ConspiracyApple’s loss

Two years ago, on July 10, 2013, the United States and 33 states and territories won a bench trial against Apple for its role in a conspiracy to fix prices on electronic book (e-books). On June 30, 2015, two members of a three-judge Second Circuit panel upheld the judgment against Apple under section one of the Sherman Act. United States v. Apple, Inc., No. 13-3741-cv (2d Cir. June 30, 2015).

If the ruling stands, Apple must pay the states and private plaintiffs $450 million under a deal that it cut while its appeal pended, on July 10, 2014.

But much more than $450 million turns on the durability of a key holding by the Second Circuit majority — that per se liability attaches not only to “horizontal” competitors who conspire to fix prices to their customers but also to “vertical” orchestrators of the horizontal conspiracy.

In this post, I will lay out the background and talk about why the Second Circuit upheld the finding that Apple participated in the conspiracy. In a later post, I will flesh out the momentous battle between the majority judges and their dissenting colleague over per se liability. I will also explain why I believe the fight has such vast implications for antitrust law.


The case concerned events that culminated  during April 2010 with a sharp bump in e-book prices. The government plaintiffs alleged that Apple and five book publishers unlawfully agreed to raise e-book prices by ganging up on Amazon and forcing it to stop charging a below-cost price of $9.99 for e-book versions of the the publishers’ best-selling titles.

All of the publishers settled before trial.

The evidence at the trial showed that on the eve of its launch of the iPad, in late 2009 and early 2010, Apple used the terms of its contracts with HarperCollins, Simon & Schuster, Penguin Group, Hachette, and Macmillan for Apple’s new iBookstore service and a swarm of high-level phone calls and e-mails to link the publishers in a hub-and-spoke conspiracy. Apple occupied the center (the hub), the publishers sat at the ends of the spokes, and a rim connected the publishers to each other.

After 17 days of evidence and arguments, United States District Judge Denise Cote issued a 160-page opinion. She summed up the outcome as follows:

[T]he Plaintiffs have shown that Apple conspired to raise the retail price of e-books and that they are entitled to injunctive relief. A trial on damages will follow.

United States v. Apple Inc., 952 F. Supp. 2d 638, 645 (S.D.N.Y. 2013).


In the meantime, some of the states and a class of people who bought e-books had brought actions against Apple for treble damages under federal and state antitrust laws. All of the cases ended up in front of Judge Cote.

In March 2014, her honor granted a motion to certify the claims of the private plaintiffs for treatment on a class-action basis. Within four months, both the state plaintiffs and the private plaintiffs entered into a settlement agreement with Apple.

The pact provides for payment of $450 million “[i]n the event the Final Liability Decision affirms the Liability Finding” and $70 million “[i]n the event the Final Liability Decision vacates and remands, or reverses and remands with instructions, for reconsideration, or for retrial of the Liability Finding”.

“Final Liability Decision” means “a final decision by the Second Circuit [or the Supreme Court] on the merits of the Liability Finding”. “Liability Finding” refers to “the holding of the Opinion and Order issued by the District Court on July 10, 2013 that Apple violated Section 1 of the Sherman Act”.

Affirmance on participation in conspiracy

The Second Circuit panel split 2-1 on the Liability Finding, with the majority affirming Judge Cote’s conclusion that Apple had indeed committed a section one violation.

Writing a 117-page opinion for herself and her colleague Raymond J. Lohier, Circuit Judge Debra Ann Livingston lays out how Apple’s Eddy Cue, Kevin Saul, and Keith Moerer worked with the book publishers to set up and implement a conspiracy to implement a regime in which the publishers could set the prices at which not only Apple but also Amazon sold the publishers’ titles as e-books.

Apple claimed innocence:

Because (in Apple’s view) the Contracts were vertical, lawful, and in Apple’s independent economic interest, the mere fact that Apple agreed to the same terms with multiple publishers cannot establish that Apple consciously organized a conspiracy among the Publisher Defendants to raise consumer‐facing ebook prices — even if the effect of its Contracts was to raise those prices.

United States v. Apple, slip op. at 53.

