Speaker 1: This is Bloombird Law with June Brussel from Bloomberg Radio.
Speaker 1: Amazon and the five largest US publishing houses are free
Speaker 1: for now of antitrust litigation overclaims they manipulated online book
Speaker 1: and e book markets. But the case may not be
Speaker 1: over just yet. My guest is antitrust law expert Harry First,
Speaker 1: a professor at n y U Law School. Harry tell
Speaker 1: us about these lawsuits. So so let's just, um, will
Speaker 1: you just explain what this what this class action, what
Speaker 1: they was about. Okay, this is a fun case, as
Speaker 1: all anti trust cases are. They are so um. First
Speaker 1: of all, it's a class action which, as you know,
Speaker 1: is brought on behalf of a lot of people, and
Speaker 1: this is brought on behalf of buyers of e books
Speaker 1: against Amazon and five Age your book publishers. So that's
Speaker 1: presumably a lot of the books a lot of money
Speaker 1: writing on this. Damages in these cases are not just
Speaker 1: what the consumers might have paid over what they should
Speaker 1: have paid the overcharge, which is what they're alleging, but
Speaker 1: it's that trebled, so damages are three times that. So
Speaker 1: a lot of buyers the book publishers published almost of
Speaker 1: the books published in the United States, and of course
Speaker 1: we've heard of Amazon, an interesting little factoy. They sell
Speaker 1: more books than any other single retail outlet in history,
Speaker 1: in history, you know, I'm not sure how far back
Speaker 1: that goes, but they have tremendous power in this industry.
Speaker 1: Is it a monopoly, Well, that's a great question, and
Speaker 1: it's a question the Federal Trade Commission has been investigating.
Speaker 1: They've been assigned the task, I guess you could say,
Speaker 1: of investigating Amazon for men balizing conduct. It's not a
Speaker 1: violation of US law just to be a monopoly. They
Speaker 1: have to do byad things to keep their monopoly or
Speaker 1: to have gotten it. And so they are under investigation.
Speaker 1: They've always been under a lot of fire. They're under
Speaker 1: fire here, they're under fire in Europe, in Asia, I
Speaker 1: mean everywhere. And you know, instinctively we know they've got
Speaker 1: tremendous power over the book publishers. They do some publishing
Speaker 1: of books, but they haven't really made a go of it,
Speaker 1: and their powers mainly as the distributor, the retailer that
Speaker 1: has great power in the change of distribution, so very powerful,
Speaker 1: and you know, the book publishers aren't not powerful. Without them,
Speaker 1: we don't have books. So these are parties on both
Speaker 1: sides with a lot of market power. So the problem
Speaker 1: in this case, the reason why the buyers are bringing
Speaker 1: is they allege that the five publishers and Amazon have
Speaker 1: conspired to fix the prices of e books roughly I
Speaker 1: guess from twenty onward and raise the price above what
Speaker 1: it would be in a competitive market without this agreement.
Speaker 1: So how did they do it? And this is where,
Speaker 1: of course it gets complicated, because you know, the planiffs
Speaker 1: have to prove that they actually agreed. So each of
Speaker 1: the publishers has an agreement with Amazon. They have these
Speaker 1: agreements individually with Amazon for how their books are sold.
Speaker 1: The arrangement is something that they call the agency model.
Speaker 1: So you know, if you if you sell your house,
Speaker 1: then you have a real estate agent. The real estate
Speaker 1: agent doesn't own your house and then sell its m
Speaker 1: for more money or less money, whatever they can get.
Speaker 1: They just act on your behalf and you tell them
Speaker 1: how much you want, what price do you want. That's
Speaker 1: an agency model, and that's the model they took with
Speaker 1: e books. Of course, e books aren't physical, they're US
Speaker 1: zeroes and ones. They're just computer code. But the fiction
Speaker 1: is well, Amazon's their agents. They don't really own the books,
Speaker 1: not that there are books, they don't own the files.
