dnaml v. apple - ebook antitrust - apple motion to dismiss

8/13/2019 DNAML v. Apple - eBook Antitrust - Apple Motion to Dismiss

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UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK----------------------------------------------------------x

DNAML PTY, LIMITED,

Plaintiff,

-against-

APPLE INC., et al.,

Defendant.

::

::::::::

No. 13-CIV-6516 (DLC)

----------------------------------------------------------x

APPLE INC.’S MEMORANDUM OF LAW IN SUPPORT OF MOTION TO DISMISS

PLAINTIFF'S COMPLAINT

Case 1:13-cv-06516-DLC Document 56 Filed 01/17/14 of 31



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TABLE OF CONTENTS

Page

I. INTRODUCTION ...................................................................................................................... 1

II. SUMMARY OF ALLEGATIONS ........................................................................................... 3

III. ARGUMENT ........................................................................................................................... 4

A. Legal Standards ...................................................................................................... 4

B. Dismissal Is Warranted Because Plaintiff Has Not Adequately AllegedAntitrust Standing .................................................................................................. 5

1. Plaintiff Has Not Adequately Alleged Antitrust Injury ............................. 7

a.

Plaintiff Has Not Adequately Alleged How It Is In A “WorsePosition” Because Of The Alleged Conspiracy ............................. 8

b. Plaintiff’s Alleged Injury Does Not Flow From AnyAnticompetitive Effect Of The Alleged Conspiracy ................... 13

(i) Plaintiff’s Alleged Lost Profits Do Not Arise FromThe Anticompetitive Effects Of Price Fixing .................. 13

(ii) Plaintiff Has Failed To Adequately Allege Harm InAny Other Markets .......................................................... 15

c. Plaintiff’s Allegations Regarding Apple’s App-Store PoliciesDo Not Amount To Antitrust Injury ............................................ 16

2. Plaintiff Has Not Adequately Alleged That It Is An Efficient EnforcerOf The Antitrust Laws ............................................................................. 17

C. Dismissal Is Warranted Under The FTAIA To The Extent Plaintiff Seeks ToRecover For Lost Foreign Sales ........................................................................... 20

1. The FTAIA Limits Federal Subject Matter Jurisdiction Over ForeignTransactions ............................................................................................. 21

2. The Court Lacks Subject Matter Jurisdiction Over Any Claim ForLost Foreign Sales.................................................................................... 22

IV. CONCLUSION...................................................................................................................... 25




TABLE OF AUTHORITIES

Page(s)

Cases

Animal Sci. Prods. v. China Minmetals Corp.,654 F.3d 462 (3d Cir. 2011) ..................................................................................................... 21

Associated General Contractors v. Cal. State Council of Carpenters,459 U.S. 519 (1983) ..................................................................................... 5, 10, 11, 13, 19, 20

Atl. Mut. Ins. Co. v. Balfour Maclaine Int’l, Ltd.,968 F.2d 196 (2d Cir. 1992) ....................................................................................................... 5

Atl. Richfield Co. v. USA Petroleum Co.,495 U.S. 328 (1990) ........................................................................................................... 6, 7, 9

Ball Memorial Hosp., Inc. v. Mutual Hosp. Ins., Inc.,

784 F.2d 1325 (7th Cir. 1986) .......................................................................................... 8, 9, 19

Bell Atl. Corp. v. Twombly,550 U.S. 544 (2007) ................................................................................................................... 5

Bhanusali v. Orange Reg’l Med. Ctr.,2013 U.S. Dist. LEXIS 113974 (S.D.N.Y. 2013)............................................................... 15, 16

Bookhouse of Stuyvesant Plaza, Inc. v. Amazon.com, Inc.,2013 U.S. Dist. LEXIS 171871 (S.D.N.Y. Dec. 5, 2013) .................................................. 14, 17

Boyd v. AWB Ltd.,544 F. Supp. 2d 236 (S.D.N.Y. 2008) .................................................................................. 5, 24

