09 February 2013

And Then There Was One

... and it's an even more reprehensible misuser of intellectual property than its five coconspirators.

By now, this isn't exactly news, but Macmillan has finally capitulated concerning the so-called "agency model"1 and settled the Department of Justice's price-fixing lawsuit concerning e-books. Neither Macmillan nor its president, John Sargent, has accepted responsibility, though.

I had an old fashioned belief that you should not settle if you have done no wrong. As it turns out, that is indeed old fashioned.... I like to believe that we would win at trial. But outcomes are hard to predict with certainty, particularly in a civil case with a low burden of proof. And so we agreed to settle with no admission of guilt.

"A Message [F]rom John Sargent" (08 Jan 2013) (reparagraphed for clarity). Thus, all five publishers have now settled, leaving only Apple as a defendant.

This is a breathtakingly arrogant refusal to take responsibility for anything. "Low burden of proof" in an antitrust action? After Leegin? Mr Sargent obviously has never seen the preparations for even the simplest of antitrust trials... and although this one does tend toward that simplest end of the spectrum (the referenced e-mails and discussions in the complaint are simple and direct proof of collusion), it certainly is not easy for either side. Perhaps he's forgotten that IBM had (literally) 1,000 lawyers working on its antitrust defense. Perhaps he hasn't looked at his own damned legal bills.

What this really calls to mind, more than anything else, is the aphorism that villains never believe they've done anything wrong — that's what distinguishes them from mere common criminals (and makes them so fit for modern politics). Book publishers are not the equivalent of buggy-whip manufacturers: There will be books for decades to come, if not longer. The commercial publishing business model may be doomed, with its artificially high entry barriers2 and insane consignment system, but that's a different issue. An outside threat to one's comfortable corporate profits, however immediate, is not an excuse for unlawful acts — and there's no question that collusion to set prices is unlawful.3

If Amazon's competition was indeed unfair, Mr Sargent, you and your colleagues should have taken advantage of that "low burden of proof" and filed your own antitrust action. We'll ignore that little complication that your own coconspirator — Apple, the remaining defendant in the current matter — had just been through a shadow-boxing antitrust battle of its own, and was about to embark on its own arrogant Quixotic quest to unfairly prevent competition in its core businesses. Instead, you chose to break the law, and any competent antitrust lawyer would have told you "Do not, do not, DO NOT consult your competitors when setting prices or establishing price models." Perhaps you didn't consult a competent antitrust lawyer; I think it more likely, based on other actions, that you didn't consult a lawyer at all. In any event, you broke the law and refuse to accept the consequences as required by law. The rule of law is imperfect — that's why we have things like "civil disobedience" and a Letter From a Birmingham Jail — but the point is that what we're supposed to do is change an unjust law. It is not to take the law into our own hands when someone else acts to our disadvantage... at least not without being prepared to accept the consequences.

  1. As I've noted repeatedly since it was so misnamed, the "agency model" has nothing to do with any defensible meaning of the word "agency." It is, instead, a retail price maintenance agreement, of the kind that was explicitly unlawful before the ill-considered decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 480 (2007) that demoted RPMAs from being per se antitrust violations to only potential antitrust violations under the irrational, illogical Rule of Reason.
  2. Yes, this is another of those difficult antitrust law concepts. I haven't found a good, short discussion on the web that is both relevant in this context and does not oversimplify in the interest of making a different point, so I'll just content myself with more truculent snark.
  3. There's also an antitrust case lurking in the monopsony problem of author compensation for e-books. The only way that the major publishers could have come to a "25% of net, not negotiable" author share — given their widely varying cost structures, the widely varying subniches, etc. — would be through another antitrust violation. Collusion is the obvious inference; under these circumstances, conscious parallelism would also violate antitrust law, although it's a harder case to prove.