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U.S. Faces Tough Questions in Apple E-Books Antitrust Appeal

One judge asked why it was wrong for the publishers to get together to defeat a "monopolist" that was using "predatory pricing."

Anthony Quintano for Re/code

A U.S. government lawyer faced tough questioning in an appeals court on Monday as he sought to defend a judge’s ruling that Apple conspired with five publishers to raise e-book prices.

In arguments before the 2nd U.S. Circuit Court of Appeals in New York, some judges appeared sympathetic to Apple’s contention that it engaged in pro-competitive conduct when in 2010 it entered an e-books market largely dominated by Amazon. Amazon at the time had a 90 percent market share.

Circuit Judge Dennis Jacobs asked a Department of Justice lawyer why it was wrong for the publishers to get together to defeat a “monopolist” that was using “predatory pricing.”

“It’s like the mice getting together to put a bell on the cat,” Jacobs said.

Malcolm Stewart, the Justice Department lawyer, replied that no publisher on its own would have entered into the deals with Apple unless they were conspiring to drive up e-book prices.

“It was to combat the public perception that books are only worth so much,” Stewart said.

The appeal followed a 2013 decision by U.S. District Judge Denise Cote that Apple played a “central role” in a conspiracy with publishers to eliminate retail price competition and raise e-book prices.

The government said the scheme caused some e-book prices to rise to $12.99 or $14.99 from the $9.99 that Amazon charged.

The publishers include Lagardere’s Hachette Book Group, News Corp.’s HarperCollins Publishers, Penguin Group, CBS’ Simon & Schuster and Verlagsgruppe Georg von Holtzbrinck’s Macmillan.

Apple has denied wrongdoing and argues that its entry into the e-books market actually helped push e-books prices on average down overall.

“We think the conduct here was innovative and pro-competitive,” Theodore Boutrous, Apple’s lawyer, argued Monday.

If Apple wins the appeal, it could jeopardize a related $450 million settlement among Apple, 33 attorneys general and lawyers for a class of consumers.

Some judges appeared open to Apple’s arguments.

Circuit Judge Debra Livingston, for example, called it “troubling” that Apple’s contracts with the publishers that normally would be “perfectly legal” had been subject to allegations of a scheme.

On Monday, Simon & Schuster and Macmillan also asked the court to reverse an injunction Cote entered against Apple that they said imposed restraints on them beyond those provided in the publishers’ related settlements with the Justice Department.

The case is U.S. v. Apple Inc, 2nd U.S. Circuit Court of Appeals, No. 13-3741.

(Reporting by Nate Raymond in New York; Editing by Grant McCool)

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