Speaker 1: I guess you could say they're just the agent. And
Speaker 1: each publisher tells Amazon what to sell the book at
Speaker 1: and then Amazon takes a cut. The cut is I
Speaker 1: think thirty of the sale price. Is that high? It
Speaker 1: sounds high. I think it's This has been the standards,
Speaker 1: thanks frankly to Steve Jobs. But we'll get to that
Speaker 1: in a minute, because that's behind all of this. So
Speaker 1: each agreed to this agency model, and when they did, individually,
Speaker 1: they issued press releases or letters to their authors, you know,
Speaker 1: explaining what that they were doing this, but each individually.
Speaker 1: And there's another wrinkle to this, which is often referred
Speaker 1: to as a price parody, cause not paro d as amusing,
Speaker 1: but equal so um in these agreements required each publisher
Speaker 1: to tell Amazon if their books were available through a
Speaker 1: different retailer at a lower price, So to inform them
Speaker 1: if let's say that they were allowing Barnes and Noble
Speaker 1: to sell the book at a lower retail price, and
Speaker 1: then Amazon could react and could say we want the
Speaker 1: same price, which is, you know, what they would do
Speaker 1: and what they did and This included not just the
Speaker 1: same price, but promotional deals, whatever sorts of things they
Speaker 1: worked out. They gave other retailers a little better deal
Speaker 1: they had to tell Amazon about and Amazon would tell
Speaker 1: them where we want that deal. Now, if the publisher's ball,
Speaker 1: then Amazon could retaliate for threatened to retaliate, and they
Speaker 1: had lots of ways to do that, some of which
Speaker 1: had become public. I mean, they sell a lot of
Speaker 1: physical books, so they can retaliate against the physical book division,
Speaker 1: and they threatened to st with that at one point,
Speaker 1: you know, to force these publishers who in the end,
Speaker 1: I mean, they need Amazon to distribute their books. So
Speaker 1: the allegation is that the price parity clause, for the
Speaker 1: price informational parity clause that combined with the agreement, you know,
Speaker 1: the agency model, was an agreement that effectively fixed the
Speaker 1: price and prevented discounting. And the plaintiffs back this up with.
Speaker 1: You know that they all had these press releases sort
Speaker 1: of telling everyone in the world, including their competitors, what
Speaker 1: they did. And the week after these agency agreements were signed,
Speaker 1: everyone increased their e book prices, some by quite a bit, Penguin,
Speaker 1: for example, by so that they argue the PLANETFS argue
Speaker 1: shows it was an agreement to fix prices. Now for
Speaker 1: the background in a prior case involving Steve Jobs. Now
Speaker 1: I said, there's background in this, and the background is
Speaker 1: what makes it more interesting is that it's not the
Speaker 1: first time we've seen a problem with price fixing of
Speaker 1: e books. And the first time actually involved litigation with
Speaker 1: the Justice Department and the States and the European Union actually,
Speaker 1: and it involved Apple. And this dated back to two
Speaker 1: thousand seven, believe it or not, when the Kindle came
Speaker 1: out and Amazon releases the Kindle with a low e
Speaker 1: book price of At that time, publishers distributed e books
Speaker 1: like they distributed hardcover books wholesale, so they would sell
Speaker 1: them to the retailer and then the retailer can sell
Speaker 1: whatever price they wanted. So they were selling books e
Speaker 1: books to Amazon for roughly nine dollars or something close
Speaker 1: to and Amazon wasn't taking very much of a profit.
Speaker 1: They were giving the consumer a great deal in part
Speaker 1: to get the Kindle to be adopted, and the publishers
Speaker 1: were just they hated this. So they actually started meeting together.
Speaker 1: And that's a key difference so far between the case.
Speaker 1: We're talking about the current class action and the old case.
