a new .that consumers ready a new book When model. passing control expense at the retailer publisher would public, to the release cartel of book all to a over ebook at a to retailers copies hardcover sell who, Apple's publishers publishers resale to recommend “wholesale” — pricing collectively agreed on new help, known as the markup, at a consumers price of to raise the precisely model spent hardcover price. After the “list” mar- protect profit their ebooks and thus on the shelves—often time enough the mar- very existence in gins and their paper- release year publishers — admittedly face ketplace and “wholesale” copy at lower “list” back by the new created strong headwinds theory, readers would In devoted prices. technology. to read higher hardcover pay the out, while it first came more when book conclude that the district

Because we paperback. wait for fans would deciding casual err court did not (2d Cir.2002). Henderson, F.3d background presented here is 1. The factual obligation, wrong light find the dissent the district court’s factual of this drawn from rec undisputed in the ings from material to the record are suggest or citations district court. Because ord before misleading. When a fact inappropriate court's find the district factual Court reviews opinion, court's we from the district comes error,” wheth ings we must for "clear assess one comes opinion; when cite that plausible in of the evidence is er "its view ("J.A.”). record, joint appendix cite the we e v. Cosm light entire record.” A. Amazon’s Kindle publishers. Apple, 952 F.Supp.2d at 649. Naggar, David a Vice in President charge 19, 2007, Amazon On November released content, of Amazon’s Kindle described this portable a electronic device Kindle: as a loss-leading “classic strategy” de- purchase, that allows consumers to down- signed to encourage adopt consumers to load, time, At and read ebooks. there discounting Kindle new releases only one other ereader available in the was and New York Times bestsellers and sell- market, emerging ebook and Amazon’s ing other ebooks without the discount. quickly In gained Kindle traction. J.A. 1485. The district court .also referred ebook revenue in North America was to this as a “loss strategy, Apple, leader[ ]” million, tiny a amount relative to the $70 F.Supp.2d 657, 708, and ex- approximately physi- billion market for $30 plained that Amazon “believed [the $9.99] cal trade books. The market growing, was pricing long-term would have benefits for however; in 2008 ebook revenue was consumers,” its id. at Contrary and, roughly million the time $140 portrayal the dissent’s opinion, uf the (Barnes Noble) Noble, Barnes & Inc. & district court did not find that Amazon launched its Nook ereader November price point used the $9.99 “assure[ ] its 2009, Amazon responsible was for 90% of market, domination” in the ebook or that all Apple, F.Supp.2d ebook sales. pricing strategy acted as “barrier to 648-49. entry” for other retailers. Dissenting Op. Amazon followed “wholesale” business Indeed, at 6-7. in November -just a 2009— model similar to the one print used with few months before launch of the publishers digital books: recommended iBookstore-—Barnes & Noble entered the price price list and received a wholesale ebook retail by launching market for each ebook that Amazon sold. In ex- Nook, Apple, 952 F.Supp.2d at 649 n. change, Amazon publishers’ could sell the early Google and as as 2007 (“Google”) Inc. ebooks on the Kindle and determine the planning had been to enter the market on, price. early retail At publishers least using model, a wholesale id. at 686. digital tended recommend a list price that was about 20% print lower than the B. The Publishers’ Reactions that, price

list to reflect the fact with an ebook, printing, there is no cost for stor- Despite the small number of ebook sales ing, packaging, shipping, returning or compared to the overall market for trade books. books, top Big executives Six saw departed

Where Amazon pub- Amazon’s pricing strategy as a $9.99 lishers’ traditional business model way was threat to their established of doing the sale of new releases and New York business. Those executives included: Ha- Times bestsellers. Rather than selling chette and Hachette Livre Chief Executive (“CEOs”) expensive more versions of these books Young Officers David and Ar- (as upon initial Nourry; release encour- naud HarperCollins CEO Brian aged by producing Murray; hardcover books before Sargent; Macmillan CEO John paperback copies), Shanks; Penguin Amazon set the Kindle USA CEO David Ran- one, price at figure stable At Operating dom House Chief Officer Made- $9.99.— price, McIntosh; selling Amazon was “certain” new line and Simon & Schuster releases and Reidy. bestsellers at a Carolyn President and CEO matched,” “roughly term, slightly Big lower the short these members of than, wholesale it paid thought lower-priced the Six that Amazon’s mass,” “critical with a they acted unless for difficult it more make would

ebooks more gather “need expressed re- the of new and copies hardcover to sell them implement- the as ammunition” before priced,” troops often and leases, were “which or noted, thirty dollars J.A. 290 “at Amazon. against a move ing court district omitted). as more,” F.Supp.2d (internal marks Apple, quotation Fur- Times bestsellers. York New well as in operated Big Six Conveniently, the road, feared publishers the ther down qualms no and had industry close-knit accustomed become would that consumers to act to- the need communicating about these point for price uniform $9.99 to the (based court found As the gether. district down driving ebooks, permanently testimo- Defendants’ own the Publisher on print versions charge for could they price basis, roughly fairly regular ny), “[o]n Moreover, be- Amazon if the books. of [Big Six] of CEOs quarter, once a demand enough, it could powerful came dining rooms of private in the held dinners Big Six from the prices wholesale lower restaurants, counsel or without New York directly Ama- with to publish allow authors discuss the entirely. in order to present, publishers assistants zon, cutting out the it, they Apple, of the challenges idea faced.” Young put common As Hachette’s becoming a de they “did point Because F.Supp.2d at “wretched 651. $9.99 him. for-ebooks “sickened” but price,” facto standard” other on compete each 289. publishers J.A. agents, over authors discussing Am- freely in hesitation “felt no recog- Big also of the executives Six and their other with each azon’s a collective problem their nized that raising prices.” strategies for those joint Penguin strat- Thus, August 2009 one. eliminating (concluded strategies months included only a few Id. Those egy report efforts for its ebooks Apple commenced wholesale before the discounted iBookstore) noted ebook launch the an alternative creating possibly “Mom- readers will of be for the attention petition platform. whose digital companies intense from

most pub- attack significant most traditional objective may [cut out] be undertook, and then considered lishers will not be altogether.... It however, new and bestsell- towas withhold publisher to any individual possible hardcov- until the from Amazon ing books because response, an effective mount in several months had spent er version the risk necessary and both resources “windowing.” stores, known practice industry needs to retribution, so kept Big Six both one Members strategy.” J.A. 287. a common develop window, plans to of their abreast another & Schuster Similarly, Reidy from Simon toward the actively pushed others publish- September opined 2009, the Wall By December strategy.2 in getting “no chance success ers had Times New York were Street practices” Journal change pricing Amazon to (first and alterations at 652 second F.Supp.2d Citing example, the district court refer- one (internal quotation marks omit- original) Hachette’s a fall email which enced ted). to observe went The district court colleágue Nourry of Si- Young his informed "Understanding impropriety advising Young, windowing plans, & Schuster’s mon exchange information confidential [Reidy] confidentially, Carolyn "Completely Nourry that advised 'it competitor, ... with a Schuster] & are [Simon told me that has you delete this prudent to double be King, Stephen with his full delaying the new your you when email return your files announcing this be until but will not support, ” Id. Apple, 952 office.’ Day.” day Labor after reporting Big beyond. that four of the Six had While Amazon had an estimated plans delay announced to ebook releases 90% ebooks, market share in trade Cue release, print until after the and the two believed that could power- become a Penguin and Random House— player ful in the market in large part holdouts— pressure peers. faced from their because consumers would be able to do many iPad, tasks on the and would not however, Ultimately, publishers the carry want to separate a Kindle for read- strategy viewed even this to save their ing alone. In an email Apple’s to then- business model as self-destructive. Em- CEO, Jobs, Steve he discussed possi- ployees inside the publishing companies bility of Amazon selling through ebooks that windowing encouraged piracy, noted application iPad, on the but felt that “it consumers, punished ebook and harmed very easy be for [Apple] to compete long-term sales. One author wrote to Sar- with and ... trounce Amazon opening gent in December 2009 that the “old model up our own ebook store” because “[t]he change” has to and that it would be better publishers book would do anything almost e-books,” publish “embrace them at the [Apple] to get into the ebook business.” hardcovers, same time pray as the “and J.A. 282. crazy.” God both sell like J.A. 325. Sargent agreed, expressed but the hope approved Jobs plan Cue’s for an ebook eventually ebooks could be sold for marketplace came to be known as —which question between “The $12.95 $14.95. the iBookstore—in November 2009. Al is,” mused, get he “how to there?” J.A. though the go iPad would to market with iBookstore, or without the Apple hoped to announce the marketplace ebook at the Apple’s Entry

C. into the Ebook January 2010 iPad launch to “ensure Market maximum exposure” consumer and add an Apple is one of other component” the world’s most innova- “dramatic to the event. tive technology Apple, F.Supp.2d and successful companies. 655 This left .

Its hardware sells Cue and his team supports worldwide and two months amidst major holiday software marketplaces like iTunes season both to create a busi App and the ness Store. But model the iBookstore and to as group lacked a dedicated semble a marketplace publishers partici for ebooks or a pate. personal hardware device that Cue also had could offer an reasons to outstanding reading experience. quickly. work He knew that Jobs was iPad, ill, that, pending seriously release of the by making which success, intended to announce on iBookstore a he January help could Jobs promised to solve that achieve a longstanding goal hardware deficien- creating cy. provides device that superior reading experience. Cue,

Eddy Apple’s Senior Vice Presi- dent of Internet Software and Operating tight timeframe, Cue, Services under a and the Saul, director of digital content and Moerer streamlined their efforts stores, saw the opportunity for an focusing Big ebook on the publishers. Six marketplace By on the iPad. February They began by arming themselves colleagues Cue and two important Saul some information about —Kevin and Keith Moerer —had researched the state of affairs within'the publishing indus- ebook market and concluded that it was try. particular, they learned poised for rapid expansion in publishers 2010 and feared that pricing Amazon’s comparable to be needed iBookstore industry, their change could

model view, Kindle, expressing in simulta- those on engaged several recorded, not “toler- that it could Reidy Ama- to thwart as efforts windowing neous is sold product a whole industry as market where zon, ate understood,” “Apple elsewhere.” cheaply turmoil. more significantly in a state it, (internal Pub- “that quo- put court F.Supp.2d at the district Apple, omitted). Amazon pressure importantly wanted Most lishers marks tation e-books, that point for however, team raise Cue’s $9.99 publishers, for to ways for searching were the Publishers that Ama- Apple’s belief expressed also willing to that, they were that do in ingrained was not point zon’s $9.99 that to achieve efforts their coordinate minds, Apple-could and that consumers’ as the part, its For at 656. Id. goal.” York Times and New' new releases sell willing to found, was Apple court district $12.99 between bestsellers somewhere “had de- prices, but higher at sell ebooks return, requested Apple and $14.99. open the iBookstore it would not cided that whole- their publishers decrease that the the store money on make could not if it company could prices so sale with Amazon.” effectively compete each profit on sale. a small make Id. flurry com- a spurred meetings These Negotiations with Apple’s D. the “[t]errifie reporting munications Publishers to it in an email news[,]” Reidy put Moonves, parent Meetings superior her Initial

1. Leslie (“CBS”), that Corporation company CBS each meetings with Apple held first a low interested in “was not Apple 15 and December Big Six between want didn’t digital books” and point for confirmed Cue’s quickly meetings 16. The Apple, to continue.” [sic] “Amazon’s $9.95 As he industry. about suspicions (first in alteration at 658 F.Supp.2d three of with speaking after wrote to Jobs (internal omit- quotation marks original) biggest issue “[c]learly, the publishers, ted). these communications Significantly, and “Amazon pricing” is new release ex- exchanges between numerous included selling because of definitely not liked much publishers Big Six at different ecutives J.A. Best Sellers.” for NYT below cost found, over “hashed who, court the district emphasized also Many publishers 326-27. anoth- Apple one meetings to with strategy with searching for their were that the in- court Apple The district found pricing. over er.” Id. regain control the Pub- among it was calls Big telephone Six that frequent each of the formed major period of publish- during other with the Defendants negotiating lisher ebooks ers, begin selling “represented it hoped Apple negotiations their it was days, and that ordinary pattern next 90 within the from the departure in participants mass of a critical n. 14. seeking Id. among them.” calls only if launch and would the iBookstore goal. Apple reaching successful Agency Model it did not publishers

informed Moerer, Meanwhile, Cue, and Saul re- un- iBookstore would succeed believe develop headquarters turned not to window agreed both publishers less Al- iBookstore. for the model at a discount business sell ebooks books and about optimistic though the team counterparts. physical their relative concerned they remained meetings, in the initial prices noted that ebook publishers iBookstore, whether the would prices about reduce and would keep prices wholesale on new releases and best- 70% of each sale. The remaining 30% by a large enough margin sellers to allow go Apple aas commission. competitive to offer prices and still This switch agency to an model obviated profit. strategy make a One that the team Apple’s concerns about negotiating whole- publishers considered was to ask for a 25% sale Big with the Six ensuring while titles, wholesale discount on all of these so that Apple profited on every sale. It did if a physical book sold at wholesale $12 not, however, solve all of the company’s (the going majority rate for the of New problems. Because the agency model bestsellers) York Times pur- could publishers handed the control over pricing, chase the ebook version and offer it $9 it created the risk that Big Six would on the iBookstore at a small markup. But sell ebooks in the iBookstore at far higher Cue was aware that some prices than offering. Kindle’s If the $9.99 digital increased Amazon’s wholesale prices were too high, Apple could be left prices in an unsuccessful effort to with a brand marketplace new brimming convince Amazon change pricing. to its titles, with but devoid of customers. 650; Id. at J.A. 1771. felt it Cue would be To solve this pricing problem, Cue’s negotiate difficult to wholesale prices down initially team devised two strategies. enough far “for [Apple] generally to com- First, they realized that could main- pete profitably with Amazon’s below-cost tain prices” by “realistic establishing price pricing on popular the most e-books.” caps for different types of books. J.A. it, J.A. 1772. As Cue saw Apple’s most course, 359. Of caps these would need to valuable bargaining chip came from the higher be than price point, Amazon’s $9.99 publishers fact that the desperate were or Apple would face the same difficult “for an alternative to pricing Amazon’s price negotiations sought that it to avoid policies and excited about ... the prospect by switching away from the wholesale [Apple’s] entry that [into the ebook mar- point model. But at Apple was not give leverage ket] would them in their open content to offering its iBookstore negotiations with Amazon.” Apple, 952 prices higher competition. than the For F.Supp.2d at 659. found, as the district court if the Publisher team, It was at this point that Cue’s Defendants “wanted to end Amazon’s $9.99 recognizing opportunity, its abandoned the pricing,” Apple similarly desired “that new, wholesale business model for a agen- there be no price competition at the retail model, cy model.3 Unlike a wholesale Apple, F.Supp.2d level.” at 647. agency relationship an publisher the sets price pay then, the will concluded, consumers for each next as the dis- Then, ebook. pay- found, rather than the retailer trict court ensure that the “[t]o ing publisher the for each ebook that it competitive iBookstore would be at higher sells, publisher pays the the prices, Apple retailer a ... needed to eliminate all essence, percentage fixed of each sale. In price competition.” retail Id. at 659. Thus, the retailer receives a commission for dis- simply agreeing rather than to tributing publisher’s the ebooks. caps price point, Ap- Under above Amazon’s $9.99 system devised, the publishers ple requirement: publish- created a second would have the freedom to set ebook ers must switch all of their other ebook Notably, 3. possibility agency the HarperCollins way an ar- aas "to fix Amazon rangement pricing.” was first mentioned Hachette J.A. 346. the best terms the other give party agen- Amazon—to including

retailers — any competitor. available it would be makes The result model. cy pricing the negotiations, Apple’s with context of compete not need would that, “[i]f, any mandated would be Clause MFN on'price, Amazon for- in hardcover pricing. New Release particular Amazon’s $9.99 eliminate able to Price iBook- plan mat, [in the ... Customer later describe Or, as Cue higher Schuster, any Macmil- time is or becomes & store] at Simon executives by any other House, offered plan “solve[d] a customer lan, Random than shall des- pub- ..., Publisher by allowing then [the] issue” Amazon reseller [the] new, Price pricing over Customer [in control lower ignate to wrest lishers (internal quotation [customer such lower Id. to meet iBookstore] Amazon.4 omitted). differently, Put marks J.A. price].” offer require publisher MFN would essen- Apple sent January 4 and On no iBookstore any ebook to each member tially identical emails was of- same ebook than what the more agency model explain Big Six elsewhere, as from Amazon. such fered the com- described Each email proposal. pub- Apple and split mission between each of January Apple sent On caps: three price lishers and recommended Agency Distri- proposed eBook Big Six prices with list books for hardcover $14.99 “Contracts”). (the As Agreement bution $35; books for hardcover above $12.99 emails, January 4 and 5 in the described $35; for all $9.99 list below proceeds split Contracts would these also ex- The emails trade other books. publish- the sale between each ebook from realistic that, sell ebooks at plained “to receiving publisher Apple, the er and titles of new resellers prices ... all [other] 70%, caps on ebooks would set price as well. agency model” in [the] need to be the $14.99, $12.99, depending on and $9.99 pub- Or, Reidy, “all Cue told J.A. 360. as But the price. unlike hardcover book’s retailers” to move “all would need lishers” emails, the Contracts contained initial 2060. model. J.A. agency to an requirement the place MFN Clauses to all other retailers move publishers Clause The “Most-Favored-Nation” 3. Apple then model. assured agency an con- agency model thoughts on Cue’s was Big that it Six each member (cid:127) on Janu- evolve after emails tinued to as oth- terms being offered the same significantly, Saul— ary 4 and 5. Most ers. alter- an in-house counsel—devised Cue’s the economic Big Six understood The requiring publishers explicitly native Clause created. that the MFN This al- incentives agency. other retailers switch at a release sells a new hardcover Suppose of a “most-fa- the use ternative involved $25, price of a wholesale (“MFN price of or list nation” Clause” vored clause Amazon, publishers With “MFN”). is a $12.50. an MFN general, Clause (or a price receiving the wholesale been one requires provision contractual mony "not credible” —a determination to be trial that his reference Cue testified at 4. record, that, in no manner errone- pro- "solv[ing] the issue” denoted Amazon ous, As clearly Id. at 661 19. less so. n. much above price in the iBookstore posal to ebooks it, pitch put "Apple’s to the $9.99, raising district court a reference to not vi- beginning to end—a wresting was—from industry control Publishers across the industry-wide price schedule.” for a new other sion pricing Amazon. In this and over found Cue’s testi- Id. respects, the court district slightly digital lower wholesale price) Apple dynamic understood this as well. found, As the every copy ebook of the volume sold on district court “Apple did not Kindle, change thinking” ultimately replaced if Amazon when it even sold the explicit requirement publishers price. ebook for less than that wholesale move other retailers to an agency model initial agency Under model—with Indeed, with the MFN. in the following price caps but no MFN pub- Clause—the weeks, Apple assiduously worked to make already money lishers stood to make less sure that agency shift to occurred. per ebook with Apple. Because Apple, 952 F.Supp.2d at 663. But Apple capped the ebook of a hardcover $25 that, also it, understood bluntly put Cue and took price, pub- 30% that $12.99 “any decent MFN forces the away model” only expect lishers could to make per $8.75 (inter- from wholesale and agency. Id. publishers sale. But what sacrificed in omitted). quotation nal marks Or as the revenue, they hoped gain short-term found, district court protected “the MFN long-term stability by acquiring more con- from retail competition as it and, pricing accordingly, trol over the abil- punished a if Publisher it failed to impose ity to protect their hardcover sales. agency terms on other e-tailers.” Id. at changed The MFN Clause the situation by making it imperative, merely desir- Thus, negotiation the terms of the be- able, publishers that the wrest control over publishers tween and the became pricing from ebook generally. retailers clear: Apple quick wanted and successful MFN, if stayed Amazon at a Under entry into the ebook market and to elimi-

wholesale model and continued to sell nate retail price competition with Amazon. $9.99, ebooks at publishers would be In exchange, it publishers offered the an iBookstore, too, forced to sell in the at that opportunity “to confront Amazon as one of same price point. The result would $9.99 organized group ... united an effort be the worst both worlds: lower short- to eradicate the price point.” Id. at $9.99 term revenue and no control pricing. over 664. Both sides needed critical mass of that, publishers recognized prac- as a goals. to achieve their matter, tical this meant the MFN MFN played pivotal a role in quid pro this Clause would force them to move Amazon quo by “stiffening] spines [pub- the of the an agency to relationship. Beidy put As they to ensure that lishers] would demand it, her company would need to move all its Amazon,” new terms from protecting and other ebook agency retailers to “unless we Apple price from retail competition. Id. at wanted money” to make even less in this 665.

