Nick Lotito & Seth Kirschenbaum

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A look at the antitrust case against Apple over e-book pricing

As we have said before on our blog, our nation has a myriad of laws. But as we pointed out back in April in one of our posts, many people aren't familiar with many of our laws. One set of laws you might not know about are federal antitrust laws. That's because these laws generally apply to business owners and companies, although many individuals are currently being prosecuted for rigging bids at foreclosure auctions in various states around the U.S. Many of those being prosecuted had no idea that what they were doing violated the law.

In today's post, we'd like to look at federal antitrust laws, particularly the Sherman Act, and see how it applies in real life. We will do this by looking at the recent ruling against Apple Inc. to see why adhering to these laws is so important.

For those of our Georgia readers who have not heard, Apple has been involved in litigation for the last three years over accusations that it conspired with book publishers to raise prices on e-book sales. According to the complaint against Apple, the alleged collusion had a two-fold purpose. The first was to allow Apple to gain a foothold in a market that has been dominated by Amazon. The second was to give more revenue back to publishers who were "dissatisfied with Amazon's aggressive discounts."

These accusations were brought under the Sherman Act of 1890, which prohibits any agreement among competitors to fix prices, rig bids,divide up customers or territories, or engage in other anticompetitive activity. As an aside, the Act was sponsored by Senator John Sherman of Ohio, brother of General William T. Sherman of Civil War fame. As the Department of Justice points out, individuals and companies alike can be convicted of a felony for violating this law. If the violation occurred on or after June 22, 2004, the penalty is a fine of up to $1 million for individuals and $100 million for corporations. Fine amounts can be increased though, depending on the circumstances of the case.

Based on these grounds and the facts of the case, this is why a federal appeals court decided to uphold a 2013 decision against Apple last month. In a 2-1 ruling, the court agreed with the lower court that Apple had violated federal antitrust laws and was therefore liable for an expected $450 million.

In some ways, Apple was fortunate. The Sherman Act is one of the laws that provide for both civil and criminal enforcement. This case was a civil one. Bid rigging, price - fixing and dividing up customers or territories by direct competitors is usally prosecuted as a criminal matter. As you probably already guessed, adhering to federal antitrust laws is incredibly important because it can cost you or your business severely in the end. For individuals, steep fines could put an incredible financial burden on a household, or lead to far worse consequences. Getting legal representation is key in these cases, as federal antitrust laws can be incredibly complicated and can lead to damaging convictions. having been former antitrust prosecutors, please contact us for assistance.

Source: The Wall Street Journal, "Apple Loses Federal Appeal in E-Books Case," Joe Palazzolo, June 30, 2015

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Nick Lotito & Seth Kirschenbaum

Former Federal Prosecutors

918 Ponce de Leon Avenue, N.E. Atlanta, GA 30306 Phone: 404-692-5168 Fax: 404-872-1622 Atlanta Law Office Map