Speaker 1: So the publishers met quite a bit, including a well
Speaker 1: known meeting at a very fancy restaurant where they had
Speaker 1: a private room to themselves, restaurant called p Sholeen on
Speaker 1: the Upper East Side, and you know, they met and
Speaker 1: they decided to approach Steve Jobs, who was coming out
Speaker 1: with his own you know, the Eye Books, the Eye
Speaker 1: Book Store on the iPad. So they agreed, and Jobs
Speaker 1: didn't want a still, he wanted to get a lot
Speaker 1: more money, so they agreed with him on this agency
Speaker 1: model that's they came up with and said, Okay, we'll
Speaker 1: give you the thirty cut, you can have a higher price,
Speaker 1: and we'll work out of the all. We can go
Speaker 1: into the mechanics if you want to how we're basically
Speaker 1: going to force Amazon and all of us to move
Speaker 1: from the sole sale model to the agency model where
Speaker 1: we can dictate the price and we're gonna push it
Speaker 1: up past point. So they constructed this agreement, which eventually
Speaker 1: resulted in their being sued. All the publishers settled that
Speaker 1: case with consent agreements, except for Apple, which litigated to
Speaker 1: the Court of Appeals and lost. So this case that
Speaker 1: we're talking about comes about once the remedies that were
Speaker 1: imposed in the earlier case expired. So under the earlier case,
Speaker 1: the publishers were not permitted to stop retail discounting. Once
Speaker 1: that expired, they entered into new agreements with Amazon that effectively,
Speaker 1: they say, ended the discounting. So this is round two,
Speaker 1: and this is the case that actually the district court
Speaker 1: just throw out. Yeah, so it sounds like what they're
Speaker 1: doing is an agreement and it's driving prices up. So
Speaker 1: why did the court throw it out? You asked the
Speaker 1: perfect question. This is the kicker, and this is one
Speaker 1: of the really hard legal issues for anti trust's law.
Speaker 1: So in the first case, remember I mentioned something about
Speaker 1: meeting in a private restaurant, and there was a lot
Speaker 1: of communication there were there were a lot of emails,
Speaker 1: phone calls back and forth among the publishers. None of
Speaker 1: that apparently exists in this case. So in the first case,
Speaker 1: when competitors get together on the same level of production distribution,
Speaker 1: their agreement is called a horizontal agreement, and the horizontal
Speaker 1: agreement on prices is considered the absolute worst thing in
Speaker 1: any trust illegal per se in and of itself. No defense.
Speaker 1: People often go to jail for it. So if it's horizontal,
Speaker 1: it's a big problem. But there's no clear proof in
Speaker 1: this case that they agreed, and the plaintiffs try to argue,
Speaker 1: you can infer they agreed by some of their behavior,
Speaker 1: there must be an agreement. He announced. On the same day.
Speaker 1: Three of the five CEOs were around for the prior case.
Speaker 1: They know how this goes, you know. Now they're better
Speaker 1: counsel and they're listening to their lawyers. Apparently they did
Speaker 1: not the last time, and they're much more cautious. But
Speaker 1: there aren't that many players, and they know what's happening,
Speaker 1: and they all come up with the same deal. So
Speaker 1: the argument goes, a jury could infer that they agreed,
Speaker 1: but the court said, no, you haven't pleaded enough. We
Speaker 1: won't allow a jury. It's what we have is consistent
Speaker 1: with individual action, as it is with conspiracy. And there's
Speaker 1: the Supreme Court decision that says that's not good enough
Speaker 1: for you know, in any trust conspiracy. And so that's
Speaker 1: why the basically why the district court rejected the complaint.
Speaker 1: Oor at a very early stage. This is just really
Speaker 1: the initial stage of this litigation. They filed their complaint.
Speaker 1: That's all that's been done. They haven't you know, had
Speaker 1: a chance to you know, go through the emails to
Speaker 1: do discovery, um, all sorts of things. So it's very
Speaker 1: early stage. But this is a problem. Competitors often announced
Speaker 1: things and others say, hey, okay, we'll do that. To
Speaker 1: think airlines for raising prices, and the other airlines do it.