Judge Livingston found the argument unpersuasive in light of the evidence:

Apple understood that its proposed Contracts were attractive to the Publisher Defendants only if they collectively shifted their relationships with Amazon to an agency model [that gave the publishers the power to set retail prices for e-books of their titles ] — which Apple knew would result in higher consumer‐facing ebook prices. In addition to these Contracts, moreover, ample additional evidence identified by the district court established both that the Publisher Defendants’ shifting to an agency model with Amazon was the result of express collusion among them and that Apple consciously played a key role in organizing that collusion. The district court did not err in concluding that Apple was more than an innocent bystander.

Id. at 58. One of the two principal questions on appeal — whether Apple in fact orchestrated a hub-and-spoke conspiracy — thus went against the Cupertino crowd.

Looking ahead

That of course leaves the other major question.

The dissenting judge, Circuit Judge Dennis Jacobs, more or less accepted the majority’s conclusion regarding the “enabler” role that Apple played as a factual matter. But he objected to his colleague’s ruling on whether what Apple did violated section 1 of the Sherman Act.

And to that battle over per se liability I will turn in the next post.

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Photo of Barry Barnett Barry Barnett

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck…

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck Redden).

Barnett is a Fellow in the American College of Trial Lawyers, and Lawdragon has named him one of the top 500 lawyers in the United States three years in a row. Best Lawyers in America has honored him as “Lawyer of the Year” for Bet-the-Company Litigation (2019 and 2017) and Patent Litigation (2020) in Houston. Based in Texas and New York, Barnett has tried complex business disputes across the United States.

Barnett’s background, training, and experience make him indispensable to his clients. The small-town son of a Texas roughneck and grandson of a Texas sharecropper, Barnett “developed an unusual common sense about people, their motivations, and their dilemmas,” according to former client Michael Lewis.

Barnett has been historically recognized for his effectiveness and judgment. His peers chose him, for example, to the American College of Trial Lawyers and American Law Institute. His decades of trial and appellate work representing both plaintiffs and defendants have made him a master strategist and nimble tactician in complex disputes.

Barnett focuses on enforcement of antitrust laws, the “Magna Carta of free enterprise,” in Supreme Court Justice Thurgood Marshall’s memorable phrase. “Barry is one of the nation’s outstanding antitrust lawyers,” according to Joseph Goldberg, a member of the Private Antitrust Enforcement Hall of Fame. Named among Texas’s top ten antitrust lawyers of 2023, Business Today calls Barnett a “trailblazer” among the “distinguished legal minds” who “dedicate their skill and expertise to the maintenance of healthy competition in various sectors” of the Lone Star State’s booming economy. Barnett is also adept in energy and intellectual property matters and has battled for clients against a Who’s Who list of corporate behemoths, including Abbott Labs, Alcoa, Apple, AT&T, BlackBerry, Broadcom, Comcast, Dow, JPMorgan Chase, Samsung, and Visa.

Barnett commands a courtroom with calm and credibility and “is the perfect lawyer for bet the company litigation,” said Scott Regan, General Counsel of former client Whiting Petroleum. His performance before the Supreme Court in Comcast Corp. v. Behrend prompted the Court to withdraw the question on which it had granted review. The judge in a trial involving mobile phone technology called Barnett “one of the best” and that his opening statement the finest he had ever seen. Another trial judge told Barnett minutes after a jury returned a favorable verdict against the county’s biggest employer that he was one of the two best trial lawyers he’d ever come across—adding that the other one was dead.

A versatile trial lawyer, Barnett knows how to handle a case all the way from strategic pre-suit planning to affirmance on appeal. He’s tried cases to verdict and then briefed and argued them when they went before appellate courts, including the Second, Third, Fifth, and Tenth Circuits, the Supreme Court of Louisiana, and (in the case of Comcast Corp. v. Behrend) the Supreme Court of the United States.

Barnett is a sought-after public speaker, often serving on panels and talking about topics like the trials of antitrust class actions and techniques for streamlining complex litigation. He also comments on trends in commercial litigation and the implications of major rulings for outlets such as NPR, Reuters, Law360, Corporate Counsel, and The Dallas Morning News. He’s even appeared in a Frontline program about underfunding of state pensions, authored chapters on “Fee Arrangements” and “Techniques for Expediting and Streamlining Litigation” (the latter with Steve Susman) in the ABA’s definitive treatise on Business and Commercial Litigation in Federal Courts, 5th, and commented on How Antitrust Enforcers Might Think Like Plaintiffs’ Lawyers.

