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So, crapshoot?

Every trial is a crapshoot to some extent, this one especially. The minimum question that must be asked here is: on what side of that 50/50 threshold does the case sit? Are the chances that Apple played a role in the allegations more or less than likely. It is rather clear that Apple had at least some inkling of knowledge that something was going on. Did Apple benefit from the result? It appears so.

And this leads into your next set of questions…

So, if Apple loses, what’s the penalty?

The penalty will depend on how culpable the judge feels Apple was in the conspiracy. Ringleader = expect a serious penalty. Party who went along for the ride but still participated with knowledge = less serious.

1. A fine? Looks to be in the tens of millions, similar to the publisher settlements?

At the minimum. The amount depends on the level of Apples culpability, as decided by the judge. Apple could get a small fine (by Apple’s standards), or it could (and I find this unlikely) receive the total amount of true economic cost discrepancy (subtract 9.99 from every ebook sold by the named publishers’ for more than 9.99, then add that total), then take that total and triple it. In that case, the fine could potentially run into the billions.

It would also likely lose its ability to use agency pricing for a period of time beyond the timeline of the publishers’ settlements, but this is simply because the timelines would not overlap.

2. Apple gets to use the wholesale model with MFN clauses for wholesaler discounts, like Amazon has?

Yes. See Robinson-Patman Act.

3. ???

Profit!

5 days ago on DOJ to Apple's Eddy Cue: 'Did your customers thank you for raising prices?'

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And I’m surprised the DoJ hasn’t torn him to shreds over that comment. It is very selective in its truthfulness.

While true across the entire spectrum of ebooks, the entire spectrum of ebooks is not under consideration in this trial.

Let me explain it it numbers. Imagine that there are 1000 ebook titles. Of those 1000 titles, five major publishers control 10% of the titles. However, those publishers make 80% of book sales.

If the five publishers raise prices on their 100 titles (10%), but the other publishers (the 90%) lower their prices by a greater combined total than the 5 publishers, then the average price of an ebook will appear to fall. Yet the total economic cost, which Mr. Snyder did not address, actually increases (80% market share outweighs the 20%).

Thus the real question is not whether the average price of an ebook fell after agency, but did agency cause an increase in the total economic cost of ebooks (discounting growing adoption, of course)?

6 days ago on DOJ to Apple's Eddy Cue: 'Did your customers thank you for raising prices?'

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1) Collusive price-fixing, in the legal sense and spirit of the Sherman Act, does not require a set price to be made. It requires evidence of a collusive agreement that causes a manipulation (or restrains the competition) of a price (see National Society of Professional Engineers v. United States).

2) Agency pricing and MFN clauses are not illegal. However, any contracts made under a conspiratorial (illegal) arrangement are null and void. If there was collusion, the agency model and MFN clauses go away, BUT this is not because they are the agency model and MFN clauses. These clauses go away because they were part of the alleged conspiracy. The same would happen if the reverse were true and the original model was agency and the conspirators wanted wholesale; those wholesale contracts would then be null and void.

3) This is a civil trial. I really wish people would stop throwing around the word “proof.” This is not a criminal trial with stringent burden of proof. The standard is called a preponderance of evidence, and it is very subjective. In theory, the winner has to simply show that it made its case by a margin of 50.1% to 49.9%. In other words, the DoJ is throwing everything it can at this in the hopes the sum total of its evidence shows a 50.1% chance that Apple likely played a part in the conspiracy.

4) This is not a jury trial. The judge has done this before, and judges typically rely on the evidence rather than testimony. The point of testimony in this case is the hope that one side slips up tremendously, thus sealing the win for another side. Since the majority of evidence so far is internal communications between the defendants, the advantage here goes to the plaintiff.

5) Before the trial, the judge said, “I believe that the government will be able to show at trial direct evidence that Apple knowingly participated in and facilitated a conspiracy to raise prices of e-books, and that the circumstantial evidence in this case, including the terms of the agreements, will confirm that." So unless the judge changes her mind or the defense can squash some of the pre-trial evidence, how can anyone say Apple is not the underdog here?

6) And lastly, Apple should have just settled. They already “lost” when the other publishers settled. Even if it prevails at trial, a victory will not undue the settlements made with the publishers. That means Apple can’t enter into a new agency agreement with those publishers for several years. If Apple had settled, the clock would have been counting down on Apple and the Publishers at the same time. If Apple loses now, the penalties will likely extend the agency model restrictions. I don’t see an upside to this risk. If this was about PR, then why did Apple settle this very same issue with the EU regulators? And even after this trial, Apple then must face the states, who are also suing.

Get it over with. Move on. Too much risk.

6 days ago on DOJ to Apple's Eddy Cue: 'Did your customers thank you for raising prices?' 3 replies 4 recommends