Speaker 1: So do you think the next step is to refile
Speaker 1: the complaint? The court gave them permission. Sometimes courts don't
Speaker 1: give permission to replead the case, but this district court
Speaker 1: judge did. But unless they have some new allegations of
Speaker 1: some kind of behavior, it's hard to know. It seems
Speaker 1: to me that it's more on a legal point at
Speaker 1: this point, unless they come up with other factual allegations,
Speaker 1: you know, unless they do, they don't have the opportunity
Speaker 1: to look further and do discovery of documents, particularly emails,
Speaker 1: things like that that ended up thinking the parties in
Speaker 1: the first case. So I'm not certain how they're going
Speaker 1: to do this. They may just decide to appeal directly
Speaker 1: to the Court of Appeals, but it's going to be
Speaker 1: difficult because courts have become more and more cautious about
Speaker 1: allowing plaintiffs to go forward and discoveries expensive. And you know,
Speaker 1: Supreme Court's taken a somewhat negative view of just allowing
Speaker 1: plaintiffs to, as they view it, I think, go on
Speaker 1: some sort of fishing expedition through gigabytes of data. So
Speaker 1: I guess we'll see. I'm I'm sure that they will
Speaker 1: try to move the case ahead, but it does I
Speaker 1: think rest on this key point about whether they have
Speaker 1: enough evidence from which a jury or the judge could
Speaker 1: infer that the party soul agreed. So we'll be watching
Speaker 1: this to see whether the plaintiffs refile they're complaint or
Speaker 1: perhaps taken appeal. Thanks so much as always, Harry. That's
Speaker 1: Professor Harry First of n y U Law School. Former
Speaker 1: President Donald Trump is asking the Supreme Court to intervene
Speaker 1: in the seemingly never ending legal fight over government papers
Speaker 1: seized at his Moral Logo home. He now wants the
Speaker 1: justices to appoint a court ordered special master to review
Speaker 1: one documents with classified markings. I'm joined by Bloomberg News
Speaker 1: Supreme Court reporter Greg Store. Former President hump is back
Speaker 1: at the Supreme Court asking the Court to intervene in
Speaker 1: the fight over government documents seized at mar Lago. What
Speaker 1: exactly is he asking them? Well, in some ways, June,
Speaker 1: it's a very narrow request. All that he's asking is
Speaker 1: that the court appointed special master who's going through all
Speaker 1: these documents that were retrieved from our lago, that that
Speaker 1: special master be allowed to review these or so documents
Speaker 1: that have classified markings on them. Right now, the judge
Speaker 1: is not not allowed to review those documents. Are Trump's
Speaker 1: lawyers making a jurisdictional argument about whether the Eleventh Circuit
Speaker 1: had jurisdiction? Yeah, that's exactly it. Essentially, they say that
Speaker 1: the Eleventh Circuit the appointment of a special Master is
Speaker 1: the kind of thing and the special master's duties is
Speaker 1: the kind of thing that can't be immediately appealed. And
Speaker 1: so they say that the Eleventh Circuit never should have
Speaker 1: even entertained the request to restrict what sorts of things
Speaker 1: the special Master could do in the lower court. Trump's
Speaker 1: lawyers make these arguments about Trump's role or a president's
Speaker 1: role in classifying documents and broad arguments. We've heard Trump
Speaker 1: even say that, you know, he can just say it,
Speaker 1: he can even think it, and declassify arguments. Are they
Speaker 1: still making that argument here? They're not, And in fact,
Speaker 1: they completely stay away from that subject. That's what they
Speaker 1: didn't the lawyers did in the lower courts too. They
Speaker 1: stay away from declaring that the president actually did something,
Speaker 1: actually declassified these documents, even as they argue that he
Speaker 1: would have had sweeping authority to do that. So, just
Speaker 1: to set the stage, this is an appeal from an
Speaker 1: eleven Circuit panel that had to Trump appointees on it.