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,429 U.S. 477 (1977) ............................................................................................................... 7, 9

Capital Imaging Assocs., P.C. v. Mohawk Valley Med. Assocs., Inc.,996 F.2d 537 (2d Cir. 1993) ..................................................................................................... 17

CSR Ltd. v. Cigna Corp.,405 F. Supp. 2d 526 (D.N.J. 2005) ........................................................................................... 24

Daniel v. Am. Bd. of Emergency Med.,428 F.3d 408 (2d Cir. 2005) ............................................................................................. 6, 7, 19

Dow Jones & Co. v. Harrods, Ltd.,237 F. Supp. 2d 394 (S.D.N.Y. 2002) ........................................................................................ 5

Empagran S.A. v. F. Hoffmann-Laroche (“ Empagran II ”),417 F.3d 1267 (D.C. Cir. 2005) ................................................................................................ 23





(Continued)

Page(s)

ii

F. Hoffmann-La Roche Ltd. v. Empagran S.A. (“ Empagran I ”),542 U.S. 155 (2004) ........................................................................................................... 21, 22

Filetech S.A. v. Fr. Telecom S.A.,157 F.3d 922 (2d Cir. 1998) ..................................................................................................... 21

Freedom Holdings, Inc. v. Cuomo,624 F.3d 38 (2d Cir. 2010) ..................................................................................................... 1, 9

Freeland v. AT&T Corp.,238 F.R.D. 130 (S.D.N.Y. 2006) .............................................................................................. 19

Gatt Communs., Inc. v. PMC Assocs., L.L.C.,711 F.3d 68 (2d Cir. 2013) ......................................... 1, 5, 6, 7, 9, 11, 12, 13, 14, 16, 18, 19, 20

George Haug Co. v. Rolls Royce Motorcars,1997 U.S. Dist. LEXIS 13650 (S.D.N.Y. 1997)......................................................................... 9

Granite Partners, L.P. v. Bear, Stearns & Co.,58 F. Supp. 2d 228 (S.D.N.Y. 1999) ........................................................................................ 16

Harris v. Mills,572 F.3d 66 (2d Cir. 2009) ......................................................................................................... 4

In re Digital Music Antitrust Litig.,812 F. Supp. 2d 390 (S.D.N.Y. 2011) ...................................................................................... 16

In re Elevator Antitrust Litig.,502 F.3d 47 (2d Cir. 2007) ......................................................................................................... 5

In re Intel Corp. Microprocessor Antitrust Litig.,452 F. Supp. 2d 555 (D. Del. 2006) ............................................................................. 22, 23, 24

In re Rubber Chems. Antitrust Litig.,504 F. Supp. 2d 777 (N.D. Cal. 2007) ...................................................................................... 22

In re Vitamin C Antitrust Litig.,904 F. Supp. 2d 310 (E.D.N.Y. 2012) ...................................................................................... 21

Indiana Grocery, Inc. v. Super Valu Stores, Inc.,864 F.2d 1409 (7th Cir. 1989) .............................................................................................. 8, 19

Information Resources, Inc. v. Dun & Bradstreet Corp.,127 F. Supp. 2d 411 (S.D.N.Y. 2001) ...................................................................................... 24





(Continued)

Page(s)

iii

Kruman v. Christie’s Int’l PLC ,284 F.3d 384 (2d Cir. 2002) ..................................................................................................... 21

Lotes Co. v. Hon Hai Precision Indus. Co.,2013 U.S. Dist. LEXIS 69407 (S.D.N.Y. 2013)................................................................. 21, 23

Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,475 U.S. 574 (1986) ......................................................................................................... 1, 9, 21

Monsanto Co. v. Spray-Rite Serv. Corp.,465 U.S. 752 (1984) ................................................................................................................. 17

NicSand, Inc. v. 3M Co.,507 F.3d 442 (6th Cir. 2007) ...................................................................................................... 7

