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United States v. Apple Inc. et al (Barnes and Noble Complaint)

United States v. Apple Inc. et al (Barnes and Noble Complaint)

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Published by: Francisco on Jun 09, 2012
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06/09/2012

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UNITED STATES DISTRICT COURTFOR THE SOUTHERN DISTRICT OF NEW YORK 
 __________________________________________ )UNITED STATES OF AMERICA, ))Plaintiff, ))v. ))APPLE, INC., ) Civil Action No. 1:12-CV-2826HACHETTE BOOK GROUP, INC., )HARPERCOLLINS PUBLISHERS L.L.C., )VERLAGSGRUPPE GEORG VON )HOLTZBRINCK GMBH, )HOLTZBRINCK PUBLISHERS, LLC )d/b/a MACMILLAN, )THE PENGUIN GROUP, )A DIVISION OF PEARSON PLC, )PENGUIN GROUP (USA), INC., and )SIMON & SCHUSTER, INC., ))Defendants. ) __________________________________________)
COMMENTS OF BARNES & NOBLE, INC.ON THE PROPOSED FINAL JUDGMENT
G
ENE
D
E
F
ELICE
 Vice President, General Counsel& SecretaryOf Counsel: B
RADLEY
A.
 
F
EUER 
 Vice President, Assistant General CounselD
AVID
B
OIES
Barnes & Noble, Inc.B
OIES
,
 
S
CHILLER 
&
 
F
LEXNER 
LLP 122 Fifth Avenue333 Main Street New York, New York 10011Armonk, New York 10504
 
 1Barnes & Noble, Inc. (“Barnes & Noble”) respectfully submits the following comments pursuant to Section 2(b) and 2(d) of the Antitrust Procedures and Penalties Act, 15 U.S.C. §16(b)-(h) (the “Tunney Act”), relating to the Proposed Final Judgment that was submitted onApril 11, 2012, by the United States and Defendants Hachette Book Group, Inc., HarperCollinsPublishers L.L.C., and Simon & Schuster, Inc. (the “proposed settlement”).
INTRODUCTION
The proposed settlement represents an unprecedented effort by the Antitrust Division of the U.S. Department of Justice (the “Government” or the “Division”) to reject its traditional roleof ending alleged collusion and to become instead a regulator of a nascent technology industrythat it little understands. The proposal is not a run-of-the-mill Tunney Act anti-collusion order. Nor is it supported by the Government’s complaint. The proposed settlement, particularly itsoverreaching regulatory provisions, warrants an exacting review because of its potential impacton the national economy and culture, including the future of copyrighted expression and bookselling in general, not only electronic books (“e-books”). Because of the far-reachingimplications of the proposed settlement, many millions of Americans, as well as all levels of thedistribution chain for books (from authors to publishers to distributors, and especially brick-and-mortar stores), stand to be affected by this case’s resolution.The proposed settlement will transform the Division into a regulator, in particular through remedies not sought or mentioned in the complaint filed by the United States (the“Complaint”). The Complaint does not dispute the legality of agency itself. Nor can it, as theagency model is widely used and perfectly legal. Nor does the Complaint challenge the abilityof publishers and distributors to negotiate agreements that are in their respective individual
 
 2economic interests. It is also important to note that the Complaint does not even seek theregulatory remedies embodied in the proposed settlement.The proposed settlement, in direct contrast to the Complaint, would for two yearsregulate the terms of publishers’ agency contracts, requiring publishers to terminate their currentagency agreements and then forbidding those same parties from entering
legal 
agencyagreements. This new regulatory regime will injure innocent third parties, including Barnes & Noble, independent bookstores, authors, and non-defendant publishers; hurt competition in anemerging industry; and ultimately harm consumers. The proposed settlement seeks to endagency arrangements that are common place in many industries and
that have brought morecompetition to the sale of e-books
. The detailed new regulations will also create complexcompliance issues and require ongoing oversight by the Division and this Court. Notsurprisingly, industry stakeholders have widely denounced the proposed settlement as damagingto the book industry and harmful to the public interest.The basis for this proposed settlement is the Complaint, alleging that certain publishershave colluded to
lower 
their own profits and increase their payments to e-book distributors suchas Barnes & Noble. If that is a valid theory of collusion, and if the aim here is to end collusion,the proposed settlement should enjoin collusion and punish the purported colluders. Even in themost egregious cases of price fixing, the Division does not adopt price controls to remedy theeffect on the market of agreed-to prices; it instead enjoins collusion and punishes the allegedcollaborators. By contrast, the proposed settlement here imposes a regulatory regime that punishes only third parties and consumers. While the Division traditionally, and appropriately,seeks to prevent future violations and permit the market to determine prices, the proposedsettlement seeks to substitute regulation for market forces.

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