growing Apple, market. 952 F.Supp.2d at Negotiations 4. Final (internal omitted). quotation marks This situation also gave each of the pub- The proposed sparked Contracts intense lishers a in Apple’s stake quest to have a negotiations as Cue’s team raced to assem- critical publishers join mass of the iBook- enough publishers ble to announce the “[wjhile because, store no one Publisher iBookstore January publish- 27. The could industry-wide effect an shift in volley push ers’ first was to back Ap- on change public’s perception the of a ple’s price caps, they which recognized value, they book’s if together they moved would become the “standard across the 665; could.” Id. at industry” see also J.A. 1981. for pricing.5 J.A. 571. In a set it, HarperCollins put 5. As one "upshot” moving executive agency the to the and model the Publish- reminded team “The January 13 between meetings found, “that this ers,” court as the district a Big expressed Six of the majority the to achieve for them opportunity rare awas agency adopt an to willingness general Apple, pricing.” control over price the to do so with model, but refused at 664. F.Supp.2d responded limits Cue Apple demanded. a create permission to for

by asking Jobs January publishers two By —Simon cap system. Under more lenient verbally Hachette —had & Schuster Times York bestsellers New regime, new iBookstore, a while join the committed if the hardcover for $14.99 could sell third, agreed Penguin, if listed $30, and for $12.99 above others, listed Cue the As for principle. terms releases, As for new price. below “chickening they kept was frustrated apply hardcovers cap would $12.99 business “dramatic out” because $27.50; a $14.99 priced $25 between J.A. proposing. Apple was change” that selling for to hardcovers apply cap would worse, re- “[p]ress matters To make 547. sold for $30; and, if the hardcover toup alerted the and 19 January 18 on ports sell ebook $30, could publishers over to the Pub- and Amazon world publishing re- Jobs and $19.99. for between $16.99 Apple, Apple,” with negotiations lishers’ pric- “live with” that he could sponded 670-71, Amazon F.Supp.2d Ama- move publishers] ing long “as as [the that it was House from Random learned 499. J.A. model too.” agen[ey] zon to ... publishers other facing “pressure from because agency model to [the] to move regime to pricing this new proposed Cue that unless all made it clear Apple had and, January 16 with Big Six on they wouldn’t Big participated, Six launch, remaining the iPad days before bookstore,” J.A. building with bother email pressure. each up turned from Amazon de- Representatives 1520. reminded prices, Cue conveying the new long- for set on New York scended that, they agree if did not publishers publishers. meetings with scheduled 27th, compa- by the other the iBookstore found, separate “[i]n court As district & No- and Barnes nies, including Amazon January 20 and over conversations book their own ble, certainly build Defendants days, the Publisher next few Correspondence for the iPad. apps store Amazon that wanted all told also companies publishing from within model distribution change agency to an promoted proposal shows that Cue F.Supp.2d at Apple, Amazon.” chal- the “best chance empha- point,” and the 9.99 lenge however, forward an issue Macmillan, presented would “not move sized that [major that at the 6 court found 5 of The district Apple. [unless] with the store Sargent agreement.” J.A. lunch between John signed January publishers] that trial, Amazon, “announced attempted Sargent he said at and 522-23. As Cue offer Amazon they planning to that wer- publishers] Macmillan [the to “assure agency [or an alone, to choose either option so that would the to going [he] en’t be with But at dinner model.” Id. retri- awa[y] wholesale] of the Amazon take the fear according to district night, that of.” J.A. Cue they were all afraid bution omitted). Sargent under- court, made (internal Cue sure marks quotation (internal quotation marks F.Supp.2d at would price caps “Apple was that adopting omitted). price stan- be would control and industry." Apple, dard across MFN, of the consequences stood the ex- but Penguin lishers was still noncommit- plaining Shanks, “that Macmillan had no choice but tal. Cue called and the spoke two agency to move Amazon to an model if it twenty for minutes. “Less than an hour sign agency agreement [later], wanted to an with Reidy Shanks called to discuss Apple.”6 day, Id. The next Sargent Penguin’s status in its negotiations with emailed to express Apple.” Cue his continued res- Id. at 675. Penguin signed the switching ervations about Macmillan’s oth- Contract that afternoon. an agency relationship.

er retailers to HarperCollins fifth, final, was the and With the iPad launch approaching, fast publisher agree in principle to Apple’s help Cue enlisted the of others. Cue had proposal. Murray, CEO, “remained received an email from Simon & Schuster’s unhappy over the Apple’s size of commis- Carolyn Reidy, already verbally who had sion and the existence of caps.” Id. Apple’s committed to terms and whom Cue at 673 n. negotiate 39. Unable to success- call later the “real leader of the fully with Murray, Cue asked Jobs to con- industry,” book moments after hearing Murdoch, tact James pub- CEO of the Sargent. J.A. 621. Cue then spoke parent lisher’s company, and “tell him we Reidy with twenty for minutes before signed have 3 so there is no leap of faith who, reaching Murray, out to Brian as the (internal here.” Id. at 675 quotation found, fully district court “was supportive omitted). emails, marks After a series of requirement that all e-tailers be Jobs summarized position to Mur- agency moved to an Apple, model.” 952 doch: F.Supp.2d at 673 n. 39. After the discus- simply [W]e don’t think the ebook mar- sions, Sargent Cue asked to speak with ket can be successful with pricing higher Reidy Murray. both and Sargent com- Heck, than Amazon $12.99 $14.99. plied, “spoke Murray both selling $9.99, these at books and who Reidy by telephone eight and fifteen knows, maybe they are right and we will minutes, respectively.” at Id. 673. Min- fail even at But willing we’re $12.99. later, Sargent utes rep- called the Amazon try at the proposed.... we’ve As resentative to inform him that Macmillan it, I [HarperCollins] see has the follow- planned sign an that “re- (1) ing choices: Throw in [A]pple with quired” company to conduct business if go see Wecan all make a of this to through agency

with Amazon model. create real mainstream ebooks market By January verbally Id. Macmillan had (2) Keep going $12.99 $14.99. agreed join the iBookstore. with Amazon You will make a $9.99. strategy term,

Cue followed a similar money bit more in the short but in Penguin. Penguin’s While CEO David the medium term Amazon you will tell agreed Apple’s Shanks they terms on Janu- paying you will be 70% of $9.99. (3) ary he informed They Cue he would have shareholders too. Hold join the iBookstore if pub- your four other back books from Amazon. Without agreed lishers to participate. By January way ebooks, buy your customers to 25, signatures pub- from three will steal them. Although discussing

6. Cue price-matching.” Apple, denied the MFN the F.Supp.2d night, .(internal the district court found this testi- quotation at 672 n. 38 marks omit- mony light deposition not credible in of Cue’s ted). clearly This determination was not er- testimony contemporaneous and his email to roneous. Sargent “legal Jobs that had concerns over Noble, Barnes & Amazon or with Murray to $9.99 also emailed Cue 677.

Id. at ,“[t]hat won’t be confidently replied, Jobs other four him that inform the price will be same.... case ... the the Murray then agreements. their signed actually withhold their will [Publishers Hachette and both executives called ... because from Amazon [e]books to agreeing before Macmillan dayA price.”8 the happy not with are terms. publish- the later, his’biographer told Jobs found, during the court the district As “[y]ou’re going with Amazon: position ers’ con which January during period we’re not agency an contract sign to the Publisher with agreements its cluded you books.” J.A. give to the going De Defendants, kept Publisher “Apple omitted). (internal quotation marks in and about who was apprised fendants at 673. Id. many on board.”7 were how Negotiations Amazon with E. kept also Defendants Publisher prophetic. to be proved boast Jobs’s court As the district communication. close sign- Defendants were the Publisher While period, noted, negotiation critical “[i]n Contracts, in- they were also ing Apple’s January 19 days between the three over they planned on Amazon forming Shanks, Young, Reidy, 21, Murray, agreements terms of their changing the times, another 34 one Sargent called However, model. agency it to an with January on exchanged 27 calls ear- began in against move Amazon their Id. at 674. alone.” iPad day after the January on nest launch, 27 iPad five January By the afternoon, Sargent That John launch. Hachette, HarperCollins, Big Six— on ultimatum to Seattle deliver flew Macmillan, and Simon & Schus- Penguin, that Amazon would behalf Macmillan: in the agreed participate ter —had agreement with sales its ebook switch holdout, Random lone iBookstore.’ agency model or suffer to an Macmillan House, join its executives because did receipt of delay Macmil- seven-month under a fare better it would believed responded Amazon releases.9 Ian’s new unwill- model and pricing wholesale were purchase Macmil- removing option agency complete switch ing to make titles from its web- and ebook print lan’s the iBook- announced pricing. Steve Jobs site. introduc- presentation his part store as found, had court Sargent, district presen- after the iPad. asked ing the When as. intention to confront of his an informed Cue purchase why someone should tation leaving for Seattle.10 before ever to Amazon opposed from Apple $14.99 ebook which, designated New Indeed, titles were January Ap- morning of months on Apple Agreement and titles under the publishers to Release ple’s for the initial deadline price caps by Apple and MFN.” Reidy restrained agency, & Schuster’s commit to Simon F.Supp.2d at 679. your prog- Apple, get update Cue to “an on emailed herding cats.” J.A. 543. ress in us trial, he had no advance Cue claimed 10.At Seattle, Sargent’s plan go to knowledge general January & Simon Schuster’s 8. On testimony to found this district court but the Reidy "[could not] that she counsel wrote to statement,” Sargent had Cue emailed incredible. be [this] that Jobs made believe trip days meeting before the took his stupid.” “[i]ncredibly about which she considered Moreover, January day place. J.A. 638. biographer meeting, Jobs his told found, "went to Amazon months Publisher Defendants ”[s]even court 9. As the district said, agency sign an going contract 'You’re period number of was no random —it F.Supp.2d at 678. On his re- Apple, head of CBS that Simon & Schuster was turn, he emailed Cue to inform him about beginning agency negotiations with Ama- Amazon’s decision to remove Macmillan zon. She informed him that try- she was Kindle, adding say ing “delay” ebooks note to to negotiations because it was you that he wanted to “make sure in “imperative are ... that the other loop.” Sargent J.A. 640. also wrote a with whom has announced deals public push letter Macmillan’s authors and for resolution on their term changes” describing the Amazon agents, negotia- time, at the same leaving “thus not us out Nourry tions. Hachette’s emailed Arnaud there alone.” J.A. 701. Each of the Pub- parent company the CEO of Macmillan’s lisher Defendants then informed Amazon to express “personal support” his for Mac- they tight were under deadlines to millan’s actions and to “ensure [him] negotiate agency agreements, new going company to find [he was] [his] kept one another about the informed de- A Penguin alone the battle.” J.A. 643. negotiations. tails of their As Nag- David express executive wrote to support similar gar, one of negotiators, testified, Amazon’s position. for Macmillan’s whenever Amazon “would make a conces- important sion on an deal point,” it would court district found that while Ama- “come back to us from publisher another “opposed adoption agen- zon was asking for the same thing or proposing cy pricing model and did not want to cede similar language.” J.A. 1491. Publishers,” authority to the it knew that it prevail position against could not again, Once Apple closely monitored the Big five of the Apple, F.Supp.2d Six. negotiations with Amazon. The Publisher 671, 680. When Amazon told Macmillan Defendants would inform they Cue when that it would be willing negotiate agency completed agency had agreements, and his terms, Sargent sent Cue email titled team changes monitored Kin- Eddy, “URGENT!!” read: “Hi I am Penguin dle. When languished behind the gonna figure need to out our final agency others, Cue informed Jobs that tonight. you terms sale Can call me “changing a bunch Penguin titles please?” J.A. Sargent 642. Cue and 9.99” in the iBookstore “because and, spoke night while Cue denied at get didn’t their Amazon deal Ap- done.” trial that the conversation concerned Mac- (internal ple, F.Supp.2d at 682 quota- negotiations Amazon, millan’s the dis- omitted). By tion marks March trict court found that “his denial was not Macmillan, Hachette, HarperCollins, credible.”11 Apple, F.Supp.2d at 681 completed Simon & Schuster had agency By February n. 52. agreed Amazon had agreements with Amazon. Penguin When agency terms with Macmillan. June, completed its deal in company’s other publishers joined who had proudly executive announced to Cue that quickly (in- iBookstore followed Macmillan’s playing “[t]he field is now level.” Id. omitted).12 February Reidy lead. On quotation wrote to the ternal marks ” going give you or we’re not Apple, the books.’ under discussion were with Amazon.” Apple, F.Supp.2d F.Supp.2d at 678 n. 47. The dis at 681 n. 52. trict credibility court’s assessment of Cue's clearly was not Eventually, erroneous. nego the Publisher Defendants 12. agency agreements tiated with Barnes & No noted, ble, 11. theAs district court Macmillan Google. and later Random House also model, executed adopted agency its Contract with a week joined earli- er, iBookstore, agency so that in early "the final terms still retained February expert ing Prices on Ebook Effect F. —to that observed Department by the Justice Defendants the Publisher and As of the average price Publish- weighted the caps quickly price iBookstore the expected, by increased new releases Defendants’ er versions for ebook the benchmark became by increased 24.2%, while bestsellers' best- New York Times releases of new 40.4%, ebooks increased and other following the the five months sellers. average ebook 27.5%, weighted for a total iBookstore, publishers the launch Indeed, Ap- even of 23.9%.14 increase price switched marketplace the joined who that, over a noting expert ple’s agreed, priced 85.7% agency model to an Amazon Defendants the Publisher two-year period, and 92.1% of releases on Kindle of new for hardcov- average prices their increased at, just or the iBookstore on releases new releases, other ebooks. ers, new caps. Apple, below, price the for reduced demand Increasing prices York for New Prices at 682. F.Supp.2d Ac- Defendants’ ebooks. the Publisher leap a similar bestsellers took Times the experts, cording to one of Plaintiffs’ 96.8% of their to sell began publishers agency sold to who switched publishers of their and 99.4% Kindle bestsellers peri- 77,307 over a two-week at, just fewer ebooks or iBookstore on the bestsellers in a than agency to od after the switch caps. During Id. below, price the before the House, period comparable two-week Random period, time that same 12.9% switch, selling which amounted agency to an mod- switched which expert Another units. at 684. in fewer Id. el, change prices the for virtually no saw Random relied on data from House best- New York Times new releases or the many ebooks Publisher estimate how sellers. agen- Amazon switched Defendants who ripple had a caps also Apple price they stayed with cy have sold had Publisher Defen- rest of the effect on the model, and concluded wholesale the Recognizing Ap- catalogues. dants’ led price increases agency the switch tied to ple’s price caps were fewer Id. to 14.5% sales. books, many these hardcover changes place took Significantly, these newly prices of their re- increased changing backdrop rapidly of a against the to shift the ebook hardcover books leased Amazon introduced ebook market. price category. Id. higher into a version 2007, just two in over Furthermore, Kindle November because the Pub- at 683. in the iPad Apple launched years before who switched Defendants lisher period, During that short January 2010. to make less mon- expected model agency grew market Apple estimated than under the wholesale mod- ey per sale sales in 2007 to million ebook on their el, they $70 also increased company million and the not new releases best- $280 that were ebooks significant- figures grow those projected expected loss of up to make sellers expert wit- ly following years. Apple’s February Based on data from revenue.13 ebook con- argued that overall sales Defen- nesses just before the Publisher 2010— years in the two after pric- grow tinued to agency switched Amazon dants average price for the weighted controls 14. A Publisher Defendants accounted 13. The five different ebooks sell in that different fact sales in of all retail trade ebook for 48.8% con- by dividing total quantities during quarter of first States United paid ebooks the total number sumers sold. ebooks creation of the iBoókstore and that History II. Procedural average price fell during ebook those 11, 2012, April On Plaintiffs filed a pair years. But experts pointed as Plaintiffs’ of civil antitrust actions in the United out, expanding the ebook market had been States District Court for the Southern Dis- rapidly Apple’s entry even before and av- trict of New York. The complaints alleged erage prices falling had been as lower-end that Apple and the Publisher Defen- publishers entered the market larger Hachette, HarperCollins, Macmil- dants — numbers of old books became available in lan, Penguin, and Simon & Schuster —con- digital form. “Apple’s experts did not raise, spired fix, to and stabilize the retail present any analysis that attempted to price for newly released and bestselling many control for the changes that the e- trade § ebooks in violation of 1 of the book market experiencing during Sherman Act and various state laws. The years early growth,” these of its Apple, litigation proceeded then along two.sepa- 685, F.Supp.2d at nor they did esti- trajectories, rate one for the Publisher De- mate how the market grown would have fendants and the Apple. other for but Apple’s agreement with the Pub- for lisher Defendants to to an agency switch model and prices. contrary, raise To the A. Publisher Defendants undisputed fact that the Publisher De- Hachette, HarperCollins, and Simon & ebooks,

fendants raised on their agreed Schuster by settle with DOJ which accounted roughly 50% of the signing consent decrees on the day same trade ebook market in quarter the first that the Justice Department filed its com- necessitated “a finding that the ac- plaint. Act, Tunney Pursuant to the tions taken Apple and the Publisher § 16 seq., days prior U.S.C. et “at least 60 Defendants led to an increase in price of e-books.” Id. the effective date” of a judg- consent ment, the United States must file a “com- Finally, response to the dissent’s statement,” petitive impact includes, which claim that Apple’s conduct “deconcen alia, inter purpose “the nature and of the ... the e-book retail trat[ed] market” and proceeding,” description “a practices of the “pro-competitive,” Dissenting thus was Op. giving alleged or events rise to the viola- it noting is worth that the district laws,” explana- tion of the antitrust and an analysis parties’ court’s economic and the tion of the relief obtained the consent entirely submissions at trial focused on the judgment anticipated. “and the effects on price figures and sales for trade ebooks. 16(b). competition § such relief.” Id. parties This is because both agreed that compliance requirements, these the relevant market in this case is “the competitive DOJ issued a impact state- market, trade e-books the e-reader ment that planned outlined remedies it system’ market or the ‘e-books market.” Hachette, Inc., impose HarperCollins, on Apple, United States v. Simon & Schuster. Two of (S.D.N.Y.2012); proposed those F.Supp.2d Apple, that, required years, remedies for two F.Supp.2d at 694 n. 60. The district limit, restrict, three “not or im- analyze competi court did not the state of set, pede ability tion between ebook E-book Retailer’s retailers determine alter, acted, any pricing policy that Amazon’s or reduce the Retail Price of E- as the accuses, entry” any dissent as a book or to offer discounts or “barrier[] potential for other other form of Dissenting promotions,” retailers. and that 348-49, Op. any agreement” 351. not “enter into with retail- mar- to the competition retail diate J.A. 17 practices. limit such

ers that peri- cooling-off that a “23-month ket” and 1126-27. competition. restore od is sufficient” period, comment 60-day Alter approved court district 1162-63. The J.A. in the district moved Department Justice 17, 2013, May on decree Penguin’s consent entry of the “the a decision court for August and Macmillan’s interest,” 15 public judgment 16(e), approval § U.S.C. B. of the two- In defense consent decree. Defendants, Apple Unlike Publisher explained DOJ provisions, limitations year trial. case to Fact to take the opted Defendants used the Publisher discovery concluded on March expert “effectuat[e] to restrictions retail motions, the and, filing pretrial after was suffi- years that two conspiracy” Apple’s on a bench trial agreed to parties in market- “allow movement to cient relief, to followed injunctive be liability and with- conditions” away from collusive place damages on the trial on by separate a of development “altering] the ultimate out prevailed. if states claims state in landscape the still-evolv- competitive On industry.” J.A. 1054-55. ing e-books 2013, conducting a 10, after July On 5, 2012, court ap- the district September trial, court the district three-week bench found the decree and the consent proved 1 of § had violated that concluded restrictions retail-price two-year ban on anti various state Act and the Sherman De- Settling “wholly given appropriate brief, In the court found trust laws. provisions of such alleged abuse fendants’ conspiracy among Apple “orchestrat[ed]” ..., recognition that the Government’s to re “eliminate the Publisher Defendants unlawful, intrinsically such terms are not mar the e-book price competition [in tail competition in the state of and the nascent prices of e- in order to the retail raise ket] industry.” e-books J.A. F.Supp.2d at 697. Be Apple, books.” group of a Defendants, conspiracy consisted cause this remaining Publisher Defen Publisher Macmillan, competitors in of quick settled Penguin and —the 2012, by Apple increase dants —assembled Pen- succession. On December price- it a “horizontal prices, constituted with es- agreed to a consent decree guin Hachette, per se viola fixing conspiracy” sentially the same terms It Act. Id. at 694. re- tion of the Sherman & Schuster HarperCollins, and Simon moreover, concluded, that even later, if February in A ceived. few months prices and eliminate agreement to raise settle. The agreed Macmillan also un analyzed were retail competition consent decree con- of Macmillan’s terms reason, of it would still consti der the rule Rather than slight tained modifications. tute an unreasonable restraint trade on retail discounts delaying prohibition § decree, 1. Id. In the district court’s violation of approved the DOJ until the court view, persuasively dem experts Plaintiffs’ compliance begin Macmillan to required facilitated onstrated days signing the decree. three within price increase e-books “aeross-the board Department the Justice exchange, and a the- Defendants” sold Publisher beginning agreed to back-date Apple, on drop sales. Id. corresponding period to December limitations hand, “the failed show that years the other length its from two and to reduce “[cjonsumers opposed Agreements,” of the months, execution explaining of the iPad and “evolution to the launch by bringing more imme- served are better (which generally” more digital publishing § of the district 1 analysis court’s and also independent Agreements), were contends that injunctive order that the any district pro-competitive imposed “had effects.” Id. court on the company is unlawful. Macmillan and Simon & Schus After the district court liability issued its joined ter have Apple’s challenge to the decision, the parties briefing submitted on injunction, arguing that it impermissibly injunctive relief. The court conducted with, interferes their consent decrees and and, hearing September on the issue judicial barred the doctrine of estop- injunctive issued a final order against pel. We conclude that the district court’s (1) Apple and entered' final “Prohibited liability determination was sound and its Conduct,” prevents which Apple from en- injunctive order lawful. We therefore af forcing MFNs with publishers, ebook re- judgment firm the of the district court. taliating against publishers signing retailers, agreements agree- with other or I. Standard Review ing any of the Publisher' Defendants restrict, limit, impede ability trial, Following a bench this Court re (2) prices; to set ebook retail “Required views the “district findings court’s of fact Conduct,” which, among things, other for clear error” and its “conclusions of law forces modify agency agree- questions and mixed de novo.” Connors v. ments with the Publisher Co., Defendants and Conn. 127, 135 Gen. Ins. 272 F.3d Life (2d apps to treat ebook sold in Cir.2001); 52(a). the iTunes see Fed.R.Civ.P. (3) any there; app store like other sold district evidentiary court’s rulings and its “Antitrust Compliance,” requires which fashioning equitable relief are reviewed Apple improve system its internal for abuse of discretion. See Zerega Ave. (4) violations.; preventing antitrust Realty Corp. v. Hornbeck Offshore Compliance “External Monitoring],” LLC, (2d Transp., 206, 571 F.3d 212-13 which appoint Cir.2009) allows the court to an exter- (evidentiary rulings); Abraham nal monitor to ensure Apple’s compliance son v. Bd. Educ. Wappingers Of injunctive with the order. Dist., (2d 66, Falls Cent. Sch. 374 F.3d relief). Cir.2004) (equitable entry