Optimum S.A. v. Legent Corp.,926 F. Supp. 530 (W.D. Pa. 1996) ........................................................................................... 24

Paycom Billing Servs. v. MasterCard Int’l, Inc.,467 F.3d 283 (2d Cir. 2006) ........................................................................................... 6, 18, 20

Port Dock & Stone Corp. v. Oldcastle Northeast, Inc.,507 F.3d 117 (2d Cir. 2007) ................................................................................. 6, 7, 13, 16, 17

Reading Indus. v. Kennecott Copper Corp.,631 F.2d 10 (2d Cir. 1980) ....................................................................................................... 16

Tommy Lee Handbags Mfg. v. 1948 Corp.,2013 U.S. Dist. LEXIS 129125 (S.D.N.Y. 2013)..................................................................... 18

Turicentro v. Am. Airlines,303 F.3d 293 (3d Cir. 2002) ......................................................................................... 21, 22, 24

United States v. Apple Inc.,2013 U.S. Dist. LEXIS 96424 (S.D.N.Y. 2013)....................................................................... 19

United States v. LSL Biotechnologies,379 F.3d 672 (9th Cir. 2004) .................................................................................................... 23

Verizon Communs. Inc. v. Law Offices of Curtis V. Trinko, LLP ,540 U.S. 398 (2004) ................................................................................................................. 17

Willie McCormick & Assocs. v. Lakeshore Eng’g Servs.,2013 U.S. Dist. LEXIS 178690 (E.D. Mich. 2013) .......................................... 11, 13, 14, 18, 20





(Continued)

Page(s)

iv

Yong Ki Hong v. KBS Am., Inc.,2013 U.S. Dist. LEXIS 136995 (E.D.N.Y. 2013) .............................................. 2, 13, 14, 16, 18

Statutes

15 U.S.C. § 6a ............................................................................................................................... 21

Other Authorities

II P. Areeda & H. Hovenkamp, Antitrust Law ¶ 348a .................................................................... 8

Rules

Fed. R. Civ. Pro. 12(b)(1) ........................................................................................................... 4, 5

Fed. R. Civ. Pro. 12(b)(6) ............................................................................................................... 4




I. INTRODUCTION

Courts treat with skepticism antitrust claims asserted by disappointed competitors. This

is because competitors usually lack the correct incentives to bring an antitrust suit—particularly

where the competitor’s interests are not aligned with consumers’ interests. That is the case here.

Plaintiff, an Australian software developer that purports to compete against Apple, Amazon, and

Barnes & Noble in the distribution of e-books, is challenging an alleged conspiracy that

purportedly raised the prices of e-books. But a conspiracy to raise prices, “though harmful to

[consumers], actually benefit[s] competitors by making supra-competitive pricing more

attractive.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 583 (1986). Thus,

the “the law is well established that competitors lack standing to challenge a conspiracy by their

rivals to raise their own prices.” Freedom Holdings, Inc. v. Cuomo, 624 F.3d 38, 52 (2d Cir.

2010); see also Matsushita, 475 U.S. at 585 n.8 (competitors “may not complain of

conspiracies . . . that set minimum prices at any level”). So too here—Plaintiff would be a

beneficiary of the alleged conspiracy because “supra-competitive pricing [became] more

attractive,” and e-books that Plaintiff previously sold below-cost and at a loss were, because of

the alleged conspiracy, sold for a profit. Indeed, the Complaint expressly states that the agency

agreements at issue were “highly profitable” and allowed for “[profit] margins far in excess of

what e-book retailers then averaged on each newly released or bestselling e-book sold.”

Compl. ¶ 49. Thus, on its face, the Complaint undercuts any suggestion that Plaintiff suffered

antitrust injury, a prerequisite for any antitrust claim.

