In a February 16 editorial, the Wall Street Journal comments on the Justice Department’s antitrust case against Apple in which the DOJ ultimately prevailed in a verdict handed down in 2013. 952 F. Supp. 2d 638 (S.D.N.Y. 2013) (“All Along the Apple Watchtower”) The thrust of the editorial speaks to the activities of the Special Master appointed by the trial judge, Denise Cote. Judge Cote appointed the Special Master to oversee Apple’s compliance with her Final Order. The Journal contends that the Special Master’s oversight activities have extended well beyond what is necessary to assure compliance and, in so doing, have imposed undue burdens on Apple. On these points, the Journal is correct.

The Journal, however, also comments on Judge Cote’s holding in which she found that Apple and five e-book publishers entered into an illegal agreement that resulted in higher e-book prices to consumers. Here the Journal, mischaracterized the agreement, and hence the court’s holding, by claiming that the agreement was simply intended to make it possible for consumers to read e-books on Apple’s I-Pad. This is a claim that the WSJ has previously made in editorials arguing that the DOJ is merely doing the bidding of Amazon, the largest sellers of e-books. (See my earlier Post here.) Whether or not there is a grain of substance to that claim is besides the point, however.

To add my own comments on the matter, I submitted a Letter to the Editor, which the Journal published on February 25 under the title, DOJ Is Right About Apple e-Books, and which I reproduce below.

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The Journal mischaracterizes the trial court’s ruling in the Justice Department’s antitrust case against Apple and five e-book publishers (“All Along the Apple Watchtower,” Review & Outlook, Feb. 17). Specifically, you say that the court found that “allowing consumers to read e-books on the iPad was an antitrust conspiracy.” Not so. The case was about agreements on a vital dimension of competition, namely price. It has long been a universally accepted proposition in both law and economics that agreements among competitors to set and regulate prices are anticompetitive. Thus, the court correctly found the agreements illegal. It is no justification that the agreements were intended to wrest control over the pricing of e-books from Amazon, the dominant player in e-book retailing.

Legitimate competition erodes a dominant firm’s position by offering consumers better prices or products. Here consumers received a worse deal. Indeed, the court found that the agreements led to an almost immediate 18% increase in the average price of e-books—hardly a boon to consumer welfare.

You are on more solid ground as regards the activities of the special master appointed to oversee Apple’s compliance with the verdict. (The publishers settled with DOJ before trial.) Even losing antitrust defendants deserve fairness and a reasonable post-verdict opportunity to show good faith efforts to comply with a court order. As you describe, there is ample evidence that this special master has overreached by placing burdens on Apple that are unnecessary to assuring adherence to the final judgment. As you urge, the Second Circuit should sack the special master or at least rein in his powers.

Theodore A. Gebhard