After the of the district court’s injunctive order, Macmillan, Apple, and Si- Apple’s Liability II. § Under mon & appeal. Schuster filed this parties yet have not conducted trial to appeal This requires us address damages assess the stemming from the important distinction between “hori state antitrust claims. agreements zontal” prices, to set which involve coordination competitors “between

DISCUSSION structure,” at the same level of market [a] To hold a violating defendant liable for agreements and “vertical” pricing, Act, § 1 of the Sherman a district court parties which are created between “at dif must “a find combination or some form of ferent levels of market [a] structure.” News, Media, concerted action between at least two le Anderson v. L.L.C. Am. (2d gally Inc., Cir.2012) (inter distinct 162, 182 economic entities” that “con 680 F.3d omitted). stituted an § unreasonable of nal quotation restraint marks Under Capital Act, trade.” Imaging are, Assocs. Mo of the Sherman the former with v. Assocs., 537, hawk Valley unlawful, Med. exceptions, per 996 F.2d limited se while (2d Cir.1993); § see 15 U.S.C. 1. On the latter are unlawful if an assess appeal, Apple challenges aspects effects, numerous ment of market known as a rule-of- imper- court the distrifit argues that Apple unrea analysis, reveals

reason a hori- its involvement in missibly Leegin Crea inferred See trade. sonably restrain from the PSKS, Inc., conspiracy Prods., price-fixing zontal Inc. v. Leather tive (in. Ap- Because themselves. 127 S.Ct. Contracts vertical, view) were (2007). Contracts ple’s L.Ed.2d 623 eco- lawful, independent in Apple’s sharp the this distinction Although interest, fact the mere nomic an orientation determining the ory, multiple with same terms agreed to the as a matter of difficult can be agreement con- establish cannot identi simply than on more turns fact and among the conspiracy sciously organized a at the are participants whether fying to raise consumer- Defendants Publisher For structure. of the market level same if the ebo'ok facing effect —even recognized the instance, long courts prices. to raise those its Contracts was conspiracies “hub-and-spoke” existence that, if it did Second, argues even entity one level an in which con- price-fixing orchestrate horizontal “hub,” structure, coordinates market subject not be its conduct should spiracy, at a dif among competitors agreement an According Ap- se condemnation. per level, Hess “spokes.” Howard ferent of rea- of the rule ple, proper application Int’l, Inc., Dentsply Labs. Inc. v. Dental unlaw- was not its conduct son reveals that (3d Cir.2010); also see F.3d ful. FTC, Us, 221 F.3d Inc. v. “R” Toys Cir.2000). (7th arrange These

932-34 below, we set forth For the reasons agreements of both vertical ments consist record, arguments. On reject these spoke and a the hub each between not err determin- the district court did among spokes agreement horizontal Apple orchestrated ing that terms,” often to the [hub’s] “to adhere Defendants, Publisher among gone spokes “would because agreement as a hori- characterizing this agreements] ex along with vertical [the holding fixing-conspiracy, or in zontal understanding that the other cept on the unreasonably re- conspiracy thing.” to the same [spokes] agreeing were §of trade in violation 1 strained Hoven E. Areeda & Herbert Phillip VI Act. Sherman ed.2010) ¶ (3d Law 1402c kamp, Antitrust Conspiracy Co., Publish- A. PepsiCo, Inc. v. Coca-Cola 315 (citing (2d Cir.2002)); er Defendants Am. 101 see also Bar F.3d Ass’n, Developments 24-26 Antitrust Law Act 1 of the Sherman Section (6th ed.2007); & Hovenkamp, XII Areeda by a on trade “effected bans restraints ¶ 2004c.15 supra, combination, contract, conspiracy.” or 544, Corp. Twombly, v. 550 Bell Atl. U.S. its Contracts with

Apple characterizes (2007) 553, 1955, 167 L.Ed.2d a series S.Ct. the Publisher Defendants omitted). (internal marks quotation independent agree- vertical parallel but 1 case is |irst question “crucial in a Section ments, that forms the a characterization challenged conduct arguments therefore whether its two primary basis from First, independent decision or from ‘stem[s] decision. against the district court’s sense, competitors. See Dickson v. ''hub-and-spoke” the horizontal meta- 15. In 193, (4th plaintiff phor Corp., 309 F.3d 203-04 is inaccurate —the somewhat Microsoft prove Cir.2002). a “rim” also existence must agreement among an wheel in the form ” agreement, express.’ an tacit or Starr v. circumstantial facts supporting the infer Entm’t, 314, Sony BMG Music 592 F.3d ence a conspiracy existed.” Id. Cir (2d Cir.2010) (alteration in original) may cumstances that raise an inference of Enters., (quoting Theatre Inc. v. Para conspiracy include “a common motive to Corp., 537, mount Film Distrib. 346 U.S. conspire, evidence that par shows that the 540, 257, (1954)). 74 S.Ct. 98 L.Ed. 273 allel acts were against the apparent indi vidual economic self-interest of the alleged Identifying the existence and na conspirators, and high evidence of a level ture conspiracy requires of a determining (inter of interfirm communications.” Id. whether the “reasonably evidence tends to omitted). nal quotation marks Parallel prove that the [defendant] and others had may support conduct alone an inference of a conscious commitment to a common moreover, conspiracy, if it consists of designed scheme to achieve an unlawful “complex and historically unprecedented objective.” Monsanto Spray-Rite Co. v. changes in pricing structure made at the 752, 764, Corp., Serv. 465 U.S. 104 S.Ct. very same time by multiple competitors, (1984) (internal 1464, 79 quo L.Ed.2d 775 and made for no other discernible reason.” omitted). tation marks Parallel action is (internal Id. at quotation marks omit itself, not, by sufficient to pr'ove the exis ted). of a conspiracy; tence such behavior could “coincidence, be the independent result of Because of the risk of condemning responses stimuli, to common .in mere parallel conduct that indepen results from terdependence unaided an advance un dent action and not from an actual unlaw derstanding among parties.” Twom agreement, ful Supreme Court has 4, bly, 550 U.S. at 556 n. 127 S.Ct. 1955 against cautioned drawing an inference of (internal omitted). quotation marks In conspiracy from evidence that equally is deed, parallel behavior that does not result consistent with independent conduct as an agreement is not unlawful even if with illegal conspiracy or, as the Court — it anticompetitive. See re Text Mes it, “ambiguous” has called evidence. Mat saging Litig., Antitrust 782 F.3d 873- sushita Elec. Indus. Co. v. Zenith Radio (7th Cir.2015); In re Flat Glass Anti Corp., 597 n. 106 S.Ct. (3d Litig., trust 385 F.3d 360-61 Cir. (1986). Thus, 89 L.Ed.2d a find 2004). Accordingly, prove antitrust ing of conspiracy requires “evidence that conspiracy, plaintiff “a must show the exis tends to exclude possibility” that the circumstances, tence of additional often re defendant was “acting independently.” factors, which, ferred to as ‘plus’ when Monsanto, 764, 465 U.S. at 104 S.Ct. 1464. in conjunction viewed parallel with the however, requirement, This “[does] not acts, can serve to allow a fact-finder to mean plaintiff that the disprove must all a conspiracy.” Apex infer Oil Co. v. Di noneonspiratorial explanations for the de Mauro, (2d Cir.1987). 822 F.2d conduct”; rather, fendants’ the evidence can, These additional only circumstances need be sufficient “to allow a reason course, of consist of “direct evidence that able fact finder to infer that the conspira the defendants agreement” entered into an explanation torial likely is more than not.” like “a phone recorded call in which two In re Paper Litig., Publ’n Antitrust competitors (2d Cir.2012) agreed prices.” to fix Mayor F.3d (quoting Phillip Baltimore, City& Council v.Md. Citi E. Areeda & Hovenkamp, Herbert Funda of Inc., (2d group, 709 F.3d 14.03(b), § Cir. mentals Antitrust Law at of 2013). plaintiffs (4th But may ed.2011)); also “present Matsushita, 14-25 accord con- consciously orchestrated.a Apple that (requiring 106 S.Ct. 1348 Defendants. among the Publisher spiracy is reason conspiracy inference that “the below, as the district competing explained inferences As light in able High In action”); concluded, that its re Fructose Apple understood court independent Litig., 295 F.3d attractive to the Antitrust were Syrup proposed Contracts Com Cir.2002). only (7th if collec- Defendants Publisher 655-56 Ama- relationships with tively shifted their its Contracts with Apple portrays Apple agency to an model—which zon as, worst, Defendants the Publisher higher in consumer- knew result con facilitating]” joint their “unwittingly to these In addition facing prices. ebook did, it Apple All Br. at 23. Apple duct. moreover, Contracts, additional evi- ample on claims, to enter the market attempt was estab- by the district-court dence identified offering contractual terms profitable that the Publisher Defendants’ lished both model, the MFN agency provisions—an Amazon agency an model with shifting to Clause, caps en and tiered —which among express the result of collusion was each profit a small company sured consciously played a them and that it from retail and insulated ebook sale key organizing in that collusion. role This had the competition. effect concluding court did not err district an incen because it created raising prices bystand- an more than innocent to de Publisher Defendants tive for the er. agency adopt Amazon model mand that consumer-facing control over and to seize Big publisher offered each Six industry-wide. although But prices ebook attractive Contract that would be proposed terms its contractual Apple knew collectively. only if the acted Defendants would entice the Publisher model, agency Apple’s proposed Under (who away with Amazon’s wanted to do publishers stood to make less money per to seek control over pricing) $9.99 agree- wholesale sale than under their retailers, from Amazon and other ebook Amazon, De- ments with but Publisher on the Pub Apple’s capitalizing success willing were to stomach this loss fendants incentives, preexisting lisher Defendants’ the model allowed them to sell because contends, joined suggest it does not that it for more than new releases and bestsellers conspiracy among Defen Publisher Clause, how- Because of the MFN $9.99. sum, prices. to raise dants ever, sold each new release bestseller argument basic because Con in the iBookstore would cost $9.99 tracts the Publisher Defendants were to sell ebooks at long as Amazon continued fully independent consistent with its busi price. in order to receive the So interests, agreements provide ness those Apple’s proposed Con- perceived benefit §a 1 con only “ambiguous” evidence of tracts, Defendants had to Publisher court therefore spiracy, and district Amazon to an agency model as switch erred under Matsushita Monsanto something publisher no individual well— inferring conspiracy. such a leverage to do on its own. had sufficient Thus, start, Defendant would be disagree. Apple’s At the be- each Publisher We accomplish agency— the shift to nign portrayal of its Contracts with the able sign an persuasive— and therefore have incentive Publisher Defendants is not only it act- if Apple’s proposed themselves not because those Contracts Contracts— See because, unlawful, competitors. with its independently but ed tandem were Glass, Starr, 324; Flat context, 592 F.3d at they provide strong evidence COrH 360-61; (noting F.3d see also J.A. 1974 price point, put price and it caps in its agreements would “not fix the agreements it specifically because antici- publishers’ problems” they if could riot pated that publishers once the gained con- model). move Amazon to agency By an trol over prices, they push them very act of signing Contract with higher $9.99, higher than than Apple itself Clause, Apple containing then, an MFN deemed “realistic.” Apple, 952 F.Supp.2d each of the Publisher signaled Defendants (internal omitted). at 692 quotation marks a clear commitment to against move Ama-

zon, thereby facilitating their collective ac- On appeal, Apple nonetheless de tion. As the explained, district court fends the Contracts that it proposed to the spines” MFNs “stiffened the of the Pub- publishers an as “aikido move” that lisher Apple, 952 F.Supp.2d Defendants. shrewdly leveraged market conditions to at 665. advantage. its own Apple Br. at 17. “[Ajikido not, move” or the attractiveness

As a sophisticated negotiator, Apple was of Apple’s offer to the Publisher Defen fully aware that proposed Contracts dants hinged on whether it could success would entice a critical publishers mass of fully help organize them to force Amazon only if publishers these perceived op- an to an agency model and then to use their portunity collectively to shift Amazon to newfound collective control to raise ebook fact, agency.16 In very this was the pur- prices. Supreme Court has defined pose MFN, Apple’s which Saul de- an agreement for § Sherman Act 1 pur vised an elegant provi- to a alternative poses as “a conscious commitment to a sion that would explicitly required designed common scheme achieve publishers adopt an agency model Monsanto, objective.” unlawful it, with other retailers. As put Cue (internal 104 S.Ct. 1464 quotation MFN “force[d] the model” from wholesale omitted). Plainly, marks this use of the agency. Indeed, J.A. 865. the MFN’s promise of higher prices as a bargaining capacity for forcing collective by action chip to induce the Publisher Defendants to publishers was precisely what enabled participate the iBookstore constituted a predict Jobs to with confidence that “the conscious goal commitment to the price will be rais the same” on the iBookstore ing prices. ebook and the “Antitrust law has never Kindle when he announced the required same, among identical motives said, conspira launch of the iPad —the Jobs independent tors” when their publishers because the reasons for would make Ama- “sign joining together zon ... lead to agency collusive action. contracts]” Spectators’ threatening to withhold Network Inc. their ebooks. J.A. Commc’n v. Colo Club, (5th fully Country 891. was also nial aware that once 253 F.3d Cir.2001) added). the Publisher (emphasis Defendants seized control Put different consumer-facing ly, over ebook prices, “independent those reasons” can also “in be prices would rise. It knew from terdependent,” the outset and the fact that the hated Amazon’s conduct was in $9.99 its own economic interest in Apple's argument appeal that it did Publisher Defendants under- not. power have sufficient market to coordinate position stood that was in a to “solve” point. the Publisher Defendants is beside the publishers' problem” by helping “Amazon power may Market afford one means them eliminate what saw as a mortal company which a can coerce others to com- namely, threat $9.99 to their businesses— wishes, ply with its but brute force is not the price point. Here, only way agreement. to foster an both regarding communication it were constant that inference the way no undermines and Apple with both negotiations ebook to raise their agreement an entered Indeed, hardly disputed. be Hovenkamp, supra, can & Areeda Amazon prices. VI omitted). that the seriously (internal argues ¶ marks quotation never Apple 1413a acting not were Defendants Publisher joint Defendants’ Publisher the Nor was concert. parallel a result Amazon against action explained, have As we decisionmaking. claims, have it cannot so, Apple Even solely competitors’ from resulting conduct among the conspiracy organized - not decisions—and business independent merely “un- if it Publisher Defendants not unlawful “agreement” any —is joint conduct.” facilitated wittingly [their] Act, if it is even § the Sherman 1 of under argument But at 23. Apple Br. Messaging, 782 Text See anticompetitive. dramatically so—on founders —and per- a generate But to at 873-79. F.3d court. As the district findings of factual plaintiff agreement, inference missible Apple’s Con- explained, district court that evidence sufficient present only need be con- “must publishers with tracts that it conclude was agreement such entire rec- in the context sidered near-simultaneous likely that equally at 699. F.Supp.2d Apple, ord.” by multiple Apple’s Contracts signing of of the ex- was unaware Apple if Even to all of the Pub- led publishers —which coordi- Defendants’ tent of Publisher Ama- moving against Defendants lisher them,17 approached when first nation it indepen- parties’ from the zon—resulted with them subsequent communications its “meeting decisions, to a as opposed dent show that negotiations progressed Monsanto, at minds.” [the] key role in consciously played a Apple Us, 221 1464; “R” Toys see 104 S.Ct. express collusion. From their organizing (holding that exclusive- F.3d 935-36 outset, told the that Cue retailer dealing agreements between its iBookstore would launch contrary to the that were manufacturers agreed them if a sufficient number but self-interest manufacturers’ individual publisher that each participate interest with their collective consistent terms, assuring identical receive would of a horizontal the inference supported major pub- that a critical mass of them participat- retailer conspiracy which the to move prepared be would lishers ed); Hovenkamp, supra, Areeda & VI on, Cue and his Amazon. Later against ¶ (“[A] in- 1425a, may be conspiracy d publishers updated about kept the team if action would ferred a defendant’s signed Apple’s many peers of their in the how contrary to self-interest been that it Contracts, them reminded agreement.” Id. of advance absence pub- ¶ “the best 1425a). offering chance Defendants was That the Publisher merely ongoing conspiracy in late but draw the district Apple endeavors to 17. Apple went its initial meet- asserting, that into factfinding doubt observed court’s into understanding ings with the that Publish- erroneously, court's that the “bedrock disliked, trying and were Defendants hinges supposed deter- er on its entire decision” and so fight, pricing, $9.99 knowing pub- Apple, Amazon's mination beforehand, open receptive to the news coordinating be had been lishers F.Supp.2d Apple, higher prices. See conspiracy joined preexisting raise amply supported findings were These meetings De- Publisher at its initial among that, help explain how says, is un- proposition it fendants —a court, thereaf- Apple and the Publisher Defendants supported the record. district however, emerged. joined ter did not find challenge price point” lishers to the 9.99 the trial repeatedly characterized as “over- it whelming” by explaining before became in “con- piece “cement[ed]” how each — standing of evidence expectations.” sumer J.A. 522. alone is “ambiguous” When and short, therefore insufficient to Apple phone support time ran coordinated conspiracy. inference of per- We are not calls between the who had cases, suaded. In antitrust “[t]he charac- agreed and those who remained on the ter and effect conspiracy of a are not to be trial, Apple fence.18 As Cue said at en- judged by dismembering it viewing deavored to publishers] [the “assure separate parts, only by but looking at it as alone, they going weren’t to be so that a whole.” Cont’l Ore Co. v. Union Carbide [Apple] take awa[y] the fear Corp., 690, 699, & Carbon the Amazon retribution that they were (1962). S.Ct. 8 L.Ed.2d 777 Com- all afraid of.” J.A. 2068. bined with the purpose unmistakable Apple’s conspiracy involvement the Contracts that Apple proposed to the continued even past signing of its publishers, and with the collective move agency agreements. Sargent Before flew against Amazon that inevitably followed Amazon, to Seattle to meet with he told signing Contracts, of those the emails Apple stayed Cue. abreast of the Publisher phone records demonstrate that progress Defendants’ set coordi- agreed Defendants, with the Publisher nated deadlines with Amazon and shared within the meaning Act, of the Sherman information during nego- with one another raise consumer-facing prices by ebook Apple’s tiations. communications with the eliminating retail price competition. The Publisher Defendants thus went well be- district court did not in rejecting err Ap- yond legitimately “exchanging] informa- ple’s argument the evidence of its tion” within “the normal course of busi- orchestration of the Publisher Defendants’ ness,” Monsanto, 762-63, 465 U.S. at 104 conspiracy “ambiguous.” (internal quotation S.Ct. marks omit- Given the record and the district court’s ted), “friendly among banter business findings, factual we do not share Apple 38; Monsanto, partners,” Apple Br. at see and its amici’s concern that we will stifle 765-66, (con- 465 U.S. at 104 S.Ct. 1464 productive enterprise by inferring an cluding message about getting “the agreement among Apple and the Publisher place market in order” could lead to infer- Defendants on the basis of otherwise law (internal conspiracy ence of quotation terms, ful contract agency such as an mod omitted)); Starr, marks see also 592 F.3d with, el and MFNs. To begin it is well 324; Oil, Apex 822 F.2d at 255-57. agreements, established that vertical law Apple responds abstract, to this evidence— ful in the can context “be experienced judge which the who plaintiff oversaw useful evidence for a attempting 18. takes issue with the "herding district court's ed to Cue’s role in us cats.” J.A. of, Moreover, conclusion that was aware and facil- publishing executives fre- itated, communication between the Publisher quently having any denied conversations Defendants. But the district court found that Apple during period, despite strong about Reidy believed Cue was a “leader” in the documentary phone record evidence to that, publishing industry and on at least two contrary. The district court found that negotiating occasions toward the end of the credibility "strongly these denials lacked executive, period, Cue called a recalcitrant supported] finding of consciousness of spoke Reidy who then agreeing before guilt.” Apple, F.Supp.2d at 693 n. 59. Apple, F.Supp.2d terms. See clearly This view of the facts is not erroneous. 659-60; Reidy J.A. 2019-20. advert- herself Competitive Consequences: car tal of a horizontal existence prove the of Effects Clauses, 64 893, 127 S.Ct. at “Most-Favored-Customer” 551 U.S.