Even if Plaintiff did lose profits, Second Circuit authorities make clear that competitor

losses resulting from an alleged price-fixing conspiracy cannot give rise to antitrust injury unless

the competitor purchased the relevant product at the artificially-inflated prices. Gatt Communs.,

Inc. v. PMC Assocs., L.L.C., 711 F.3d 68, 77-78 (2d Cir. 2013); Yong Ki Hong v. KBS Am., Inc.,




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2013 U.S. Dist. LEXIS 136995, at *26-28 (E.D.N.Y. 2013). Plaintiff makes no such allegation.

Any harm that Plaintiff suffered thus does not arise from the anticompetitive effect of the alleged

price-fixing scheme.

Plaintiff’s Complaint also fails because Plaintiff has not alleged that it is an efficient

enforcer of the antitrust laws. Plaintiff is, at best, an indirect victim of the alleged conspiracy

because it did not purchase any e-books at inflated prices. The fact that other plaintiffs brought

lawsuits two years ago related to the same conduct—e.g., a putative class of e-book purchasers,

the United States, and individual states—further confirms that Plaintiff is not an efficient

enforcer here. In addition, any damages asserted by Plaintiff are entirely speculative because,

according to Plaintiff’s own allegations, the alleged conspiracy necessarily increased Plaintiff’s

profits. Plaintiff’s speculative claimed injury raises the specter of multiple and duplicative

recoveries and confirms that Plaintiff is not an efficient enforcer of the antitrust laws and that

dismissal is warranted.

Alternatively, if the Complaint is not dismissed due to Plaintiff’s failure to adequately

allege antitrust standing, the Complaint should still nonetheless be dismissed under the Foreign

Trade Antitrust Improvements Act (“FTAIA”) to the extent Plaintiff seeks to recover for lost

foreign sales. Although Plaintiff claims that the relevant geographic market is the United States,

Plaintiff appears to claim harm from the foreign effects of the alleged conspiracy. But an

Australian corporation’s claim over lost sales due to prices charged to foreign customers

involves only foreign effects and foreign harm, and therefore falls squarely within the

prohibitions of the FTAIA. Plaintiff thus must allege that the Defendants’ foreign conduct had a

direct effect on domestic commerce. Plaintiff has not done so, and any claims for lost foreign

sales should be dismissed.




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II. SUMMARY OF ALLEGATIONS1

The Publisher Defendants initially distributed their e-book titles pursuant to a

“‘wholesale model.’” Compl. ¶ 17. Under the wholesale model, publishers set the “‘list price’

of a book”—i.e., the price that “typically . . . appears on the book’s cover”—and would sell the

book to retailers at a wholesale price, “approximately one-half of the list price.” Id. ¶¶ 16-17.

The retailers would then “take ownership of the books” and could “resell them . . . at prices of

the retailer’s choice.” Id. ¶ 17.

Plaintiff contends that Defendants HarperCollins, Hachette, Macmillan, Penguin, and

Simon & Schuster (the “Publisher Defendants”), as well as Apple, conspired to raise the prices

of e-books. Id. ¶¶ 30-77. The alleged conspiracy supposedly came to fruition in 2010 when the

Publisher Defendants adopted the agency model for distributing e-books. Id. ¶¶ 43-77. Under

the agency model, the publishers set the prices at which e-books are sold to consumers. Id. ¶ 2.

Retailers received a 30% commission on each e-book they sold. Id. ¶¶ 2, 4. Plaintiff contends

that “[t]he Publisher Defendants’ collective adoption of . . . Agency Agreements allowed them

(facilitated by Apple) to raise, fix, and stabilize retail e-book prices.” Id. ¶ 84. Seemingly apart

from the purported conspiracy, Plaintiff also claims that Apple adopted a policy that imposed “a

30 percent commission on all e-book sales” from any e-book apps on Apple’s iPad and iPhone

platforms. Id. ¶¶ 4, 95.

