Department of Justice responds to comments, will not change its settlement terms

Today the Department of Justice finally got around to posting over 850 comments it received on its proposed anti-trust settlement with three agency pricing publishers—along with its own response (PDF) to the concerns and issues raised by the comments it received. In summary, the Department of Justice considered all the relevant issues raised by the comments, pro and con, and found nothing sufficient to convince it to budge one iota from the settlement plans it had drawn up.

Of those comments, fewer than 70 were in support of the settlement, and the rest were opposed. (However, hundreds of those opposed, and a number of those supporting, were the result of coordinated letter-writing campaigns, many of which simply copied and pasted the form letters on which the campaigns were based.)

A lot of the opposed comments came from organizations, individuals, and other entities who had benefited from agency pricing, though they had not been directly involved in the collusion. The Department of Justice had a number of things to say about their arguments in its response.

As I was reading through the DoJ’s response, I thought about an old Usenet humor post that hadn’t crossed my mind in years.

About fifteen to twenty years or so ago, one of the memes that circulated around Usenet (we had them then, but they mostly related to text-based humor, not funny pictures of cats) was the “Generic Flame Form” letter, which included a list of things commonly said in flame posts. For example:

___ You have greatly misunderstood the purpose of the net.

The joke was that most Usenet flame posts were so similar to each other that you could effectively save a lot of time and effort simply by checking the appropriate lines on this form and posting that, instead of writing an original flame of your own.

I bring this up because if I were to summarize the Department of Justice’s response to its critics, I think I could boil it down to the flame-form-style line:

_X_ You have greatly misunderstood the purpose of anti-trust law.

The response, of course, goes into great detail about every aspect of its settlement, and every major point brought up by the critics (and some by its supporters, too), including the rather self-serving comment by Apple, the only one of the defendants to submit a comment.

But at the root, the Justice Department argues that it is not the purpose of anti-trust law to protect competitors, but to protect the people who took the most harm from the anti-competitive practice—the consumers themselves. The DoJ cited a number of cases to point out that it was understood that some third parties (bookstores, some authors, agents, other publishers, etc.) stood to benefit from the anti-competitive behavior without being involved directly in the collusion, but the law isn’t supposed to take their desires into account.

It also noted that Amazon’s predatory pricing is not sufficiently anti-competitive to qualify for anti-trust sanctions itself—it has not prevented other parties from entering the e-book industry either before or since the settlement was announced—but even if it was sufficient to be illegal, that does not allow other parties to do something else illegal to counter it. Two wrongs do not make a right. It also points out that if Amazon ever does cross the line into illegality, it will be there to look into them, too.

The DoJ said that it is not “over-regulating” the industry because the level of reports and investigation built into the settlement is actually quite minor. It said it is not enforcing a particular business model, because it is actually doing the opposite—it’s enforcing not that one particular business model, and publishers can implement any other model they like as long as it’s not that one. And if publishers are concerned about e-bookstores “free riding” on physical bookstores, they are free to make arrangements to pay those bookstores promotional fees to make up for that. (Because we all know how much publishers love paying promotional fees.)

Then there was the contention that it would be impossible to audit stores like Amazon to make sure that they lived up to arrangements whereby they could sell some of a publisher’s books at a loss as long as they took an overall profit on the entire line. The DoJ points out that such arrangements are entirely voluntary, and publishers are free to enter into them or not, as they wish—and it would be up to them to arrange ways to ensure and audit the stores’ compliance under those contracts. And it points out the whole idea came about as part of the agreement negotiated between the DoJ and three publishers:

Significantly, Section VI.B was the product of settlement discussions between the United States and Settling Defendants. Settling Defendants evidently believed, in entering this settlement, that they could successfully implement this limited “safe harbor” for which they negotiated.

All in all, the paper made for interesting reading. I’m sure there are some interesting points it brought up that I haven’t covered here, but I’m equally sure our readers will bring them up in the comments. One thing I hadn’t expected is that, apart from the dry legalese, it’s actually rather amusing reading in some places. The authors are at times clearly bemused with the antics of some of the commenters, such as one lawyer who offers up rationales for various legal motions that none of the defendants and their own expert legal teams have themselves filed!

I’m sure that the ‘net is going to be full of outraged responses over the next few days from those whose arguments were dismissed, then things will settle down until the terms go into effect. Then the next Main Event will take place next June, when the trial of the two non-settling publishers and Apple opens. It’s going to be an interesting few months.

4 Comments on Department of Justice responds to comments, will not change its settlement terms

  1. Felix Torres // July 24, 2012 at 7:35 am //

    Don’t forget the tone of the DOJ replies.

    They got downright testy and snarky (rare in legal briefs) with several commenters, telling B&N that the Price Fix didn’t give them anything they couldn’t get by cutting their operating costs and telling the Authors Guild that if they want publishing to be exempt from legal enforcement they should take it up with Congress. (And stop telling them *not* to do their jobs.)
    And to the booksellers that just because the collusion benefitted them doesn’t mean their interests have to be protected.
    There’s a few good zingers in there.
    Like Laura Resnick’s: “breaking the law is not a reasonable reaction to being faced with aggressive business competition.”
    “Even if there were evidence to substantiate claims of ‘monopolization’ or predatory pricing’ they would not be sufficient to justify self-help in the form of collusion.”

    They also explicitly reiterated there is no evidence of Amazon predatory pricing that will hold up in court.
    “In the course of its investigation, the United States examined complaints about Amazon’s alleged predatory practices and found persuasive evidence lacking . . . ”

    (There is a specific legal test of what is and isn’t predatory pricing. See here:

    My impression is that, rather than swaying the DOJ, the astroturf campaign simply annoyed them. A lot. (Especially the Schumer stunt.)
    This may come back to haunt the price fixers if the suit comes to trial. Expect the DOJ to paint the non-settling parties as unrepentant and insist on harsher terms than the settlement they tried to torpedo. Before the comments phase, the tone was “more in sorrow than in anger”.
    Now there is real anger.

    Pass the popcorn; this is getting fun.

  2. I read some of those comments yesterday and was astonished by the lack of real arguments. Mostly it was just talk of doom and gloom, but without real explanations on how Amazon manages to single-handedly destroy the American book culture.

    If you want somebody to support your cause, it might be better to provide real, rational arguments instead of just stating that a change of the status quo would harm your business and lower your profits. Hard to gain any sympathy for that…

  3. Yeah. I think the snark is what subconsciously brought up in my mind the “Generic Flame Form” letter. Because I really could see whoever wrote some of these comments actually using something like that. It’s rare to find sarcasm in a legal document, but when you do find it, since it’s the kind of sarcasm that has to be able to pass legal muster, it’s usually the good stuff.

  4. Felix Torres // July 24, 2012 at 8:48 am //

    @Eskapistin: The problem is that the DOJ is (properly) only concerned with matters of *law*. Real, rational arguments have to be based on law and precedent, not emotion or projections. Just legal facts.
    Social and cultural concerns are a matter for Congress.
    As they said, anybody who thinks publishing should not be subject to the laws of the land (for whatever reason) should take the matter up with Congress and (implied) stop wasting *their* time with the whining.
    And yes, they probably noticed that most of the comments appeared to be form letters or cut off the same speaking points list. Those guys are surrounded by politicians 24×7; of course! they recognize astroturf campaigns when they see them. Pretending otherwise is an insult to their intelligence.
    Easy to see why they’re so testy: I saw a comment from a lawyer that said the apologists comments’ were 98% PR for public consumption rather than proper legal briefs.
    BTW, the Judge has to wade through that crap, too. 😀

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