tel,” Leegin, (1996); multiple competi 517, see also 2705, where L.J. 520-21 Antitrust particularly Chevalier, that would agreements A. sign vertical & Judith tors B. Baker Jonathan they interests were own their against Mostr- Consequences be Competitive of see, e.g., Interstate independently, acting Antitrust, Provisions, Favored-Nation 222, States, 208, 306 U.S. v. United Circuit 2013, 20-26, http:// at available Spring (1939); Toys 467, L.Ed. 610 83 S.Ct. 59 digitalcommons.wcl.american.edu/cgi/ The MFNs in Us, at 935-36. 221 F.3d “R” & cont viewcontent.cgi?article=1280 of econom a set created Contracts Apple’s ext=facsch_Iawrev.19 the. Con to which pursuant ic incentives difficulty on this short, no we have In to the Publisher only attractive tracts were argument that rejecting Apple’s récord they acted collec to the .extent Defendants concluding Ap- that court erred district contract terms had That these tively. Publisher Defen- “conspir[ed] with the ple circum particular under the effect an such competition retail to eliminate dants furnish therefore this case—and of stances Apple, 952 prices.” e-book and to raise Apple’s agreement of evidence part of that Having concluded at 691. F.Supp.2d says noth Publisher Defendants — an correctly identified the district court It should legality. their broader ing about Apple and Publish- agreement between analysis our is in that self-evident be consumer-facing to raise in which er Defendants context particular formed Apple’s deployed. prices, were we turn contract terms ebook ground new event, breaking agreement are no that any arguments we dissent’s MFNs, surely though concluding § that Act. 1 of the Sherman not violate did contexts, “Misused many can be proper - ends in some cases.” anticompetitive Restraint of Trade B. Unreasonable Blue United Wis. Cross & Shield Blue Act, by its “Although the Sherman Clinic, 1406, 65 F.3d 1415 v. Marshfield terms, ‘in re every agreement prohibits Starr, (7th Cir.1995); at 324 see 592 F.3d trade,’ has Supreme] Court [the straint conspiracy). (finding MFN evidence recognized Congress that intended long circumstances, an right MFN Under restraints.” outlaw unreasonable anticompetitive “facilitate horizontal can Khan, 3, 10, 118 Oil Co. v. State by “reducing] company’s] [a coordination” (1997). Thus, 199 139 L.Ed.2d S.Ct. coordinated to deviate from a incentive claim, plaintiff antitrust to succeed on an Jonathan B. arrangement.” horizontal de- the common scheme Baker, prove must Restraints with Horizon Vertical Apple under- suggest holding remotely The Publisher Defendants our Nor does 19. unlawful, price caps always caps which are stood that become these Khan, Co. v. industry.” are not. See Oil State across the J.A. "standard (1997) L.Ed.2d 199 S.Ct. U.S. negotiations therefore reflected (holding price-fixing that vertical maximum understanding prices would common analyzed under the agreements should be rule rise, opinion among the co- but a difference reason). caps Apple required price be- high they conspirators how could reason- over the Publisher Defen- cause it knew once Andreas, 216 ably go. States v. See United to seize control over dants moved Amazon Cir.2000) (“The (7th F.3d need prices, they them. ebook would raise spme conspiracy with negotiate details of the the Publisher wanted to ensure that Defen- strip does not defen- cartel ... members prices” that reflected the set "realistic dants role.”). organizer dant of the producing ebooks. J.A. 359. lower costs of signed by conspirators (holding “constituted that the of reason applies rule restraint of per unreasonable trade either vertical Khan, minimum price-fixing); se or under the rule of reason.” Capital U.S. 118 S.Ct. (holding that the Imaging, 996 F.2d at 542. rule of reason applies to vertical maximum price-fixing). cases,

In antitrust “[p se ]er analysis rule-of-reason are ... two case, In this the district court held that methods of determining whether a re between and the ‘unreasonable,’ i.e., straint is whether its Publisher was Defendants unlawful under anticompetitive outweigh effects pro- rule; per alternative, se in the even competitive effects.” Atl. Co. v. assuming that a rule-of-reason analysis Richfield Co., 328, 342, USA Petroleum U.S. 49.5 required, the was district court concluded 1884, (1990). S.Ct. 109 L.Ed.2d 333 Be agreement that the was still unlawful. See cause balancing typically requires Apple, 952 F.Supp.2d at 694. appeal, On case-by-case analysis, “most antitrust consider primary we three arguments analyzed claims are under ‘rule of [the] against application of per se rule. reason,’ according to which the finder of First, Apple and our dissenting colleague fact must decide the questioned whether argue per that the se rule is inappropriate practice imposes an unreasonable restraint in this case because Contracts with Khan, on competition.” 10, 522 U.S. at the Publisher vertical, Defendants were 275; Commc’ns, 118 S.Ct. see also Gatt not horizontal. if Even the challenged Assocs., L.L.C., 68, Inc. PMC v. 711 F.3d agreement horizontal, here was Apple ar- (2d Cir.2013). However, 75 n. 8 some next, gues promoted it “enterprise and restraints predictable “have such per and productivity.” Finally, Apple contends effect, anticompetitive nicious and such that even if horizontal, was potential procompetitive limited for bene not, fact, it “price-fixing” conspir- fit, they are deemed per unlawful se.” acy of the kind that per deserves con- se Khan, 10, 522 U.S. at 118 S.Ct. 275. This address, demnation. We reject, these rule a longstanding judgment” “reflect[s] arguments in turn. Because the ebook case-by-case analysis unnecessary industry, however, is new and at least practices that, “by certain their na arguably involves ways some new of doing ture[,] have a substantial to un potential” business, consider, I also writing only for reasonably competition. restrain FTC v. myself, Apple’s argument. rule-of-reason Ass’n, Sup.Ct. Lawyers 411, Trial 493 U.S. 433, 768, (1990) 110 S.Ct. 107 L.Ed.2d 851 Whether the Per Se Rule Applies (internal omitted). quotation marks Agreement a. Horizontal

Horizontal price-fixing conspiracies tra been, ditionally remain, light the “ar In of our conclusion that the dis- chetypal example” of a per se unlawful trict court did not in determining err Catalano, restraint on trade. Inc. v. Tar Apple organized a price-fixing conspiracy Sales, Inc., get 643, 647, 100 446 U.S. among Defendants, S.Ct. Publisher (1980). By contrast, 64 L.Ed.2d 580 and the dissent’s argument against initial Supreme years Court in recent has per se rule —that Apple’s conduct must clarified vertical including subject be analysis to rule-of-reason be- restraints — those that restrict general cause it involved merely multiple indepen- —should ly subject be dent, to the rule of reason. See agreements vertical with the Publish- Leegin, 551 U.S. 127 S.Ct. 2705 er succeed. Defendants —cannot objective of when liable conspiracies § 1 of under legality” of test true “The se unreasonable per was a conspiracy the restraint whether Act “is the Sherman Posner, A. Richard trade. See restraint merely regulates and as is such imposed Treatment in the Antitrust Step Next competition thereby promotes perhaps Legali Per Se Distribution: Restricted or even may suppress it is such whether (“[C]ases (1981) 6, 22 L.Rev. ty, 48 U. Chi. City Trade Bd. competition.” destroy collude ... or distributors in which dealers States, 246 U.S. v. United Chi. bring in the manu among themselves (1918)(emphasis 242, L.Ed. 38 S.Ct. cartel, ... can be their to enforce facturer a hori- to orchestrate added). By agreeing rules the conventional with under dealt com- conspiracy, price-fixing zontal con price-fixing to horizontal applicable unlawful “achievfing] [that] mitted itself Klor’s, Broadway- v. Inc. spiracies.”). Monsanto, objective,” Stores, Inc., example, the Su Hale marks omit- (internal quotation S.Ct. promi considered whether Court preme among ted): namely, collusion appliances electronic of could nent retailer to set ebook Defendants Publisher § 1 the Sherman under of be held liable moreover, agreement, of type This prices. with and fostering Act for always or almost would “that is a restraint com to have those its distributors among competition and restrict always tend to retailer. 359 boycott competing a panies 886, at Leegin, 551 U.S. output.” decrease 705, 207, 3 L.Ed.2d 741 79 S.Ct. U.S. (internal marks quotation 127 S.Ct. 2705 ar this (1959). Court characterized The omitted). sup boycott[]” “[g]roup aas rangement and our by Apple raised response, The consisting a combination “wide ported Apple engaged colleague, dissenting a retail manufacturers, distributors of se per is unfit for in “vertical conduct” It then 212-13, 705. 79 S.Ct. er.” Id. at therefore misconstrues condemnation were that, if the combination decided of type It is the analysis. Sherman Act trial, retailer liable holding at proved impose that de agreed restraint “[g]roup appropriate be because or the per se rule termines whether by traders refusals boycotts, or concerted rules These appropriate. is rule of reason traders,” per are se with other to deal re [a] evaluating “whether are means of Id. at of trade. restraints unreasonable unreasonable,” the reason straint is 212, 705. 79 S.Ct. role in particular of defendant’s ableness a a similar Supreme The Court followed 495 U.S. Richfield, at scheme. Atl. v. Mo- States General approach in United (in added) (emphasis 342, 1884 110 S.Ct. 1321, 127, 16 86 S.Ct. Corp., 384 U.S. tors omitted); see also marks quotation ternal (1966), it considered when L.Ed.2d 415 v. Bd. Athletic Ass’n Collegiate Nat’l car manufactur- prohibited § 1 whether 85, of Okla., Regents the Univ. Motors, coordinating er, from General (1984) 2948, 103, 82 L.Ed.2d 104 S.Ct. other deal- dealerships prevent group (“Both of Reason rules and the Rule per se prices. discount selling cars at from ers judgment about to form a employed are arrangement a majority called this of the re significance competitive in of trade” conspiracy restraint “classic (internal marks omit quotation straint.” Motors’ entertain General refused to ted)). company’s reasons to consider request 140, at Id. conspiracy. creating principle, Su Consistent explained that Court S.Ct. our Circuits have Sister preme Court “[tjhere that the effect be no doubt can “hub-and-spoke” all participants held ... the combination here was to restrain unreasonable they pose because a “threat trade and commerce within the meaning of to the system central nervous of the econo- “[ejlimination, the Sherman Act” because my,” United Socony-Vacuum States v. Oil joint action, collaborative of discounters Co., 59, 224 n. U.S. 60 S.Ct. access to the per market is a se (1940); 84 L.Ed. 1129 just threat is violation the Act.” Id. at 86 S.Ct. significant when a vertical partici- market 1321; see, Us, e.g., Toys “R” F.3d pant organizes the conspiracy. Indeed, as 936; Marina, Denny’s Inc. v. Renfro notes, the dissent the Publisher Defen- Prods., Inc., (7th 8 F.3d 1220-21 dants’ coordination to fix is uncon- Cir.1993); United v. MMR Corp. States tested on appeal. See Dissenting Op. (LA), (5th Cir.1990); F.2d see competitive 348. The effects of that same Stutz, Albert Foer & Randy also Private restraint are no merely different because a Antitrust Law in the Enforcement of conspirator different is the defendant. (2012). United States 29 Accordingly, Because the when Supreme reasonableness of a re- Court effects, straint turns on anticompetitive has applied the rule of reason to vertical and not the identity of each actor who agreements, it. has explicitly distinguished participates it, in imposing Apple and the situations which a player orga vertical dissent’s observation that the Supreme nizes horizontal instance, cartel. For Court has apply per refused se rule Business Electronics Corp. v. Sharp Elec to certain vertical agreements inappo- Corp., tronics the Court concluded that an site. The rule is unquestionably reason agreement “between a manufacturer and a appropriate to analyze agreement be- dealer to terminate” another dealer is a tween a manufacturer and its distributors nonprice “vertical restraint” that should be to, instance, for price limit the at which the evaluated under the rule of reason. 485 distributors sell the manufacturer’s .goods 717, 726, U.S. 1515, 108 S.Ct. 99 L.Ed.2d or the locations at which they sell them. (1988). 808 The Court distinguished Gen Leegin, 881, See 551 at U.S. 127 S.Ct. eral Motors and Klor’s on grounds that 2705; T.V., Cont’l Inc. v. Sylvania GTE “both cases involved horizontal combina Inc., 36, 57, 2549, 433 U.S. 97 S.Ct. 53 tions,” 734, 108 1515, id. at S.Ct. and noted (1977). L.Ed.2d 568 These vertical re- that “a facially vertical imposed restraint widely strictions “are used in our free by a manufacturer it because has economy,” market can enhance int'erbrand been coerced ‘horizontal ... carte[l]’ competition, and inevitably do not have a in reality restraint,” horizontal id. at “pernicious effect competition.” on Cont’l 4, (alteration 730 n. 108 S.Ct. 1515 origi in T.V., 57-58, 433 U.S. at 97 S.Ct. 2549 nal). recently, More in Corp. NYNEX v. (internal omitted). quotation marks But Discon, Inc., the Court ruled that buy “a “agreement relevant in restraint er’s buy decision to from one seller rather trade” this case is not Apple’s vertical than subject another” is to analysis under Contracts with the Publisher Defendants the rule 128, 130, of reason. (which 525 U.S. 119 well, might if challenged, have to be 493, (1998). S.Ct. 142 L.Ed.2d 510 In reason); evaluated under the rule of it is arriving conclusion, at this horizontal the Court took agreement Apple orga- that distinguish, care to among overturn, nized rather Publisher than Defendants to Klor’s, prices. noting raise ebook explained below, per As se liability ap was agreements horizontal with propriate organizer purpose the conspira and effect of raising prices per cy are sé in that case agreement because the at

324 theory on “hub-and-spoke” ing plaintiffs agree a ‘vertical’ “simply not issue remand). customer, but supplier ment between com among agreement a ‘horizontal’ [also] colleague suggests dissenting Our (citing 136, 493 119 at S.Ct. Id. petitors.” liability for se “rejected per also Leegin 734, 108 at 485 U.S. Corp., Bus. Elecs. Dissenting hub-and-spokes agreements.” 1515). S.Ct. single on a relies position This at 346. Op. Leegin Creative analysis decision of how Court’s opinion’s The sentence Inc., PSKS, is no Products, Inc. v. harm can Leather restraints resale vertical 2705, 877, 127 S.Ct. 551 U.S. that, a “verti different. if states which competition, (2007). Leegin, a 623 L.Ed.2d resale minimum setting cal sepa- into entered manufacturer leather a hori facilitate” upon to entered prices is retailers, of its each with agreements rate held cartel, need be it “would zontal goods to sell its them required which Leegin, reason.” rule of under the unlawful retailer plaintiff prices. certain —a If the 2705. 127 S.Ct. U.S. at require- comply refused who to overturn General meant Court Supreme resale these argued that ment — it has precedents Motors Klor’s— per se constituted agreements maintenance sen cryptic consistently reaffirmed —this Act. The Su- Sherman violations way to accom certainly an odd tence was concluding that disagreed, preme Court Court Supreme result. plish judged are to be price restraints “vertical overturn, dramat normally or so “does not 882, 127 reason.” Id. rule of limit, authority sub earlier ically silentio.” careful to analysis was Its S.Ct. Term Long v. Ill. Council Shalala restraints and vertical between distinguish Inc., Care, S.Ct. price restraints Vertical horizontal ones. also, (2000); Nestor e.g., see L.Ed.2d se rule because per are unfit n. Whitney, 466 F.3d v. Pratt & to in- encourage retailers used to can be Cir.2006) (“It purview (2d within our is not by ensuring promoting product vest Court Supreme anticipate whether their will undercut that other retailers existing prece day overrule may one 890-92, See good. for that id. prices Santiago, v. States United (quoting dent.” However, vertical 127 S.Ct. Cir.2001) (inter (2d 151, n. 6 268 F.3d organize to can be used also restraints omitted))). marks quotation nal prices, increase which cartels horizontal possibility the worry about not We need be, per se unlawful.” are, ought to “and gov- law covertly changed the Leegin that used for 127 S.Ct. 2705. When Id. at conspiracies, howev- hub-and-spoke erning agreement the vertical purpose, such by the relied er, passage upon because prove “useful ... may be evidence holding entirely with is consistent dissent Id.; cartel.” see of a existence horizontal liable conspiracy in such a the “hub” supra, Hovenkamp, & also VI Areeda joins. A that it the horizontal ¶ it made that was clear Court 1402c. vertical can conspiracy use horizontal of the man- addressing only the lawfulness with- coordination to facilitate agreements and not agreements vertical ufacturer’s to those parties agreements out the other the manufacturer plaintiffs claim to, horizon- about, or agreeing knowing in an horizontal unlawful “participated also example, a car- For goals. tal conspiracy’s Id. at competing retailers.” with cartel compli- could ensure PSKS, tel of manufacturers 2705; 907-08, also see S.Ct. by having prices fix Prods., a scheme to ance with Leegin Creative Leather Inc. v. ad- “require its dealers Cir.2010) (consider- (5th every member Inc., 615 F.3d 412 to specified prices.” tors, here resale VIII Ar and can escape therefore per se liabil- ¶ eeda Hovenkamp, supra, & 1606b. Be ity. We think not. Even in light of this may it cause be difficult to distinguish such conclusion, however, we must address two facilitating practices from procompetitive arguments additional that Apple raises vertical resale agreements, quot against application of per se rule. passage Leegin ed from notes that those “vertical agreements] ... would need to' “Enterprise b. Productivity” held unlawful be under the rule of reason.” 551 U.S. at 127 S.Ct. 2705. But there refuge seeks per se rule is no such possibility for confusion by invoking a line of cases in which courts context, hub-and-spoke where the vertical permitted defendants to introduce organizer has not to verti committed procompetitive justifications for horizontal agreements, cal but agreed has also to price-fixing arrangements that would ordi- participate in the horizontal conspiracy. narily be per condemned if se those agree- situation, In that the court need not con ments “when adopted could reasonably sider whether the agreements vertical re have been promote believed to ‘enterprise ” strained trade because all participants and productivity.’ Apple Br. 50 (quot- agreed restraint, to the horizontal which is ing In re Acid Litig., Antitrust Sulfuric ought be, “and per se unlawful.” Id.20 (7th Cir.2012)) (inter- F.3d quotation omitted). nal mark The deci- short,

In the relevant “agreement sions falling in narrow, this line are restraint of trade” in this case is the they do not support Apple’s position. .price-firing conspiracy identified Music, Broadcast Inc. court, v. Columbia Apple’s district vertical con (“BMI Broadcasting ”), System, Inc. tracts the Publisher Defendants. How defendants corporations the law were might treat formed vertical copyright agreements negotiate owners absence of a “blanket li- finding Apple agreed censes” allowing perform create the licensees to any horizontal is Instead, restraint ques irrelevant. licensed works for a fee. 441 flat 1, 4-6, tion is whether the vertical organizer of a U.S. S.Ct. 60 L.Ed.2d 1 (1979). horizontal conspiracy designed to raise Although this literally scheme agreed has to a restraint any “price amounted to fixing” by the defen- anticompetitive less than its co-conspira- dants’ members, the Court upheld it un- Leegin, 20. Since the Sixth spoke Circuit ac system has spokes is how the are connected knowledged plaintiffs can "establish[] a (3d to each other.” 618 F.3d Cir. per se violation the Sherman [of Act] under 2010) (internal omitted). quotation marks spoke theory.” hub and the Total Benefits The acknowledged court also "[t]he anti- Planning Agency,Inc. v. Anthem Blue Cross & competitive danger alleged inherent” in hori Shield, 430, (6th Blue 552 F.3d n. 3 435 zontal necessarily mitigated collusion “is not Cir.2008). To the extent that the Third Cir by the fact that” a broker at a different level cuit decided in otherwise Toledo Mack Sales of the market "managed structure the details Serv., Trucks, Inc., Inc. & v. Mack 530 F.3d bid, of each nor the likelihood that the 204, (3d Cir.2008), 225 opin more recent horizontal collusion would not have occurred ions cast doubt on that decision. In In re without the broker’s Id. involvement.” at Brokerage Insurance Litigation, Antitrust for panel 338. Brokerage, in Insurance how example, the court noted that "hub-and-spoke ever, had no occasion to revisit Toledo Mack conspiracies” long "a history in antitrust plaintiffs because the had failed to establish a jurisprudence,” and cited Total for Benefits horizontal "rim” in the hub- —the position the that "[t]he critical issue for estab and-spokes conspiracy. Id. at 362. lishing per se violation with the hub and 326 Supreme the Court advantages. As blanket son’s reason because of rule the der itself, in BMI see explained including has eliminate only way to were the

licenses — 11, 99 S.Ct. 1551—the & n. 441 U.S. at 8 copyright cost of each “prohibitive” the of all the benefits lose se rule would per licenses, individually negotiating owner’s ” could seek conspirators if being “per se work, use of licensees’ their monitoring of its on the basis justify their conduct at Id. the licenses’ terms. enforcing every in competitive benefits purported Collegi- 20-21, In National 99 S.Ct. 1551. Here, joint no venture there was case. Regents v. Board Athletic Ass’n ate of of relationship be productive other similar (“NCAA"), University Oklahoma the in con the any participants of the tween in the applying BMI relied on Court the does joined. Apple also spiracy (but ultimately striking reason rule claim, it, creating nor could down) by the National placed restrictions if only the possible market is retail ebook (“NCAA”) Association Collegiate Athletic with coordinate participating that its games football the number of on price. one another on net- television agree could members 103, 85, 104 468 U.S. to broadcast. works Conspiracy Price-Fixing c. (1984). Many 2948, 70 82 L.Ed.2d S.Ct. for noted, Court has Supreme As mem- on its NCAA’s restrictions collu that horizontal nearly years 100 held product if the [ama- were “essential bers “archetypal ex prices raise is the sion to all,” available so is to be at teur athletics] restraint of per se unlawful ample” of a broadcast re- “fair evaluation” of the a' , ’ Catalano, 100 U.S. at trade. 647 re- “competitive character strictions’ successful, conspira If these S.Ct. jus- consideration NCAA’s quired] to set power concentrate the cies 101, at restraints.” Id. tifications including among conspirators, 103, 104 S.Ct. 2948. to fix market and to control the “power charac Supreme Court has prices.” unreasonable Unit arbitrary and Co., to situa these as limited terized decisions Potteries v. Trenton ed States competition where the “restraints tions L.Ed. U.S. S.Ct. (1927). to be avail “not product if is unsuccessful or are essential And even if Needle, Inc. v. Nat’l complete at all.” at elimination able Am. ... aimed 183, 203, conspiracies pose League, 560 U.S. competition,” Football (2010) system of (quot the central nervous 176 L.Ed.2d 947 “threat S.Ct. 2948) NCAA, 101, 104 creating dangerously economy” by at ing 468 U.S. S.Ct. omitted). competitors (internal opportunity marks But quotation attractive cases, expense of power their broadly, these and oth if read enhance even Oil, Socony-Vacuum others. category, apply rule of in this ers (1940). Thus: 224 n. 60 S.Ct. 811 restraint at issue reason when with some kind imposed per connection are [P]rice-fixing condemned cartels joint XI potentially tempting venture. efficient se because conduct ¶ 1908b; Hovenkamp, supra, dangerous soci- very & but Areeda businessmen Acid, see, are at 1013 social benefits e.g., F.3d The conceivable ety. Sulfuric magnitude, defen (describing joint principle, formed small venture few dants). occurrence, always in differently, a in participant speculative Put only price-fixing may premised invoke on existence agreement price-fixing likely to be exercised certain, which is power “enterprise limited kinds if And adversely public.... to the even of rea to receive the rule productivity” power usually ebook, is any established while upset model, and reduced not, litigation defenses are will com- prices be by consumers eliminating the plicated, delayed, condemnation to print, store, need and ship physical vol- price-fixers be encouraged to hope for umes. Its price point $9.99 for new releas- escape, punishment and criminal less es and represented bestsellers a small loss justified. generally per- Deterrence of a on a small percentage of its designed sales practice nicious would be weakened. to encourage consumers adopt the new technology. Ass’n, Lawyers Trial 493 U.S. at n. Areeda, S.Ct. 768 (quoting Philip Faced with pressure downward ¶ (1986)).