Speaker 1: It is, and it was an opinion that came out
Speaker 1: very quickly and was very definitive about essentially letting this
Speaker 1: investigation go forward. Uh. One other thing the Elevens did
Speaker 1: was to say that the Justice Department and National Security
Speaker 1: personnel could go ahead and start looking at these documents,
Speaker 1: start using them. And that is not something that Trump
Speaker 1: is asking the Supreme Court to intervene on. It's only
Speaker 1: asking the court to do that rather narrow thing of
Speaker 1: letting the Special Master look at them to see if
Speaker 1: some sort of privilege claim with these classified documents. Not
Speaker 1: clear what that what that might be, but there's some
Speaker 1: sort of privilege claim there. This is an emergency appeal,
Speaker 1: But where's the emergency Yeah, it's a good question. The
Speaker 1: former president waited more than two weeks to go up
Speaker 1: to the Supreme Court with this, and Justice Thomas, who's
Speaker 1: the justice who handles emergency matters out of the eleven Circuit,
Speaker 1: also didn't suggest there was any massive rush. He gave
Speaker 1: the government a week to respond to it, so I
Speaker 1: wouldn't expect anything coming out of the Supreme Court for
Speaker 1: at least the week. Yeah. So does that signal that
Speaker 1: Justice Thomas doesn't think this is much of an emergency either,
Speaker 1: that he's giving the Justice Department so long to respond
Speaker 1: in an emergency matter? Yeah, I think that much is.
Speaker 1: I wouldn't want to go any further than that and
Speaker 1: suggest it says anning about Justice Thomas's views on the matter.
Speaker 1: But in terms of the timing of it, and that
Speaker 1: makes sense, there's not you know, sometimes you see an
Speaker 1: emergency request and and and a party says, you know,
Speaker 1: we need something by you know, ex date or something
Speaker 1: some particular bad things going to happen. There was nothing
Speaker 1: like that in the Trump filing, and in fact, it
Speaker 1: was rather unclear as to exactly what the particular urgency
Speaker 1: was for for the former president. The eleven Circuit yesterday
Speaker 1: approved an expedited appeal of the appointment of the Special
Speaker 1: Master to review the documents. Will that play in it
Speaker 1: all here? That now, that's on an expedited track, that
Speaker 1: is certainly possible. You know, the Supreme Court when it
Speaker 1: gets the government's response, the government may probably will mention
Speaker 1: that and and sort of suggests, Hey, there's there's even
Speaker 1: less reason for the Supreme Court to get involved here
Speaker 1: because the Eleventh Circuit is moving quickly to get all
Speaker 1: this stuff resolved. Hard to say exactly how all those
Speaker 1: things will intersect, and no doubt will have various other
Speaker 1: developments happening between now and the time the Supreme Court rules.
Speaker 1: Trump's record at the Supreme Court is not that great,
Speaker 1: despite his three appointees. Remind us of some of his
Speaker 1: past endeavors. Yeah, well, he's of course had those big
Speaker 1: fights about subpoenas for his financial records that the Supreme
Speaker 1: Court ruled on and didn't give him nearly everything he
Speaker 1: was seeking. And then, perhaps more relevant to the current controversy,
Speaker 1: there was the issue of whether papers we're going to
Speaker 1: be turned over to the committee investigating the January six
Speaker 1: attack on the Capitol and the Supreme Court rejected Trump's
Speaker 1: effort to try to block records from being turned over
Speaker 1: from the Archives to the Committee, and only just as
Speaker 1: Clarence Thomas dissented there. How long do you think this
Speaker 1: is going to take? A matter of days? Weeks? The
Speaker 1: Court will wait until they get that response. Normally, the
Speaker 1: court then waits to give the applying party a chance
Speaker 1: to follow a reply brief. That will probably take a
Speaker 1: couple of days. Then it could be any time after that.
Speaker 1: Thanks so much for being on the show. That's Bloomberg
Speaker 1: News Supreme Court Reporter Greg Store and that's it for
Speaker 1: this edition of the Bloomberg Law Show. Remember you can
Speaker 1: always get the latest legal news on our Bloomberg Law podcast.
Speaker 1: You can find them on Apple Podcasts, Spotify, and at
Speaker 1: www dot Bloomberg dot com, slash podcast, Slash Law, and
Speaker 1: remember to tune in to The Bloomberg Law Show every
Speaker 1: week night at ten pm Wall Street Time. I'm June Grosso,
Speaker 1: and you're listening to Bloomberg