Clients and other hard graders have praised Barnett for his courtroom skills and legal acumen.

A client in a $100 million oil and gas case, which Barnett’s team won at trial and held on appeal, said Barnett and his team “presented a rare combination of strong legal intellect, common sense about right and wrong, and credibility in the courtroom.” David McCombs at Haynes and Boone said Barnett “has a natural presence that goes over well with juries and judges.”

Even former adversaries give Barnett high marks. Lead opposing counsel in a decade-long antitrust slugfest said “Barry is a highly skilled advocate. He understands what really matters in telling a narrative and does so in a very compelling manner.”

Barnett relishes opportunities to collaborate with all kinds of people. At the Center for American and International Law (CAIL), founded by a former prosecutor at Nuremberg in 1947 and headquartered in the Dallas area, he has served on the Executive Committee, co-chaired the committee that produced CAIL’s first-ever strategic plan, supported CAIL’s Institute for Law Enforcement Administration and other development efforts, and proposed formation of a new Institute for Social Justice Law. CAIL’s former President David Beck said “Barry is extremely bright” and is “very well prepared in every lawsuit or professional task he undertakes.”

Barnett is also a Trustee of the New-York Historical Society, a Sterling Fellow at Yale, a member of the Yale University Art Gallery’s Governing Board, a winner of the Class Award for his work on behalf of his college class, and a proud contributor to the Yellow Ribbon Program at Harvard Law. Barnett’s pro bono work includes leading the trial team representing people who are at greatest risk of severe illness and death as a result of being exposed to the novel coronavirus SARS-CoV-2 while being detained in the Dallas County jail—work for which he received the NGAN Legal Advocacy Fund RBG Award.

At Susman Godfrey, Barnett has served on the firm’s Executive Committee, Employment Committee, and ad hoc committees on partner compensation, succession of leadership, and revision of the firm’s partnership agreement. He also twice chaired the Practice Development Committee.

Barnett understands that clients face many pressures. Managing the stress is important, especially in matters that take years to resolve. He encourages clients to call him whenever they have a question or concern and to keep the inevitable ups and downs in perspective. He wants them to know that he will do his level best to help them achieve their goals. He also strives to foster trust and to make working with him a pleasure.

Cyrus “Skip” Marter, the General Counsel of Bonanza Creek in Denver and a former Susman Godfrey partner and client, said Barnett is “excellent about communicating with clients in a full and honest manner” and can “negotiate for his clients from a position of strength, because he is not afraid to take a case through a full trial on the merits.” Stacey Doré, the President of Hunt Utility Services and a former client, said that Barnett is “an excellent trial lawyer and the person you want to hire for your bet-the-company cases. He is client focused, responsive, and uniquely savvy about trial and settlement strategy.” A New York colleague said, “Barry is a joy to work with as co-counsel. He tackles complex procedural and factual hurdles capably, efficiently, and without drama.”

Barnett’s wide-ranging experience and calm, down-to-earth approach enable him to connect with clients, judges, jurors, witnesses, and even opposing counsel. He grew up in Nacogdoches, Texas. He co-captained his high school varsity football team as an All-East Texas middle linebacker while also serving as the Editor of Key Club’s Texas-Oklahoma District, won the Best Typist award, took the History Team to glory, and sang in the East Texas All Region Choir. As Dan Kelly of client Vistra Corp. put it, Barnett is “a great person to be around.”

Barnett is steady and loyal. He has practiced at Susman Godfrey his entire career. He and his wife Nancy live in Dallas and enjoy spending time in Houston and New York. Their daughter works for H-E-B in Houston, and their son is a Haynes and Boone transactions lawyer in Dallas.

As a member of Ivy League championship football teams in his junior and senior years at Yale and a parent of two Yalies, Barnett has no trouble choosing sides for “The Game” in November. And he knows how important fighting all the way to the end is. On his last play from scrimmage, in the waning minutes of The Game on Nov. 22, 1980, he recovered a Crimson fumble.

Yale won, 14-0.