Antitrust Law at 412-13 prices but unconvinced that withholding books argue and its amici Amazon was a viable strategy, agreement horizontal among the the Publisher publish Defendants —their coordina- actually ers was not tion a “price-fixing” by con orchestrated Apple—combined spiracy that per grab deserves se forces to treatment in control over price. Collec- place. the first tively, But it is well established Publisher Defendants account- per se condemnation is ed not limited to 48.8% ebook sales 2010. J.A. agreements that literally organized, set or Once they restrict had sufficient Instead, prices. any conspiracy clout to “formed demand control over pricing, in for the purpose and the form of agency agreements, with the effect of from Am- raising, depressing, fixing, azon and pegging, or sta other ebook distributors. This bilizing price of a control commodity pricing ... over is facilitated their ulti- se,” illegal per goal and the mate precise “machinery raising prices ebook to the employed ... price caps. Socony- immaterial.” See VIII Areeda & Hoven- ¶ Oil, (“Even Vacuum 811; kamp, supra, 310 U.S. at 1606b specif- S.Ct. when Catalano, see 647-48, prices also ic agreed U.S. at are not upon, express an cases); (collecting S.Ct. 1925 XII horizontal Areeda that each manufac- ¶ Hovenkamp, 2022a, & supra, turer will use price d. The con resale maintenance or spiracy among Apple other and the distribution Publisher restraints should be il- comfortably legal. Defendants qualifies Its as hori business function is to fa- zontal price-fixing cilitate conspiracy. price coordination among manufac- turers.”). words, In other the Publisher As we already explained, the Pub- Defendants took they collusion what lisher primary objective Defendants’ in ex- could not by competition. win And Apple pressly colluding to shift the entire ebook publishers’ used the frustration with Ama- (with industry agency to an model pricing zon’s bargaining as a chip $9.99 help) was to eliminate pric- Amazon’s $9.99 negotiations and structured its Con- ing bestsellers, for new releases and which tracts to coordinate push their to raise believed threatened their prices throughout industry. A coordi- short-term ability to sell hardcovers at nated prices effort to raise across the rel- higher prices long-term and the consumer evant present market was in every chap- perception of of a new book. story. ter of this They grown accustomed to a business they rarely which competed with conspiracy one This prices to raise also had could, another on partial- least Immediately its intended effect. after the ly, control the price of new releases and Publisher Defendants switched Amazon to bestsellers releasing copies model, hardcover agency increased the Kin- before paperbacks. Amazon, and the dle of 85.7% of their new releases

328 not even conduct need that courts held best- Times York New their of 96.8% and or a power” of “market analysis extensive price the of 1% within sellers to demonstrate analysis” market “detailed of prices the increased also They caps. v. Ind. FTC character. anticompetitive its two offerings. Within ebook other their 460, 447, 106 Dentists, U.S. 476 Fed’n weighted the agency, of move

weeks (1986); see also 2009, L.Ed.2d S.Ct. Defendants’ Publisher the price of average Eng’rs v. United Soc’y Nat’l Prof'l of just under for accounted ebooks—which 692-93, 98 S.Ct. States, 435 U.S. in- 2010—had in sales all ebook of half (1978). court’s The district L.Ed.2d for 18.6%, prices the while creased Publisher and the Apple’s of assessment re- and other House Random un motives, with the coupled Defendants’ relatively stable. mained their prices in the increase ambiguous in prices reduced increase sudden This price confirm ebooks, sufficient to was Defendants the Publisher sales ebook result, of the the and goal, the fixing was analysis One durable. to be proved and FTC, Ass’n v. Dental See Cal. conspiracy. af- periods before and two-week compared 779-80, 119 S.Ct. took control Defendants Publisher ter the (1999). L.Ed.2d they sold found that pricing and over regarding Moreover, Apple’s evidence An- the switch. after fewer ebooks 12.9% ebook the prices and growth long-term a re- conducted Plaintiffs for expert other the con- with not inconsistent industry is that, over analysis, which showed gression conspiracy price-fixing the clusion switch, following the period a six-month raising prices. actually succeeded 14.5%fewer sold the Defendants Publisher fundamentally al- ebooks popularization they the than ebooks industry by eliminat- publishing tered Nonetheless, occurred. increases costs marginal associated many ing Defendants the Publisher prices for ebook launched books. When selling months, controlling oth- for six over those Ama- years after just two the iBookstore than higher factors, 16.8% remained er Kindle, mar- ebook introduced zon ex- And even the switch. before growth rapid already experiencing ket showing that a chart pert produced were those trends prices, and falling re- prices new Publisher Defendants’ 1630, 1647. J.A. continue. expected re- bestsellers, offerings leases, and other Publisher that the court found district they years a full after two mained elevated con- move to collective retake Defendants’ pricing. control over took Amazon’s to eliminate prices trol —and that, New years in the two releases out new points price point $9.99 tapped conspiracy, prices across following the York Times bestsellers — trends, causing prices slightly and fell brakes on those market as a whole ebook slowing offerings and However, their when across- rise output increased. total pub- to other growth relative fix sales their at issue involves to know presume court can consistently lishers.21 No Court has Supreme ing, Parallel N. 42nd See segment the market. are Defendants Significantly, Publisher (7th Co., F.3d 405-06 E New v. St. Denim releases major producers of new all pow- Cir.2002) (“The key in a market bestsellers, inquiry collectively Times York has analysis the defendant is whether er categories. Those prices those increased losing busi- ability to without notwithstanding raise the in- high prices remained omitted)); ebooks, (internal quotation marks ness.” low-cost publishers and of new flux Distribs., Walker Inc. v. K.M.B. in that Warehouse interested consumers detriment of

329 ebook, proper price of an long but Salvino, Baseball Props., Inc., Inc. v. judicial experience applying (2d 290, Sherman Cir.2008) (“Per F.3d se treat “[a]ny Act has shown that combination ment is appropriate not ... where the tampers which with ... structures economic and competitive effects of the directly be interfering would with the free challenged practice unclear.”); are Sulfu play of market forces.” Socony-Vacuum Acid, (“It ric 703 F.3d at 1011 is a bad idea Oil, 811; at U.S. 60 S.Ct. also see subject way novel doing business Arizona v. Maricopa Cnty. Soc’y, Med. ... per se treatment under antitrust 332, 346, 102 S.Ct. 73 law.”). assume, I therefore for the sake of (1982). L.Ed.2d 48 By setting new, dura- argument, that it is appropriate to apply prices through ble collusion rather than the rule of reason and to analyze the com competition, Apple and the Publisher De- petitive effects of Apple’s agree horizontal imposed fendants their view of proper ment with the Publisher Defendants. pricing, supplanting play. market’s free evidence, however,

This conjunction Notably, ample viewed evidence the district findings court’s as to and anal- here concerning purpose and effects of ysis of the conspiracy’s history pur- Apple’s agreement with the Publisher De pose, is sufficient support the conclusion fendants scope affects the of the rule-of- that the to raise ebook prices analysis reason called for in this case. Un per awas se unlawful price-fixing conspira- der a prototypically robust rule-of-reason cy. analysis, plaintiff must demonstrate “actual adverse effect” competition on Rule Reason the relevant market before the “burden above, explained

As neither Apple nor shifts to the defendants to offer evidence dissent presented has any particularly of the pro-competitive effects of their strong reason to think that the conspiracy agreement.” Geneva Pharms. Tech. Corp. we identified spared should be se per Inc., v. Barr Labs. 386 F.3d 506-07 My concurring condemnation. colleague (2d Cir.2004) (internal quotation marks therefore affirm the district court’s omitted). The factfinder weighs then I, too, decision that basis alone. believe competing evidence “to determine if the per se condemnation is appropriate in effects of challenged restraint tend to this case and view sloganeering promote destroy competition.” Id. at references to “innovátion” as a distraction 507. But every not requires case that rule straightforward from the nature of the analysis reason ple candidate for “is conspiracy proven Nonetheless, at trial. I nary market examination.” Cal. Dental am mindful of Apple’s argument Ass’n, U.S. 119 S.Ct. 1604. industry nascent ebook has some new rather, “What required, is is an enquiry unusual features and that the per se rule is case, meet for the looking to the circum fit not relationships “business where stances, details, logic of a restraint.” the economic impact of certain practices is 781, 119 Id. at S.Ct. 1604. immediately Leegin, obvious.” (internal 887, 127 end, U.S. S.Ct. To quota Supreme Court has omitted); tion marks Major League accord applied an abbreviated version of the rule Co., (2d Mfg. Cir.1995); industries, 61 F.3d 128-29 products uct very some can be Dep’t U.S. of Justice & Fed. Trade products close ... while cf. substitutes other are Comm’n, Merger § Guidelines Horizontal 6.1 substitutes”). more distant that, (2010) (noting prod- "[i]n differentiated “the increases” were “price (noting that “quick known reason —otherwise agree the defendants’ anti- result” expected whose agreements review—to look” circum ment). ascertained. in these easily unsurprising are It effects competitive “quick This to discern easily S.Ct. able are id. at we See stances that itsof the plaintiff effectively relieves look” that horizon of anticompetitive effects the anal market a robust providing of burden op approach quick-look A conspiracy. tal directly shifting inquiry the id., by ysis, see rule-of-reason the only to shift erates pro- the defendant’s of to a consideration procompetitive Apple’s directly to analysis XI Areeda See justifications. competitive conspira organizing justifications ¶ (“[W]hen 1914d Hovenkamp, supra, & any defenses those give I not cy; do one to be its face’ ‘on appears restraint un I otherwise would than shorter shrift an abbre price,” increase to ... that tends My rejection analysis. robust der a more “operates to analysis rule-of-reason viated nothing to do thus has defenses Apple’s to cut than rather proof the burden shift ap quick-look my application per in a usually true is inquiry, as off the how un to do with everything proach NCAA, Supreme case.”). Thus, se are. those defenses persuasive se per applying refrained Court broadcast television challenged rule to require an

restrictions, it did but Entry a. Market ... to demon analysis industry “elaborate agree- that its argument initial character.” anticompetitive [their] strate was Defendants the Publisher ment with (internal 109, 104 S.Ct. 2948 at 468 U.S. (an argument presented procompetitive omitted). And in marks quotation adopted brief in an amicus principally Dentists, the Court Federation Indiana dissent) by that wholeheartedly to a group rule per se apply the did not point, the market, price eliminating Amazon’s $9.99 when, in the relevant boycott immediately ob ebook other “not enabled impact agreement economic challenge with a vious,” dispensed it nonetheless the market but to enter retailers anticom- agreement’s analysis of the full defense— But this dominance. Amazon’s at character. petitive competitors more higher prices enable that Base Major League 2009; see also S.Ct. justification for no a market —is to enter 317; v. States ball, United 542 F.3d at As the conspiracy. price-fixing horizontal (3d Univ., Cir. F.3d Brown cogently explained: has Supreme Court 1993). are competitors any case which [I]n our supporting Here, evidence the same toor price level to increase the able condemnation is per se determination it could by agreement, production curtail appeal dispose of this way to the correct has agreement that the argued be inqui “quick look” at supports also most at- market more making effect Contrary to of reason. ry the rule under If new entrants. potential tractive to approach suggestion, the dissent’s agree- justifies horizontal potential rule-of-rea “taint” the not somehow does one imposing among competitors ments concedes analysis. The dissent son or another voluntary restraint kind of signing object Apple’s the conscious freedom, seem it would competitive their Defendants Publisher with the Contracts more successful to follow conspiracy organize horizontal towas level, raising inis consumer-facing raise among them to attack. it is from antitrust safer Op. Dissenting prices. See ebook Nothing could be more inconsistent with petitors, such potential that a new en- our cases. inability trant’s profit to earn a would re- sult not from any artificial “barriers to Catalano, 446 U.S. at 100 S.Ct. 1925. entry,” but that, rather from the fact argument Nor does this become strong- light of the value proposition offered asserted, here, er when it is that a firm, the dominant consumers would not horizontal cartel at one level of the market buy choose to the new products entrant’s promoted entry another, market en- at the willing it is and able to offer. hancing competition. My dissenting col- Einer Elhauge, See United States Anti- league’s view that “deconcentrating,” Dis- (2d 2011) trust Law and Economics ed. 349-50, senting Op. at Amazon’s share of (“If a firm a makes better mousetrap, and justifies retail ebook sales concentrating door, the world path beats a to its it may power pricing over in the hands of the drive out all rivals and establish a monopo- Publisher Defendants a reflects basic mis- ly; result, but that good is a not a bad understanding of the nature of compe- one.”). tition protects. that antitrust law New From perspective, entrants to a market are desirable to the the dissent’s con- extent that tention Apple consumers would that buy choose to could not have entered them products at the ebook retail offered. When market without price- a fixing conspiracy, market is concentrated and an incum- because it could not have firm charging profited bent is either supracompetitive by charging more than Am- azon prices, by new entrant can following benefit consum- Amazon’s pricing, is a by complete ers non undercutting sequitur. The posited incumbent’s dilem- prices, thus ma is offering point better value for the whole of competition: if goods. Apple same Dominant could not profit by firms who want turn a selling to competition $9.99, deter that new releases and keep can bestsellers at ifor —so it could charging supracompetitive not make the prices may iBookstore and iPad — entry erect so attractive keep barriers to to that pay these new consumers would out, competitors more than buy and the dissent is quite $9.99 read those right platform, that these ebooks on generally barriers are un- its then there was no place desirable. platform its in the ebook retail market. Neither the district court nor however, Market dominance may, arise an obligation Plaintiffs had to identify a consequence “as a of a superior product, “viable alternative” for profitable acumen, accident,” business or historic entry because had no entitlement to unlawful; is “not not it is an impor- enter the market on preferred its terms. tant element of the system.” free market Dissenting Op. at 352-53. Trinko, 407, at U.S. 124 S.Ct. 872 (internal omitted). quotation marks Although prices low that deter new en- ability to provide goods particularly at try may low simply reflect the dominant firm’s prices way is one that a firm can gain efficiency, such it is true that pricing below-cost edge marketplace. Competitors can, circumstances, under certain be anti- are, course, challenge entitled to competitive. domi- suggests dissent that nant firms offering, among pricing gave other Amazon’s it an unfair advan- things, superior products prices. tage, and lower so that even if priced (whatever But guaranteed. success is not A domi- ebooks at an efficient level charging nant firm prices may been), low might have it still would not have proven itself more efficient than its com- been able to enter profit- the market on a conspir horizontal not authorize does taking risk Amazon was But

able basis. marketplace vigilantism losing as a form pricing, acies in loss-leader by engaging competi encourage “ruinous perceived in order to eliminate sales some money on Mari “That below- evils.” “competitive Kindle. tion” or other adopt readers 346, 102 losses on painful at may impose Soc’y, 457 U.S. pricing copa Cnty. Med. cost Oil, the antitrust no moment Socony-Vacuum is of target (quoting S.Ct. injured: It is 811). Indeed, is not competition if laws 60 S.Ct. were laws antitrust axiomatic to raise conspiracy justify attempt competition, protection ‘the passed threat potential “on the basis prices ” v. Grp. Ltd. Brooke competitors.’ less nothing ... is poses competition Corp., Tobacco & Williamson Brown policy of the basic assault on than a frontal 2578, 125 L.Ed.2d 113 S.Ct. U.S. Soc’y Act.” Nat'l the Sherman of Prof'l Co. v. (1998) Brown Shoe (quoting S.Ct. 1355. U.S. Eng’rs, 435 294, 320, 82 S.Ct. States, 370 U.S. United particularly ironic And it (1962)). low- Because 8 L.Ed.2d upon insist able “terms” that (all welfare consumer improve er Defen a cartel of Publisher organizing is un- pricing equal), below-cost being else namely, against dants to move Amazon— a if there is anticompetitive lawfully competi price retail elimination of firm en- that “dangerous probability” precise opposite accomplished the tion— recoup its losses later in it will gaging mar to concentrated what new entrants levels after monopoly prices to raising supposed provide. ordinarily are kets market. Id. If of the driving rivals out its first short, the dissent err Apple and Defendants the Publisher Apple and (a mar single-retailer symptom equating a truly was that Amazon’s conduct thought (a ket) competition), lack disease standard, under this anticompetitive the dis by prescribing again and then err § of the Sherman under could sued have the cure. ease Itself as (Whether pursued its would have Act. DOJ compe- on “frontal dissent’s assault” unclear action rele- is own enforcement legal only wrong as a not tition law is availability private of a given vance just given; it is reasons that, matter all pricing Failing Amazon’s remedy.) fidelity to the also, professed its landscape that competitive despite of the part facts, premised accept.22 view of had district court’s ebook retailers competing rec- on various mischaracterizations Instead, invites conduct that dissent that far from clear simply, Put it is ord. by the Sherman prohibited is strictly retailers itself or other ebook Apple either to fix collusion Act—horizontal —to retail ebook entered the could not have power. market abuse perceived cure a with the Apple’s efforts without market abstract, that its merit Whatever price to eliminate Defendants Publisher dominance is for collusion over preference noted, court As the district competition. See Trin to antitrust law. wholly foreign or show attempt argue “[Apple] did (refer ko, at S.Ct. to new price that the admission at trial “supreme evil of as the ring to collusion in ille- participation must be or markets antitrust”). long-term Because of “sug- did not schemes” and price-fixing gal Sherman Act competition, threat subsidize ebook would have consumers supposing that us of the dissent 22. While accuses by paying more entry Apple’s into the market lawyer- genteel, "competition should that be rules,” not have to Apple so that would for ebooks designed, sporting under Dis- and fair compete price. position on dissent’s senting Op. at it is the gest[] only way it could have charging price? the best district court —the agree entered the e-book market was to actually found that Apple believed it would with the Defendants to Publisher raise e- have been to charge “unrealistic[ ]” more prices.” Apple, F.Supp.2d book than its caps after switching to an agency model, Apple, F.Supp.2d 692, a finding says nothing about what Apple district court’s statement that Apple would have been willing charge if “losing money feared it tried or was under a forced to match Amazon’s wholesale model. pricing,” Id. at peg 658—the largely which the dissent The record makes clear the flaws hangs argument hardly its a conclusive —is argument. dissent’s When Cue was still finding Apple money have lost contemplating model, a wholesale his ob had it entered a market that featured re- jective was not for pricing to price competition. Noble, tail Barnes & match precisely, Amazon’s but rather for part, for its stay had chosen to enter and that pricing to “generally be competitive.” in the market in the face of Amazon’s J.A. 1758. And had opted to com too, pricing. Google, plans to enter pete on both platform but con the ebook market before launched cluded that it could not match Amazon’s Moreover, the iBookstore. the district pricing, some might $9.99 consumers well court never found that Apple could not paid somewhat more to read new have entered the market on a wholesale iPad, releases and bestsellers on the charging model while more than Amazon revolutionary boasting many ereader more for new releases and bestsellers. To fill features than the The iPad was theory, this hole in its suggests the dissent Kindle.23 coming to market with or without price- “impairfed] would have fixing conspiracy, and by charging brand” than some iPad owners more Amazon. (internal who wanted to Dissenting Op. surely read ebooks quotation would omitted). not buy marks have wanted to a putting separate But Kindle aside the Apple’s solely fact that to benefit from perception pric of its Amazon’s brand $9.99 ing value is for new really irrelevant —does the dissent releases and bestsellers. (Whether think it is require Apple desirable to more effi- would have viewed its cient competitors charge profits to the same as under that scenario large enough as their solely less efficient justify entry rivals so the lat- to is not an antitrust con cern.) spared ter will be indignity the of not prediction (en (D.C.Cir.2001) banc) ("While A that consumers would have merely paid more to read ebooks on possessing monopoly power the iPad than on is not itself an violation, the improved Kindle because of the necessary iPad’s antitrust it is a element of reading experience (citation omitted)); or other monopolization charge.” attractive fea- a suggest ("A tures does not Elhauge, supra, somehow that ebooks at 268 firm that lacks goods are goods.” "Veblen Giffen power [or] Dis- unilaterally dominant market ... can -- senting Op. at n. 7. The dissent also choose with whom deal without fear of suggests Trinko, Apple depended that could not have liability.”); antitrust see also ("Under on the advantages part iPad’s hardware 124 S.Ct. 872 certain circum- stances, strategy charge a more cooperate be- a than.Amazon refusal to with rivals can required cause antitrust law anticompetitive would have it to constitute conduct and violate open up the app. very § iPad to a Kindle Id. recogniz- at 352. 2. We have been cautious in But for a ing exceptions, unilateral refusal to deal to be such because of the uncertain unlawful, the monopoly sharing defendant must have difficulty virtue of forced and the See, power, Apple plainly e.g., identifying which did remedying anticompetitive not. Corp., firm.”). United States v. by single 253 F.3d conduct a Microsoft made summarize, court district To fact-find- court’s district actuality, the conspiracy that a horizontal finding no organized illustrates

ing in the ebook competition conspir- price-fixing eliminate Defendants’ Publisher bring more necessary to necessary precon- was a market was retail it acy not because Am- challenge it was entry, but because the market into market retailers dition chip. support was evidence bargaining azon, does record a convenient nor looming deadline if a even importantly, under More operating this conclusion. aligning its interests that, by evidence, fact that recognized were such there Publisher Defendants those is con- into the market entry competitor’s prices way to raise them offering to raise conspiracy horizontal on a tingent market, gain could it ebook across (absent monopolistic only means prices extremely market on entry into quick firm, market’s dominant by the conduct elimination terms, including the favorable challenged lawfully be which cannot Amazon. from competition of retail inefficient, collusion) competitor is that the a horizontal orchestrate But offer consum- not i.e., entry will enhance that its legiti- is not a to raise conspiracy reasons, I would For these er welfare. a deal. way to sweeten mate entry argument reject the conclu support also do The facts important represented market into the position market Amazon’s sion that the horizontal benefit procompetitive retailers discouraged other ebook it orchestrated. conspiracy price-fixing price- market entering the absent by Apple. conspiracy orchestrated fixing Other Justifications b. with the ebooks popularized Amazon in late entry the Kindle launch of and other retailers’ Apart from its position market because strong enjoyed to other market, points into the Trinko, 540 U.S. at innovation. of its benefits of procompetitive purported Cf. opportu 407, 124 (noting that S.Ct. 872 Defendants, with the Publisher risk power “induces gain market nity in the price decreases namely, eventual and eco innovation taking produces technologi industry and various ebook Noble Barnes & growth”). nomic in the iPad. cal innovations embedded and when major competitor, first Amazon’s Ap correctly concluded court district a wholesale the market —on it entered a connection between establish to ple failed Nook the introduction model—with among conspiracy and the benefits these mar began it to erode Amazon’s in Ap the Publisher Defendants. Apple and promised itself The iPad also ket share. NCAA, 694; see F.Supp.2d ple, competition with or more to introduce (concluding 113-15, U.S. at S.Ct. a by providing Apple’s iBookstore without produce to to the need coordinate ebook to build companies platform not athlétics was related intercollegiate in tablet investing without marketplaces XI Ar rights); on coordination television gave new entrants These development. ¶ Hovenkamp, supra, 1908b. &eeda leverage negotiate more publishers prices ebook may it be true While pric models or different alternative sales new industry-wide, eventually declined Indeed, already in were publishers ing. for- digital the adopting were publishers agency an mod about separate discussions before falling even prices mat and were Apple of Barnes & Noble before el with Apple did market. entry into the Apple’s competi way swap rigors fered link- evidence any admissible not introduce collusion. the comfort of tion for reason, ing the continued influx of into new titles agreement horizontal to raise market to its with ebook consumer-facing prices ebook that Apple the Publisher Defendants.24 did it Nor orchestrated unreasonably restrained explanation provide price- for how this given trade. But the clear applicability fixing agreement altered the business and per context, se in rule the analysis pricing publishers of other in decisions a here is largely offered in response to the procompetitive direction. The district dissent. I confidently join also my with give Apple court’s refusal credit for concurring colleague affirming the dis- these was therefore proper. trends trict court’s conclusion that Apple commit- technological innovations embedded per ted a § se violation 1 of the Sher- similarly the iPad are Ap- unrelated to man Act. ple’s agreement with the Defen- Publisher touchscreen, dants. The iPad’s backlit au- Injunctive III. The Order dio and capabilities, ability video offer consumers a number of on services Next, Apple and two of the Publisher single revolutionized comput- device tablet Defendants —Macmillan and Simon & But, ing. testified, Apple’s witnesses challenge specific portions of Schuster — every intention of company bring- the district September court’s 2013 in- ing the to market with or iPad without the junctive In particular, order. Macmillan Moreover, iBookstore. not the was and Simon & ask Schuster us to vacate the only entity that could use the iPad’s new provision prohibits Apple, peri- which for a features to enhance the ebook experi- time, od of entering agreements from with retailers, or ence—other the Publisher Defendants that restrict themselves, designed could have ability prices. to set ebook S.P.A. 205. applications ebook on plat- launched Apple separately form. district court seeks vacatur of a provi- not correct these score hardware innovations as sion requiring it to apply same terms procompetitive benefits of the agreement applications conditions to ebook in its between and the Publisher Defen- App Store as it applications, does to other prices. dants to raise and of the district court’s decision to ap- point Accordingly, agree compliance I monitor. with the district We address that, court’s decision under the rule of each of arguments parties’ turn. Apple sought expert testimony to introduce reliably methods to the facts hand. United Burtis, Michelle Williams, Dr. which believed (2d it States v. 506 F.3d long-term growth continued link Cir.2007); see Fed.R.Evid. 702. Dr. Burtis price changes to its launch of the iBookstore. merely compared average prices ebook However, the district court excluded this testi- years from the entry two before into mony grounds that Dr. "did Burtis average the market years two any scientifically analysis offer sound of the rapid after. She did account for the purported price cause for or seek decline growth change and industry explain in that or may for the control factors that led have process used to she determine whether F.Supp.2d it.” Apple, 952 at 694 61. This n. Apple's agency agreements responsible were was no Zerega abuse of See discretion. Ave. Joiner, prices. for lower See Gen. Elec. Co. v. Realty, 571 F.3d at proponent 212-13. "[T]he 136, 146, 512, 522 U.S. 118 S.Ct. 139 L.Ed.2d expert testimony has the burden of estab- (1997); Dukagjini, United States v. lishing by preponderance of the evidence” 45, (2d Cir.2003). F.3d The district court expert’s opinion that the is based on sufficient therefore acted well within its in discretion facts, product principles is of reliable and excluding testimony. Dr. Burtis’s methods, applies principles and those discounting limiting Apple’s agreements and Simon & Schuster Macmillan A. years than authority longer that lasts two injunctive or- September In the because, of the filings support in the “Ap- mandated court der, district decrees, years that two argued it consent any maintain into or enter shall not ple time to restore amount of was a sufficient a Publisher Defendant with market. Neither competition the ebook limits, restricts, impedes or persuasive. is objection alter, Retail set, reduce the or ability to dis- price or to offer any E-book Price begin argument with the We any promotions.” other form of or counts amended impermissibly injunctive order began upon prohibition This S.P.A. consent decrees. the Publisher Defendants’ expires at different entry of the order 60(b) es- Rule of Procedure Federal Civil Publisher Defen- for each of the times seeking “relief grounds for tablishes date lifts expiration earliest The dants. order, proceed- judgment, a final between agreements for the ban 60(b), including modifi- Fed.R.Civ.P. ing,” entry 24 months after beginning Hachette v. In- cations of consent decrees. Rufo Expiration dates injunctive order. of the Jail, Cnty. mates of Suffolk each of the other agreements with 378-79, 116 L.Ed.2d 867 112 S.Ct. set in six- are then Publisher Defendants (1992); v. Eastman Kodak United States intervals, Schuster’s with Simon & month (2d Cir.1995). Co., The 63 F.3d entry after expiring 36 months ban approach, a flexible enumerat- adopts rule ending Macmillan’s ban judgment final reasons for modification while ing specific after 48 months. “any other allowing also alterations seek and Simon & Schuster Macmillan justifies relief.” Fed.R.Civ.P. reason publish- Both prohibition. of this vacatur 60(b). seeking an alteration” party “[A] de- subject separate ers are consent provision catch-all bears the under this crees, signing them from prohibit which establishing significant that a “burden agreements any ebook retailers which in circumstances warrants change “set, alter, ability the retailer’s restrict Sec’y modification.” United States v. prices, or reduce” ebook “or to offer (2d Dev., 239 F.3d Hous. & Urban 1126; The discounts.” J.A. J.A. 1148. Cir.2001). years & prohibition lasts two for Simon argu Publisher Defendants’ The months for Macmillan.

Schuster and 23 that the district Defendants, premise ment rests on the Publisher According to both con injunctive court’s order modified their injunctive against court’s order the district decrees, decrees and therefore should sent Apple, light of these consent 60(b)’s First, requirements. complied with Rule for two reasons. con- unlawful Macmillan’s and premise is incorrect. injunctive impermissi- tend that the order pro consent by ex- Simon & Schuster’s decrees bly their consent decrees modifies any restricting them from retailer’s during they cannot hibit tending the time which injunctive authority prices. to set at which negotiate to restrict Second, of those they argue order does not alter the terms ebooks.25 Apple sells Instead, provides against it relief judicially es- decrees. that DOJ should have been party by limiting Apple’s au- seeking prohibition on a topped from different company injunc- to set certain limits on that the lows 25. Macmillan also contends discounts, longer can set for imposed which it no tive the restrictions order broadens by Apple. al- ebooks sold by its consent decree because the decree

337 thority negotiate to ability away set court, factual context[ ]” before the we typ prices agreements any with ically the Pub- consider whether the party’s argu lisher Defendants. The fact that the order “clearly ment is inconsistent with its earli also has the preventing effect of the Pub- position,” er whether party “succeeded lisher Defendants from restricting Apple’s in persuading a court accept” that earli pricing authority does not render it position, “[r]e- er and whether the “party seek order, judgment, lief a final pro- or ing to assert an position inconsistent ceeding” requiring a motion under Rule derive an unfair advantage impose an 60(b). 60(b). Fed.R.Civ.P. A consent de- unfair detriment on the opposing party if order[],” cree is “enforced as [an] but not estopped.” 750-51, Id. at 121 S.Ct. largely (internal “construed as [a] ].” SEC quotation 1808 omitted); marks contract Mkts., Inc., v. Citigroup Global 752 F.3d Adelphia see also Recovery Trust v. Gold (2d 285, Cir.2014) (internal 297 quotation man, Co., (2d Sachs & 748 F.3d 116 omitted). Cir.2014). scope marks Its must be dis- granted is “[R]elief when corners, cerned within its “four and not impact the ... judicial integrity is cer reference to might satisfy what pur- Republic tain.” Ecuador v. Chevron poses of one parties of the (2d it.” United Corp., Cir.2011) (in 638 F.3d Co., v. 678, 682, States Armour & omitted). U.S. ternal quotation marks (1971); S.Ct. 29 L.Ed.2d 256 see We argu conclude DOJ’s also Perez Danbury Hosp., v. 347 F.3d ments in support of injunctive order (2d Cir.2003). injunctive An or- clearly were neither so inconsistent with against entity der party that is not arguments its earlier unfairly nor so detri the consent decree and changes neither mental to the Publisher Defendants as to interprets the terms of nor the decree does judicial warrant estoppel. support modify not the contract and therefore does decrees, the consent Depart the Justice 60(b) require Indeed, a Rule motion. argued ment two-year that a ban on re matter, a practical injunctions often al- stricting retailers’ abilities to set ter the options parties. available to other was sufficient to movement in “allow 60(b) Rule does not district hold courts marketplace away from collusive condi issuing injunctions higher to a standard tions.” J.A. 1055. It then pushed for a simply injunction because the may affect longer, five-year on agreements restriction rights addressed party’s different con- specifically Apple. facially While in sent decree. consistent, emphasized we have the need

Macmillan and Simon & Schus- “carefully consider the contexts in which judicial estoppel argument ter’s fares no apparently contradictory statements are Judicial estoppel better. is “invoked is, fact, made to determine if there discretion,” court at its designed and is direct and irreconcilable contradiction.” “protect integrity judicial of the pro Grp. Rodal v. Anesthesia Onondaga, by prohibiting parties P.C., (2d Cir.2004). cess from deliber 369 F.3d And ately changing positions here, according to the context particularly important. exigencies Hamp moment.” New The consent agree decrees ban certain Maine, 742, 749-50, v. shire U.S. ments between the Publisher Defendants 1808, 149 (2001) (citation S.Ct. L.Ed.2d 968 any injunctive order, retailers. The omitted) (internal quotation hand, marks omit on the other pertained only to the ted). propriety While the applying es- Publisher agreements Defendants’ .with depends toppel heavily “specific on the Apple. Given factfinding extensive 338 be assured could defendant!] publisher de relationship Apple that the trial about bargaining taking the same it was Defendants that Publisher the

veloped with to, J.A. Apple.” conspira peers vis-a-vis their as its position coordinate willingness its for the the rationale distinguishing independent This a basis for 2376. cy, DOJ argu- consent in the DOJ’s that restrictions order ensures injunctive of the length order. injunctive re- in the those “inconsistent produce from decrees did not ment reversing a party a case of the integrity not This was the compromise or sults” legal sys of the courses, the detriment v. Glass process. Simon judicial Safelite have his interests tem, “simply Cir.1997). because (2d 68, 72 Corp., 128 F.3d U.S. 532 Hampshire, New changed.” 749, 121 1808. S.Ct. Apple B. not court did Furthermore, the district & and Simon like Apple, Macmillan request Department’s the Justice approve of the portion the Schuster, objects to discounting re- on all five-year ban a agree- from preventing it injunctive order the Publisher Apple between strictions In addi- authority. pricing limit its ing to Instead, injunctive order the Defendants. to vacate anoth- tion, asks us company system, which an interval-based adopts “apply requires it to provision, which er to limit agreeing Apple prevents to the sale conditions terms and same 24 and 48 authority for between pricing App through an E-book or distribution of Defen- the Publisher on depending months applies to all App [it] Store Apple’s in- this imposed district court dant. through or distributed apps sold other point “there would be no system so terval Apple con- 207. S.P.A. App Store.” [the] renegotiating would be in time when necessary to provision that neither tends defendants publisher with all disagree. We public.26 protect [a] in time once[, point no one when and] (1986)); Republic also see 344 L.Ed.2d argues that the district court’s Apple also 33, Co., F.2d 36- Philippines Land 852 v. N.Y. sepa- appoint a 53 and Procedure decision cases). Cir.1988) light (2d (collecting 37 principles. devoted ration-of-powers inappropriate to background, be it would this three conclusory to these only sentences two argue for this failure excuse challenges to the district separate facial challenges panel its facial to entertain the ar- authority. We therefore deem court’s briefing authority scant on the court’s district them. do not consider guments forfeited and (2d before us. 815, States, 833 78 F.3d United Frank v. Jacobs, separate panel a Judge who sat on Cir.1996) ("Issues sufficiently are argued not as-applied Court considered not be of this that and will general deemed waived conduct, contends challenge the monitor's other appeal.”), vacated on on considered 2501, warps role of a neu- 1114, injunction "the 138 S.Ct. that tral, grounds, 521 U.S. of an Gonzales, court-appointed that referee into (1997); Zhang v. L.Ed.2d Dissenting Op. at 353. Cir.2005). adversary party.” (2d We also n. 7 F.3d argument, this it is that, merits in Whatever following 53’s amendment Rule note Here, Ap- appeal. this properly before us on Advisory stated Committee (and argumen- ple has asserted without appointed under on master” ”[r]eliance monitor, sort) appointing a any complex decree tation appropriate when Rule "is Act, Rule general, the Sherman violates particularly when complex policing, requires principles. The dis- separation-of-powers intransigent,” party proved has resistant chal- facial position broad eschews Supreme and this sent’s Court both and that conduct of lenge focuses and instead appointments. approved such Court case, drawing particular in this monitor advisory note committee’s Fed.R.Civ.P. (2003 panel, but entirely not before Amendments) on a record (citing Local 28 of E.E.O.C., ap- separate panel in another presented ato Int’l Ass'n v. Workers’ Sheet Metal Inc., 787 F.3d 481-82, v. peal. States See United 106 S.Ct. plaintiff, “A Government un goal. that The district court expressed private plaintiff, like must seek to obtain concern Apple and the Publisher De- necessary to protect public relief the from may fendants use applications ebook to anticompetitive conduct and to re injunction’s circumvent the rules Ap- about further anticompetitive dress harm.”. F. ple’s pricing authority, that Apple may Hoff S.A., Roche Ltd. Empagran mann-La v. impose restrictions on ebook applications 155, 170, 2359, U.S. 124 542 S.Ct. 159 punish publishers to who refused to act in (2004) added). (emphasis L.Ed.2d 226 concert competitors. with their For in- “[wjhen Thus, the purpose to restrain stance, the court found evidence that Ran- law, appears trade from a clear violation of dom eventually joined House the iBook- it necessary is not that all untraveled Apple’s store on desired terms in part to that end open roads be left and that Apple because prevented company the only the worn one be closed.” Int’l Salt launching application in ebook the States, 392, 400, v. United Co. U.S. 68 App Store. The district court was there- 12, (1947), abrogated L.Ed. 20 S.Ct. correct fore to decide provisions that these grounds by other Ill. Tool Works Inc. v. injunctive the order “necessary to were Ink, Inc., 28, Independent 126 protect public the from further anticom- 1281, (2006). S.Ct. L.Ed.2d The petitive conduct.” F. Hoffmanm-La “large district court has discretion to mod Roche, 170, 542 U.S. at 124 S.Ct. 2359. judgments to fit exigencies [its] el the id., case,” the particular and “all doubts” CONCLUSION remedy are about to be “resolved in We have considered appellants’ re- favor,” [the Government’s] United States maining arguments find them to be Co., E.I. v. du Pont de Nemours & without merit. Because we conclude that 316, 334, U.S. 81 S.Ct. 6 L.Ed.2d 318 § Apple violated 1 of the Sherman Act by (1961). orchestrating a horizontal conspiracy The district court was well within among the Defendants to raise Publisher. its discretion to Apple’s ability restrict prices, injunctive and that ebook relief up pricing its give authority and to require ordered the district court is appropri- treat applications ebook ately designed guard against future way that it applications. same treats other conduct, anticompetitive judgment Apple relinquished authority to set the district court is AFFIRMED. part conspiracy as of its with the By delaying Publisher Defendants. Ap LOHIER, Circuit Judge, concurring in ability to ple’s renegotiate similar restric part concurring judgment: arranging tions and for the restrictions to join I expire majority opinion except different for each times Publish Defendant, injunctive part relating II.B.2 application er order ensured view, my and the the rule reason. Publisher Defendants not be able to appeal use that same strate rises or falls based applica- on the part of a gy conspiracy. provi per new tion of the se That clearly rule. rule requiring sion applications ebook in the applies agreement the central in this (and App Store to receive the same terms and agreement alleged case to be unlawful): conditions as other applications furthers publishers’ horizontal (2d Cir.2015). 2015 WL 3405534 arguments We do with reference to has proper appeal believe it is to resolve this failed to make. of e-books. retailer prospective duct as Leegin prices. fix ebook Cf. to reverse. PSKS, I vote Prods., Inc. v. Leather Creative Inc., 551 U.S. 127 S.Ct. ^{[*] [*] [*]} (vertical (2007) agreements L.Ed.2d 628 the district quarrel no I have a'plaintiff evidence fact; useful I. “may ... be findings of conscientious court’s of a existence prove them, cite them attempting affirmatively rely on cartel”). affirm on that I would findings pages horizontal The 156 throughout. interactions alone. basis communications track 48-day course of over happened publisher said, recognize that I That States events, See United detail. detail pow- as defendants, Apple both used who Inc., 655-81 F.Supp.2d Apple v. keep and to against Amazon leverage erful I”). All that is (S.D.N.Y.2013) (“Apple check, may appear collusive in each other however, case, are to decide needed And Apple. culpable than be more to the architec facts that show the schematic to appeal Ap- some surface is there also arrange vertical horizontal and ture of the market, in that the ebook argument ple’s competitive dynamics ments and uncontested virtually of Amazon’s light in in a nutshell are set out They forces. But dominance, competition. more needed and at somewhat following paragraphs, appro- bullying is corporate more Background section length in the greater bullying. It corporate to antidote priate opinion. to re- been lawful for cannot have launch of its preparing was As dominant market competitor’s spond to rec- company in tablet first iPad (the corporations rival by helping power e- support could the device ognized that Court as the District prices, fix publishers) including books, gave consideration sympa- However happened here. found However, Ama- platform. an e-book retail publishers’ and the Apple’s plight thetic market, in the preceded Apple zon had been, per- I am may have predicament in ascendency percent a 90 established vigi- “marketplace permitting suaded e-books, effectively ex- and was sales of lantism,” would do far Majority Op. offering bestsel- cluding entrants new good, than competition more harm ($9.99) many for books at a lers matter, and policy as a be would disastrous paying was prices Amazon below the was by the Sher- any not sanctioned is event publishers. man Act. to enter positioned Although Apple was market, so unwilling it do retail JACOBS, Judge, Circuit DENNIS a loss on e-book would incur on terms that dissenting: (as it met happen if Amazon’s sales would impair its or that would price), below-cost dissent. respectfully

I (as happen if it likely fail brand Amazon). So, aas than charged more Inc. from by Apple taken appeal This buyer entry competing condition to States District in the United judgment wares, insisted publishers’ for District New Southern Court to a distribution agree publishers that the (Cote, J.), awarding an antitrust in York that barrier would lower model that States-, of the United junction in favor retail entry. Columbia, states, and the the District was imple- model distribution plain new of Puerto Rico. Commonwealth Apple’s con- terms by several con mented Apple’s premised claims are tiffs’ publishers: agency pricing, tracts with ti- firms ground on the of liability per se. price caps, Lohier, ante, ered and a most-favored-nation Op. Judge See at 339-40. clause. It is conceded that none of those reverse, I Since would I consider as well is; alone, standing illegal. Apple terms the rule of reason. Judge Livingston’s encouraged publishers implement (for also opinion alone) argues herself that the agency pricing their contracts with oth- judgment could be affirmed on that alter- Although er retailers. were un- ground. native happy about Amazon’s below-cost The district court committed three deci- (which e-books eroded the publishers’ sive errors: sales) publisher hardcover no one alone (cid:127) (and The district court ruled the ma- order, could counter Amazon. short affirms) jority that a vertical enabler five of country’s largest publishers six of a price-fixing horizontal conspiracy agreed jointly pres- terms and is in per se violation of the antitrust adopt sured Amazon to agency pricing. However, laws. Supreme Court publishers thereby prevailed what teaches that a vertical agreement de- the district court found to abe horizontal signed to facilitate a horizontal cartel price-fixing conspiracy. The barrier to en- “would need to be held unlawful under removed, try thus Apple entered the retail ” the rule Leegin reason. Creative market as a competitor. formidable In the Prods., PSKS, Inc., Leather Inc. v. 551 market, per- deconcentrated Amazon’s 90 877, 893, U.S. 127 S.Ct. cent percent. market share is now 60 (2007) added). L.Ed.2d (emphasis (I that, acknowledge in adducing facts (POINT I) court, by found the district opinion this (cid:127) The ruling district court’s alternative unavoidably imputations casts on Amazon. under the predeter- rule of reason was requires acknowledgment Fairness (erroneous) by mined its per ruling. se Amazon appeared has not litigation Thus the district im- court assessed opportunity and has not had a full to dis- pacts competition recogniz- on without pute the district findings court’s or charac- ing that Apple’s role as a vertical Moreover, terizations. the fact of Ama- player it pub- differentiated from the monopoly zon’s support alone would not lishers. The court should instead inference that Amazon’s behavior was in competitor considered as a unlawful.) any way on the distinct plane horizontal of re- tailers, Apple competed where Justice, states, Department (and players Amazon smaller such as Columbia, the District of and the Common- (POINT II) Noble). & Barnes wealth of Puerto Rico sued and the (cid:127) publishers five conspiracy conduct, for Apple’s unreason- assessed under the trade, able restraint of § in violation of rule of reason on plane the horizontal Act, of the Sherman Antitrust competition, unambigu- U.S.C. retail was settled, § publishers 1. The Apple pro- ously and overwhelmingly pro-compet- ceeded to a bench trial. The district court major potential itive. was a ruled that conduct as a vertical competitor by in a market dominated enabler publishers’ horizontal price percent monopoly, justifi- and was conspiracy constituted a per ably violation se of unwilling to enter a market on (in event) 1,§ and that any Apple’s con- terms that would assure a loss on sales § duct would also violate 1 under the rule or reputation. exact a toll on of reason. appeal, majority connection, On this af- the district court erro-

CO was also pricing Amazon’s below-cost monopolist’s $9.99

neously deemed at a because publishers, $9.99 compe- threat for good categorically price as cannibalized sales cost, e-books price point, was lower than it tition because (more Id. editions. hardcover profitable) after rose e-book and because major publishers (POINT Although at 649. broken. monopoly was pricing Amazon’s below-cost III) believed un- publisher each id. at “predatory,” the dis- (by error pervasive A further to take on powerless it that was derstood on this my colleagues court trict feared Amazon, Publishers at 650. id. assumption implicit appeal) is directly with might “compete that Amazon lawyer-de- genteel, should competition be au- directly with by negotiating publishers rules, and sporting fair under signed, and id. literary agents rights,” thors and by gloves-off is offended law that antitrust against insubor- might “retaliate” competition. ‘buy removing the “by dinate allow cus- site that Amazon buttons’ BACKGROUND ... elimi- books purchase tomers of the U.S. inception From from its products' publisher’s] nating [a through e-books market for retail publisher, at 679. One altogether,” id. site mar- retail the e-book Amazon “dominated when Macmillan, such retaliation suffered of all e-books.” ket, nearly 90% selling “buy buttons” removed Amazon I, at It assured F.Supp.2d 649. 952 Apple of Macmillan versions and e-book print cus- by charging its retail its domination Id. titles. and bestsel- releases new tomers $9.99 share con- market percent 90 Ama- Amazon’s lers, price that the wholesale below law. monopoly under antitrust a at 649- stituted publishers. to Id. paying zon was See, v. United Am. Tobacco Co. e.g., 50, reported media popular 708. 1125, States, 781, 797, S.Ct. a loss on the sale Amazon “takes (1946) “a (characterizing as at 652. That L.Ed. Id. popular most e-books.” share of monopoly” a market competi- substantial potential retail pricing deterred fíeld”); Areeda & 3B “over 80% of the entering relevant market— tors from ¶ (3d Law 801 Hovenkamp, Antitrust e-books the United States”1— “trade ed.2008). pricing was Amazon’sbelow-cost run risk of “would because an entrant when by Apple entry to barrier if it or was forced losing money tried retail entry into the e-book contemplated it compet- to remain pricing match Amazon’s I, Apple iPad.2 via the market at itive.” Id. 658. supra, Hovenkamp, entry, & 2B Areeda dispute defi- parties not this market 1. The did 420c, ¶ I, at 78. F.Supp.2d at 694 n. 60. Apple nition. disputes there was majority whether below- entry under any Amazon's the label barrier did not use 2. the district court While regime, at one com pricing because least entry,” findings of made cost fact "barrier to Op. attempted join the See petitor market. finding new en- point clearly. that a ante, (for Livingston, Judge at 299 run the e-book retail in 2009 "would trant to Court), any if that entrant had 333. Even money forced losing if it tried or was risk of (nobody that it contends compet- of success pricing chance Amazon’s to remain to match e-books, or I, meaningful number of itive,” F.Supp.2d Apple at sold money, mam any or reduced Amazon’s that the effect of made court left no doubt district percent), to less than 90 regime market share pricing was to moth below-cost Amazon’s entry imply ease of because need fact entry protect existing market "impede and may a market incumbent protect barrier "a of a barrier power” operation basic —the (“MFN”) F.Supp.2d Apple clause, at 658. nevertheless publishers under which develop plat undertook to e-book price retail must their new in Apple’s releases launch, form time for the iPad’s sched store at or below the lowest offered January uled 2010. Id. at 654-55. by any other e-book retailer. Id. at 662. However, “Apple open did not have to an The district court found that the MFN iPad”; e-bookstore when it launched the “effectively clause forced” each publisher it willing to enter the market signed Apple’s agency contract on the that its condition e-book retail busi move its other retailers onto the agency profitable, ness would be such that model. because, Id. at 664. That is once “compete effectively could with Amazon” Apple’s cost was set as a percentage of the adopting without and be loss-leadership price, retail publishers if suffer pricing strategy. low-cost Id. 656-59. at Apple matched price. Amazon’s retail $9.99 Apple opened extensive negotiations Second, the proposed contract included publishers with to determine if at all how maximum for various categories of it could enter the e-book retail market. e-books. Id. at 661-62. The district court Id. at 655-57. met with the leaders found that these tiered caps had the largest publishing of the six houses in the effect of anchor setting prices across the e- Hachette, HarperCollins, United States: industry. book Nonetheless, Id. 670. Macmillan, Penguin, House, Random observed, as the district court these terms Simon & Schuster. Id. at 655. At inherently are not illegal, “entirely outset, Apple understood that pub- lawful may MFN, contracts include an lishers were unhappy with Amazon’s be- price caps, pacing tiers.” Id. at 698. e-books; pricing of low-cost so knew Apple negotiated As that the publishers willing “were to coordi- contract, sign agency it told each ma- nate their efforts” to combat the $9.99 jor publisher that all signing publishers price, point. Id. at 656. would receive the same terms. Id. weeks, Apple After some several end, In the five of the largest publish- six publishers devised a new model e-book signed ers Apple’s agency contract. Id. at distribution. Amazon had been paying House, (Only 673. Random the country’s e-book, price wholesale for each resell- and Id.) largest, did not. As the district court (often loss) ing at a for a retail of its found, the signatories represented five choosing. Apple’s distribution contracts “over 48% of all e-books in the United (cid:127) adopt would agency system: publishers they signed States” when Apple’s agency would set the retail prices of e-books sold contract. Apple Id. at 648. unveiled its e- through Apple’s platform and Apple would “¡Bookstore” platform book retail —at —the fixed-percent take a commission on each public the first demonstration the iPad However, sale. Id. at 659. agency January 2010. Id. at 678-79. (or retailer) expose Apple model any would publishers After the signed on to risk, Ap- to publishers might protect because contract, ple’s agency they had to focus on by setting hardcover sales retail prices for Amazon’s of the high adoption agency e-books so model Apple appear would (as above) out of because explained touch with consumers otherwise aware of Am- price. azon’s Id. MFN clause Apple solution would allow to $9.99 match First, bestsellers, was proposed twofold. Amazon’s agency pay and contract included a most favored nation publishers no more than a percentage 420a, ¶ completely excluding entry.” Hovenkamp, supra,

without 2B Ar eeda & at 73. (cid:127) However, notion that Amazon’s below-cost “the The on $9.99. commission “designed loss-leadership pricing from Ama- was retaliation feared [publishers unison,” adopt to encourage in id. at consumers acted they unless zon ante, they Kindle,” Livingston, Op. Judge reassurance “needed (for Court), alone,” Apple novelty, 674. An execu- is a id. at not be signatory of the five each findings with neither the fact supported liaised tive front” encourage a “united rate, anyAt the effect publishers, nor the record. Amazon, and to negotiations in their of the rele- pricing of e-book outside who “apprised about publishers keep the irrelevant. vant market is many were on board.” Id. how in and was (cid:127) Amazon’s majority The asserts that also communicated publishers at 678. only pricing below-cost was limited at 674-77. other. Id. each directly with per “a “a small loss” on small pub- that the five realized Amazon When (for of its sales.” Id. at 327 centage concert, in it acceded acting lishers were Court). are These observations agency contracts. Id. signed from a submission apparently drawn 680-82. Amazon, downplaying the anti-com findings on which are Those monopoly-protec effects of its petitive committed an anti adjudged pricing. The district court did tive ' putative violation trust violation. statistics, rely presumably on these be (a) embedding agency to: amounted misleading and self- cause are (complete with MFN clauses model minority they ignore that the serving: contracts with price caps) Apple’s own releases and comprising of titles new (b) encouraging pub naturally have an outsize bestsellers horizontally in their to coordinate lishers industry. Accordingly, impact on the push industry-wide adoption efforts the district court found that the below- pub agency model. and the consequences on the pricing cost lishers shared the motive to increase the market, namely that a entrant new publishers’ pricing power in order de losing money run the if “would risk They prive monopoly. Amazon of its suc it tried or was forced to match Ama noted earlier ceeded: as the district court pricing competitive.” zon’s to remain litigation, “Amazon’s market share I, F.Supp.2d at percent decreased from 90 to 60 e-books (cid:127) support I can find no record for the years following in the two the introduction market narrative that Amazon’s share agency pricing.” Ap United States v. eroding Apple’s entry, before Inc., (S.D.N.Y. 623, ple, F.Supp.2d 889 640 “promised the iPad to introduce more 2012). competition with or without iBookstore,” and that thereby enjoyed negotiating increased foregoing Background accepts leverage. Op. Judge Livingston, upon findings relies the district court’s ante, Similarly, at 334. the assertion say Judge fact. cannot the same of One disrupted that Barnes & Noble Ama- Livingston’s opinion, supports its le- which market, in the e-book zon’s dominance gal analysis conclusions and its market 334, by supported see id. at is neither findings appeal, made now on with novel i.e., findings by court’s nor remand other means. A few exam- the district ples: record.

345 contrast, By my analysis antitrust agreements relies horizontal “raising, depress- court, findings ing, on the made the district fixing, pegging, or stabilizing the (a) others, incorporates commodity.” no in order of a United States v. Co., disputes my colleagues, Socony-Vacuum 150, avoid factual Oil 310 U.S. (b) 223, 811, (1940). 60 to defer to the district S.Ct. 84 thorough court’s L.Ed. 1129 findings arriving my fact at legal conclu- cases, Among modern per se rule (c) sions, and to respect the limited role of exclusively takes aim at agree- horizontal appellate courts. ments, “competition because among the [product]

manufacturers the same ... is DISCUSSION primary concern of antitrust law.” T.V., Continental Inc. v. Sylvania GTE

I Inc., 36, 19, 2549, 433 U.S. 52 n. 97 S.Ct. 53 (1977). L.Ed.2d 568 Accordingly, error, principal legal The district court’s trend of antitrust law has been a steady flow, from which other errors is its conclu- constriction of the per se rule in the con- § sion that violated 1 per under the See, text of relationships. vertical e.g., Having se rule. found that the publishers’ Prods., Leegin Creative Leather Inc. v. strategy coordinated was a horizontal PSKS, Inc., 877, 901, 551 U.S. 127 S.Ct. price-fixing conspiracy, and that 2705, (2007) 168 L.Ed.2d (holding 623 conspiracy facilitated that in its vertical agreements vertical for minimum prices relationship publishers, with the see per violations); Co., are not se State Oil I, 691, F.Supp.2d 952 the district court 7, 522 U.S. at 118 S.Ct. (holding 275 legal drew the conclusion that these facts agreements vertical for maximum prices per established a se violation of the Sher- violations); not per are se Continental by Apple. man Act appeal This turns on T.V., (holding U.S. 97 S.Ct. 2549 purely participation whether vertical non-price that vertical restraints are not and facilitation price-fixing of a horizontal violations); per se White Motor Co. v. conspiracy gives rise to per liability. se States, 253, 261-64, United 372 U.S. Section of the Sherman Act “out- (1963) S.Ct. 9 L.Ed.2d (holding restraints”; law[s] unreasonable so a that vertical territorial restraints are not court weighing alleged “pre- violation violations). per se The cases have “contin- sumptively applies rule of analysis, reason limit, temper, ued to or overrule once under which plaintiffs antitrust must dem- prohibitions strict on vertical restraints.” particular onstrate that a contract or Leegin, 551 U.S. at 127 S.Ct. 2705. combination is in fact unreasonable and A vertical relationship that facilitates anticompetitive before it will be found un- horizontal conspiracy does not Dagher, lawful.” Texaco Inc. v. 547 U.S. per amount to a se violation. In another 1, 5, (2006) 126 S.Ct. L.Ed.2d age, Supreme treated such a Court Khan, (quoting State v. Oil Co. U.S. hub-and-spokes conspiracy per as a se vio- 3, 10, 118 S.Ct. 139 L.Ed.2d 199 Circuit, lation. See Interstate Inc. v. Par- (1997)). se, exception, liability per Co., amount Pictures Distrib. categories reserved for those of behavior 208, 226-27, 467, 83 S.Ct. L.Ed. 610 definitively so and universally anti-eom- (1939). per But the se rule has in been petitive that a court’s consideration of steady retreat. market forces reasonableness would pointless. Traditionally, be explicit signal Id. restraints The most recent and is per given that are se unlawful take the form of in Leegin, explains which that “the 2705. 127 S.Ct. at Leegin, 551 U.S. of ‘restraints on prohibition Act’s Sherman liability for rejected per se then The Court dynamics of to meet evolves trade’ wording agreements, hub-and-spokes conditions,” that such economic present of review rule-of-reason prescribes that per of se doctrine of the “the boundaries per se un- facilitate dealings that vertical immovable.” not be illegality should (the of type agreements horizontal lawful (alterations 899-900, 127 S.Ct. U.S. at found court the district agreement manufacturer omitted). that a held Leegin undertaken): had § 1 se violation per not commit did set- agreement extent a vertical To on a retailers with several agreed it when is entered minimum resale ting could retailers minimum of cartel type either upon to facilitate a centu- overruled holding that charge—a retail- among or [among manufacturers Dr. Miles articulated ry-old principle un- too, be held ers], it, need to Co., D. Park & Sons v. John Medical Co. rule reason. under the lawful L.Ed. 502 31 S.Ct. 220 U.S. added). we Leegin, After (emphasis Id. 881, 127 (1911). at Leegin, 551 U.S. See rule a vertical per se apply cannot Dr. reasoned Leegin 2705. S.Ct. con- price-fixing a horizontal facilitator of agreements “treated vertical Miles liable, must be held an actor spiracy; such its with distributors makes manufacturer Id. all, the rule of reason.” “under if at combination to a horizontal analogous as that, “appreciated is animated distributors,” Leegin but competing among between effect in economic cases, rejected differences ... the Court later “[i]n Id. agreements.” horizontal vertical govern- rules of reliance the approach every chal- 888, 127 2705. Since at S.Ct. defining when ing restraints horizontal as ei- thus lenged restraint classified Leegin, ones.” to vertical applicable rules vertical, may draw or one horizontal ther Dr. Miles 127 S.Ct. agree- inferences: vertical certain reliable “[o]ur with to be inconsistent was held subject are not presumptively ments cases[,] formulate antitrust [which] recent vertical liability; nature per se appreci- with the in accordance principles feature; the in- is its salient be- in economic effect ated differences arrangement on a aof vertical fluence agreements, vertical and horizontal tween (on plane another cartel horizontal failed the Dr. Court differences Miles the vertical not render competition) does Id. consider.” per se unlawful. arrangement Leegin holding of Although express consid- circuit to have only sister Our overruling of beyond the extend does not Leegin arrived wording ered this Miles, analysis Dr. the Court’s reinforces Mack I draw. Toledo conclusion subjects ever- shift that the doctrinal Trucks, Inc., Service, v. Mack & Inc. Sales agreements category of broader vertical (3d Cir.2008), a manufac- F.3d the rule of reason. review under distributors turer used contracts subsisting scope first stated the Court con- and enforce a horizontal to facilitate liability: per se distributors) that was (among spiracy 210. The among competing illegal per se. See id. at A horizontal cartel itself instruc- Leegin’s Circuit held competing retailers Third manufacturers arrangement “would compe- the vertical or reduces tion—that output that decreases rule of under the is, held be unlawful to increase need order tition the rule reason prescribed be, unlawful. ought per se reason” — 347 “[Hjorizontal analysis for proper agreements the whether the verti- as a class de § scrutiny cal conduct violated 1. See id. at 225. serve stricter than ... vertical agreements,” because agree horizontal tack, Taking opposite majority the “pose ments significant the most dangers opinion appeal on this insists that a verti- competitive harm.” 11 Areeda & Ho conspiracy cal facilitator of a horizontal ¶ 1902a, venkamp, supra, at 232. Horizon se, per Leegin. liable after In sup- even tal conspiracies are illegal per se port argument, majority of that cites because motives of horizontal players are seven that pre-date Leegin,3 Op. cases aligned and dominant and create irresisti (for ante, Judge Livingston, at 322-24 See, temptations. Smith, ble e.g., Adam Court). majority post- The cites one (Collier The 1902) Wealth Nations 207 Leegin question: case that considers this (1776) same, (“People of the trade seldom namely, analysis the Third Circuit’s of a ..., meet together but the conversation conspiracy that involved both vertical and ends in a conspiracy against public, horizontal relationships, concluding that in some prices.”). contrivance to raise § the horizontal relationships violated among Collusion competitors does not per se that pursuant Leegin describe Apple’s conduct or account for its vertical relationships “would have to be motive. conduct had no element analyzed under the traditional rule of rea- of collusion with a horizontal rival. Its Brokerage son.”4 In re Ins. Antitrust (and own in competition rival presum- (3d Cir.2010). 300, Litig., 618 F.3d is) ably Amazon; competition and that majority’s holding in this case place takes on a plane horizontal distinct therefore a split, creates circuit and puts plane of the horizontal conspiracy wrong us on the side of it. among publishers. All Apple’s ener- that, majority 3.The cases are cited conspiracy Leegin, in this Stores, after "all zontal Klor’s, Broadway-Hale order: Inc. v. judged vertical restraints are to be un- Inc., 207, 705, 359 U.S. 79 S.Ct. 3 L.Ed.2d (emphasis der the rule-of-reason standard” (1959); United States v. General Motors added)). 127, 1321, Corp., 384 U.S. 86 S.Ct. (1966); Us, FTC, Toys L.Ed.2d 415 “R" Inc. v. analyzed 4.The Third Circuit network (7th Marina, Cir.2000); Denny's 221 F.3d 928 restraints, including conspiracy among in- Productions, Inc., Inc. v. 8 F.3d 1217 brokers, conspiracy among Renfro surance insur- (7th Cir.1993); Corp., United States v. MMR ers, agreements that connected the bro- (5th Cir.1990); 907 F.2d 489 Business Elec- explained kers and insurers. The court Corp. Sharp Corp., tronics v. Electronics Leegin impact way: s 1515, U.S. 108 S.Ct. 99 L.Ed.2d 808 Supreme jurispru- Under Court's (1988); Discon, Inc., Corp. NYNEX v. dence, virtually agreements all vertical U.S. 119 S.Ct. 142 L.Ed.2d 510 (1998). now receive a traditional rule-of-reason analysis. Leegin, See unhelpfully, majority Just as cites dicta S.Ct. 2705. In the factual context of this affirming from a Sixth Circuit case the dis- case, a horizontal means ... alleged missal of a lawsuit that a hub-and- agreement among either the spokes brokers conspiracy. See Total Plan- Benefits global ning conspiracy. or the insurers in the Agency,Inc. v. Anthem Blue Cross & Blue Shield, (6th Cir.2008). Agreements between brokers and insur- 552 F.3d 430 ers, hand, majority on the holding sup- cites the other are vertical and case as if its ports legitimacy analyzed would have continued the hub-and- to be under the tra- spokes theory Leegin, interpre- after a flawed ditional rule of reason. given disposition Brokerage Litig., tation the Sixth Circuit's In re Ins. Antitrust 618 F.3d (hold- (3d hub-and-spokes Cir.2010) (internal claim. Id. at 435 318-19 citation ing omitted). plaintiffs inadequately alleged a hori- and footnote 887, 127 at Leegin, 551 U.S. experienced. in been condemned that has it did gy—all conceded government 2705. As weakening its S.Ct. to directed case—was previously no court has argument, it aside rival, to at oral pushing and competitive kind. Sever- of this entry. On the a considered restraint Apple’s room make (a) verti- generis: a Apple’s to e- it mi matters al features make that plane horizontal (b) a horizontal competition facilitating in business, relationship Apple was cal book (c) to en- it not do barriers So does overcome conspiracy collusion. to in never firm anti-competitive by single dominated try conduct in a market Apple’s deem emergent con- (d) horizontal an publishers’ industry an created just because illegal per se. to be found technology. was spiracy customary are a agreements “[V]ertieal analysis my to show As I undertake of the part market indispensable even below, reason, the re- rule of under the the same represent do not and so system” faced market conditions strictive competition. Ar threat presumptive Apple’s of results pro-competitive and the ¶ 1902d, at supra, Hovenkamp, & eeda dealings categor- make its vertical conduct designed a vertical Even 240. if one tests Even reasonable. ically among competi competition decrease reason, the rule of conclusion under threat to market pose the not does tors yields sufficiently complex analysis is by a horizontal is posed competition results pro-competitive substantial such (1) market for two reasons: agreement, liability is an abdication per se (such countervailing measures forces distinguish reasonable restraints duty to more effec categorically are competitors) unreasonable." those that are vertical countering anti-competitive tive (2) agreements vertical agreements, II of operation fundamental to so are con- first that legality Having concluded uncertainty about the market se, corollary per impose anti-competitive arrangements would duct was vertical court the district followed when Id. 240-41. errors costs on markets. vast court Once a to the rule of reason. driving are evo turned market realities Such unreasonably per law, “rejected party acted has finds that antitrust which lution transactions, epiphany is govern on rules in a set of approach of reliance se defining court to conclude that required when for the restraints ing horizontal reasonably doing the Leegin, party acted ones.” same applicable vertical rules at the same samé role same acts in the U.S. S.Ct. arising from the dis- time. The influence why per se present case illustrates wrongdo- per se accusation trict court’s agree- vertical given not is treatment analysis that followed. ing infected all conspira- horizontal that facilitate ments joined deemed to Once (as on ap- uncontested Assuming is cies. se, illegal per goal, that was conspiracy per § 1 violated that the peal) motive, seemingly needed and conduct coordination, Apple’s pro- through their sé (and scrutiny legal or got) no additional — conspiracy was of that horizontal motion moral or economic. , dealings. to vertical limited liability Apple’s per se Having confirmed here inapplicable per se rule com- plane horizontal by conflating the per reason: The se independent another hori- publishers with the among petition arrangements apply does not rule among retail- competition plane zontal already well- the courts are which ers, the district court committed the same III analysis. error in its rule of.reason Thus appeal, On this we have reached no ma- (as below) explained the court district jority as to the rule of Judge reason. anti-competitive overstated the nature of Livingston that, writes for herself alone as dealings vertical overlooked rule, an per alternative to the se she would on pro-competitive effects retail com- reason; also affirm under the rule of with- horizontal petition plane on which —the judge out a second supporting this conclu- Apple does e-book business. “The district sion, dicta, it is because our affirmance is analyze court did not the state of competi- based on per theory se adopted by two retailers,” tion between ebook as the ma- judges. my Unlike I colleagues, must ad- jority Op. Judge Livingston, concedes. of reason, dress the rule of my because vote (for Court) ante, at (emphasis depends to reverse my conclusion that omitted). Exactly. theory alternative of liability every is Judge Livingston’s opinion succumbs to bit untenable as liability per se. fallacy by the same declaring majori Analysis under the rule of reason— ty’s per analysis own overwhelming se so whether by conducted full or an un- that full scrutiny requires rule-of-reason quick tainted compels the conclusion no more than a look— “quick Quick-look look.” § did not violate 1 of the Sher- analysis is an appropriate tool when man Act. The issue is decided compar- “an rudimentary observer with even a un (a) ing the restrictive effect of Apple’s derstanding of economics could conclude (b) dealings with the pro-competitive result arrangements in question would of deconcentrating a market that had been anticompetitive effect.” Cal. Den an by monopolist dominated and insulated FTC, 756, 770, tal Ass’n v. from competition through below-cost pric- 1604, 143 (1999). S.Ct. Quick- L.Ed.2d 935 ing. analysis look is not a tool for cutting cor Judge Livingston’s ners. opinion justifies reason, Under rule of the initial quick-look analysis by referring to e-book plaintiffs burden rests with the “to demon- price majority’s increases that form the challenged strate the defendants’ behavior argument earlier application for the had an actual competi- adverse effect on rule, per Op. Judge se see of Livingston, tion aas whole in the relevant market.” ante, that, increases at any 330— Corp. Geneva Pharms. Tech. v. Barr Labs. rate, are the expected monop result when Inc., (2d 485, Cir.2004) 386 F.3d 506-07 pricing olistic below-cost dissipates. (internal omitted). quotation marks Upon substance, In form and Judge Living- plaintiffs’ showing effect, of such an “the analysis ston’s demonstrates that when burden shifts to the defendants offer finding one starts with a pro-competitive unreasonable- evidence of the effects of se, per analysis ness the rule of reason is their agreement,” and then “the burden tainted. It is called confirmation bias. plaintiffs prove shifts back to the The characterization of Apple’s any legitimate conduct as competitive benefits offered “vigilantism” telling. Op. of Judge Liv- defendants could have been achieved (for ante, ingston, Court), at 297-98 through less restrictive means.” Id. The 332. Use of that word either assumes the reasonableness of the restraint then boils conclusion that illegal, the conduct is down to whether the dominant effect of (which else it self-help confuses with promote competition used is to - virtue). to be or restrain it. Id. object of antitrust is not an prices accounting of for low Analysis begins v. Brown & Grp. Ltd. Brooke law. See Apple’s vertical effects. anti-competitive 209, Corp., 509 U.S. Tobacco Williamson terms negotiating consisted conduct L.Ed.2d 168 113 S.Ct. course, every Of contracts. own of its (1993). charts court The district to some of trade is a restraint Contract treating developments, short-term Athletic Ass’n Collegiate extent, Nat’l see as anti-com- pricing end of below-cost Okla., 468 Univ. Regents v. Bd. disapproval observing with petitive L.Ed.2d S.Ct. U.S. rise to com- tendency natural here alone is neither (1984); this fact so pro- reason The rule of levels. petitive there. nor safely it can be as- competition; motes Apple that agency sharpens, prices competition if that sumed was innocuous: publisher with each signed of take care themselves. will including agree, each parties term — effects, the pro-competitive to the As clause, structure, and MFN agency primarily account reason must take rule of The dis- absolutely legal. caps price —is the e-book retail deconcentrating of of expressly: so found trict court increasing the num- The benefit market. and this argue, Plaintiffs do not from the in a market derives ber firms found, agency has not Court concentration “inverse correlation between content, any or model distribution Fox, M. Eco- Eleanor competition.” and Agree- included of the clauses one Concentration, Efficiencies and nomic negotia- ments, any of the identified or and Political Social Goals Competition: Indeed,. inherently illegal. tactics tion is and Choices, Concentration in Industrial an may contracts include entirely lawful (Eleanor System 149 M. the Market MFN, pricing or tiers. price caps, 1979). eds., As T. Halverson Fox James & I, The main F.Supp.2d at 698. Apple found, weigh- was Apple court the district Apple’s vertical resulting restraint market, entry into the retail e-book ing its shifting pricing power conduct was only way was the agency structure publishers. retailers to e-book from e-book Nobody market. enter Apple would as a operated restraint And this effect en- Apple’s since proposed has —before pressure faced Amazon the sense that by means” which try any “less restrictive — charge agency model adopt the same com- could have achieved Apple by publishers, which 'prices set the five Pharms., Geneva petitive benefits. See with each competition course remained prove (plaintiffs’ at 507 burden 386 F.3d other, who account and with the alternative). and less restrictive viable of the indus- remaining percent for the broke Ama- challenged conduct Apple’s try. immediately deconcentrat- monopoly, zon’s market, plat- added a retail ed e-book plain- and the opinion The district court e-books, and reading removed form for on the idea that briefs fixate tiffs’ And removal entry others. for most new barriers ended Amazon’s $9.99 long for the entry reduces bestsellers, of a consum- barrier releases monopoli- vulnerability to a market’s price. term preferred lower ers would in the sound basic These effects zation.5 preference near-term But the consumer’s Ne., Inc., permit Corp. v. speaking, entry & Stone Oldcastle Generally barriers Dock (2d Cir.2007); United States v. power monopoly allows F.3d monopolization and (D.C.Cir. See, 253 F.3d Corp., e.g., entry barriers. Port firm to erect Microsoft only quick- of antitrust law. Even if goals have entered the e-book market on less case, analysis appropriate look were in this restrictive theory terms. Each misappre- these effects would vindicate con- law, hends the market or the or both. The (Judge Livingston’s duct. opinion dis- absence of alternative bespeaks means pro-competitive counts this effect not- reasonableness of the measures ing open question whether “below-cost took. unlawfully pricing anti-competitive,” Theory 1: Apple competed could have thereby suggesting Apple’s disman- terms, with Amazon on Amazon’s using tling entry pro- barrier could be wholesale contracts and below-cost pric competitive only if the barrier was itself ing. option. This never an The dis Op. Act violation. of Judge Sherman Liv- trict court found as fact that: a new en ante, ingston, at 331-32. But it is no trant into the e-book retail market “would insuperable matter whether barrier run losing money the risk of if it tried or tore down had been raised law- was forced to match Amazon’s pricing to not.) fully or competitive,” I, remain Appl e pro-competitive Another effect is the en- 658; F.Supp.2d at Apple was willing” “not innovation, couragement of a hallmark and to engage 657; in below-cost pricing, id. at of competition. Apple began benefit re- Apple and could have money- avoided this conjunction tailing e-books with its re- losing price simply by structure forgoing iPád, integrated lease of the a device that market, entry to the see id. at 659. Even cutting-edge applications, functions and Apple if had willing adopt been to below-

just one of which the capacity for pricing, cost the result at best would have buy users to and read e-books. It is im- duopoly, been and the hardening of the possible likely to know the course of inno- existing entry. barrier to Antitrust law vation, pro-competitive and effects of inno- disfavors a duopoly nearly durable as measured; nevertheless, vation cannot be much monopoly as itself. 6See Areeda & encouragement of innovation must be ¶ Hovenkamp, supra, 1429. afforded weight considerable under Theory Apple rule of 2B 2: could have generally reason. See Areeda entered ¶ using e-book retail market Hovenkamp, supra, & the wholesale Apple’s busi- model charged higher prices is not than technology ness of the clothes- Amazon’s. The district court pin. foreclosed well; theory this it Apple found that The restraint of vertical conduct impair refused to charging its brand slight was no more than a offset to the it unrealistically high “what considered competitive pervade benefits that now I, prices.” Apple 952 F.Supp.2d at 659. relevant market.6 if Apple Even had willing been to tarnish competitive How else could the by offering benefits its brand bad money, value for have been realized this market? In the the notion that customers actually would litigation, course of this bought three theories Apple e-books from at the have been offered for Apple higher price how could defies the law of demand. 2001) (en banc); Corp. prices see also Mobil Oil v. 6. Amazons's below-cost threat- also Comm'n, books,

Fed. Power hard-copy Ap- 302 n. ened the market for see I, (1974). ple 94 S.Ct. F.Supp.2d L.Ed.2d 72 Each is and thus the authors, likely royalties less to may arise when the other is absent of who well consider from a industry. market. have some role in this

COCH is not fundamentally, litigation More cer- sales may stimulate prices

Higher has This observation e-books.7 market alternative. perfumes tain -wines —not under- are in markets that force especial for justify higher Apple could Nor advance, where technological rapid going the basis on by competing the e-books product is half-life competitive iPad, there hardware, because its new span than considerably brief more And among platforms. inter-operability requirement A litigation. antitrust pursue attempted if instead litigate entrants market potential by program competition hardware-based (but restrictive the market of enter but iBookstore run the iPad ming its reasonable) terms, license legal application, Kindle reject Amazon’s for the duration. entirely monopoly an exposed have been might peril. See United antitrust different 34, 50-80 Corp., 253 F.3d States v. Microsoft a mo- compete with steps to Apple took ( (en banc); An Google D.C.Cir.2001) en- to more the market open nopolist (Eur. Apr. droid, Comm’n No. competitive minor trants, generating (antitrust brought 2015) proceedings conduct was Its process. restraints Competition European Commissioner reasonable; suggest- has no one eminently own favoring Google’s Google for against could be “What alternative. a viable ed use devices that on mobile applications doctrine than antitrust perverse more system). Google’soperating highly entry into discouraged new have asked 3: could Theory Mes- In re Text markets?” concentrated Ama- against act

Department Justice 867, 874 Litig., 782 F.3d saging Antitrust United monopoly. zon’s Counsel (7th Cir.2015). argu- this at oral actually proposed States however, time, easily he same of reason ment. At the rule Application of the. Department the of Justice liability. That conceded Apple of antitrust absolves e-book already Amazon’s “noticed” government argument oral the why is challenge it not to and had pricing chosen conspiracy, drug to a this case analogized it as “regarded government the because a criminal—at every is in which player Any request consumers.” good for axis, level, big or every whether every futile. have would therefore been Apple small, or recidivist. new entrant whether that the True, have known Apple could not use- analogy the found government adopted the have Division would Antitrust in an all- necessary ful—and —because is not a pricing that below-cost position justification there is industry no criminal could have antitrust who policy: concern of under a rule reason. or harbor adopt government the guessed that as a primitive that is- matter a policy IV as a matter doctrine and illiterate antitrust violation, I T no antitrust Because see Nevertheless, hindsight re- of economics? separate chal- Apple’s not consider need antitrust enforce- government veals that My eol- injunction to the itself. lenge option. not an was against ment Amazon 92-93, id. at terms, demand. See subject perfectly inelastic e-books are In economic 453-54, 835; Bagwell & nega- B. Simon demand therefore have Laurie the and law generally Bernheim, elasticity Theory of demand. See in a Douglas tive Veblen Effects Mankiw, Principles of Economics Gregory N. Econ. Conspicuous Consumption, 86 Am. (6th ed.2012). Veblen are neither E-books (1996). Rev. goods, goods nor do nor Giffen reasons, leagues, good their own do not lawyer $1,025 trust to the team at an hour. Id.) challenge reach that either. Yet the in- Apple When challenged that tariff as junction unreasonable, shortcomings and its bear upon Bromwich explained that courts; injunction the institutional interest of the gave Apple standing no object: Apple’s challenge deserves some “the response. expenses fees and paid to be view, my injunction the monitor and his warps the role team are not set neutral, Apple; they monitor, of a are set court-appointed referee into with approval adversary that of an reserved for party, predicta- with the DOJ and the States.” Id. Bromwich). Plaintiff ble consequences. (quoting Bromwich right, which telling: The monitor is an arm of the district injunction contemplated no role for the court, loyalty and owes in that direction judge. 53(a). only. See Fed.R.Civ.P. But Once the Department of Justice selected injunction redirects loyalty of the mon- him and approved fee, his hourly Brom Apple’s itor to adversary chief litiga- wich up drew his own mandate. Although tion, the Department of Justice. Under injunction' contemplated that the moni injunction, the DOJ recommends the tor would check sufficiency of an ¶ antitrust (Injunction VI(A)),

monitor approves policy was to prepare (id. VI(I)), ¶ in 90 monitor’s fees and mediates (and days Apple’s compliance it), disputes between the monitor Bromwich inquiry started his (id. immediately (H)). HITVI(E), injunction Thus the appointment; on his he multiplied inter office, first creates a neutral fact-finding views, document inspections, and discon gives and then an adversary ability tents; he demanded to interview office, decide who holds the much how he executives without the (out presence gets paid pocket), of the other side’s counsel; chosen and he took aim at the broadly may how he reach in- competitive culture of the corporation gen quire. Reciprocally, the monitor is direct- erally obviously culture that is aggres ed to inform government if he “discov- —a sive, just but obviously no business of ers or suggests” receives evidence that See id. 134-36, the courts. 140-41, violations, further antitrust whether or not *2-3, WL 3405534at *7. (Id. HVI(F).) related to litigation.

This is a device that must misfire. Having thus been by selected an adver- sary party, paid at a approved by rate (and As events happened were adversary party, and directed to look to fore-ordained) seemingly the monitor has adversary party for the mediation of reason to gratitude look to the DOJ with (in disputes, every Bromwich was respect loyalty. The DOJ recommended Mi- important lawyer) to a by retained and run monitor, chael Bromwich as and the dis- adversary. Apple had an unenviable trict court appointed him. United States choice: it could accept scrutiny by a law- Inc., v. 131, 134-35, 787 F.3d yer whose incentives corrupted by were (2d 2015). *2 May WL at Cir. injunction office, that created his fee, a meaningful cap Without on his attack the fee and the widening scope of proposed Bromwich defendant inquiry, thereby sharpening the confronta- $1,265 compensate him at per horn*—an by tions created the mechanics of the in- eye-popping agent rate service as an of junction Id. at a court. 2015 WL 3405534 at (Because *3. Bromwich lacks antitrust ex- A magistrate judge has cut Bromwich’s pertise, Id. proposed he to add an actual hourly anti- fee. n. 2015 WL this panel And a n. 4. at *6 narrowly scope has construed

Court 136-38, inquiries. Id.

the monitor’s at *4. But the structural

2015 WL allowing injunction remains:

defect agent the court to serve

an arm of strong take It would

adversary party. worldly transcend the lawyer for a

stuff unlimited injunction:

incentives of (now cut) $1,000 an rate of at the

work may

hour, party a solvent paid in order protesting,

expect retaliation monitorship subject to exten- perform that will be court for reasons

sion him- from the monitor by input

influenced

self. injunction that thus the lines

An blurs adversary system good does no for the the- courts.

reputation of

William R. HENDRICKSON Hendrickson,

and Patricia

Plaintiffs-Appellees,

v. America,

UNITED STATES

Defendant-Appellant.

No. 14-1958-cv. Appeals,

United States Court of

Second Circuit. 25, 2015.

Argued: March

Decided: June

Case Details

Case Name: United States v. Apple, Inc.

Court Name: Court of Appeals for the Second Circuit

Date Published: Jun 30, 2015

Citation: 791 F.3d 290

Docket Number: 13-3741-cv (L)

Court Abbreviation: 2d Cir.