Plaintiff is an Australian corporation and has allegedly “been involved in the e-book

industry for over a decade—primarily as a software developer.” Id. ¶¶ 5, 87. Plaintiff purports

to be a competitor of Apple, Amazon, and Barnes & Noble in the e-book market, but Plaintiff

“did not have a dedicated e-reader such as the Kindle, Nook, or iPad.” Id. ¶¶ 3, 94. “Instead, the

1 Apple does not concede the truth of Plaintiff’s allegations. Further, Plaintiff incorrectly assumes that the trial judgment in United States of America v. Apple Inc., Case No. 12-CV-2826, “constitutes prima facie evidencethat Apple violated the antitrust laws.” Compl. ¶ 111.




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draw to [Plaintiff] was that it priced aggressively.” Id. ¶ 3. Plaintiff alleges that it often priced

certain of its e-books below cost and “fund[ed] retail e-book price decreases out of [its] own

margins.” Id. ¶¶ 59, 100(f); see also id. ¶ 89 (during “‘Happy Hour’ promotions,” Plaintiff

offered “for $5.00” e-books with “digital list price[s]” of $25.00 and $27.99); id. ¶ 89 (Plaintiff

“test marketed with discounts of over 80 percent”); id. ¶ 90 (Plaintiff offered product “bundles

where e-books would be given away for free”). Plaintiff alleges that Hachette and HarperCollins

were its “primary e-book suppliers” and does not claim to have distributed e-books from any

other Publisher Defendant.2 Id. ¶ 92. Thus, although Plaintiff alleges that e-book retailers

“would not be able to forgo profitably the sale of the Publisher Defendants’ e-books,” id. ¶ 105,

Plaintiff only distributed the e-books of at most two Publisher Defendants.

Plaintiff contends that the alleged conspiracy prevented it from discounting its agency e-

books and “effectively put [it] out of business.” Id. ¶¶ 93, 108. Plaintiff nowhere claims,

however, that e-books it received from non-Publisher Defendants were affected by agency

agreements or by the alleged conspiracy. There is nothing in the Complaint suggesting that

Plaintiff could not offer these non-agency e-books at below-cost prices, bundle them with other

products, or include them in “Happy Hour” promotions. Defendants’ alleged conduct thus left

some portion of Plaintiff’s e-books entirely unaffected.

III. ARGUMENT

A. Legal Standards

Apple moves to dismiss under Federal Rules of Civil Procedure 12(b)(6) and 12(b)(1). A

motion to dismiss under FRCP 12(b)(6) tests “the legal sufficiency of the complaint.” Harris v.

Mills, 572 F.3d 66, 71 (2d Cir. 2009). Although “heightened fact pleading of specifics” is not

2 And the Publisher Defendants state that only Hachette had an agency agreement with Plaintiff. See PublisherDefendants’ Memorandum of Law In Support Of Motion to Dismiss (Dkt. #53) at 3, 6.




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required, a plaintiff must allege “enough facts to state a claim to relief that is plausible on its

face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also id. (plaintiffs must elevate

their claims “from conceivable to plausible”). Further, district courts should “‘insist upon some

specificity in pleading before allowing a potentially massive factual controversy to proceed.’” In

re Elevator Antitrust Litig., 502 F.3d 47, 50 n.4 (2d Cir. 2007) (quoting Twombly, 550 U.S. at

558). Moreover, even pre-Twombly, Supreme Court decisions held that it was not “proper to

assume [a plaintiff] can prove facts that it has not alleged or that [a defendant] ha[s] violated the

antitrust laws in ways that have not been alleged.” Associated General Contractors v. Cal. State

Council of Carpenters, 459 U.S. 519, 526 (1983).

On a motion to dismiss under FRCP 12(b)(1) “for lack of subject matter jurisdiction, the

party asserting jurisdiction bears the burden of persuasion.” Boyd v. AWB Ltd., 544 F. Supp. 2d

236, 242 (S.D.N.Y. 2008). “Challenges to subject matter jurisdiction may contest ‘either the

facial sufficiency of the pleadings in the complaint or the existence of subject matter jurisdiction

in fact.’” Id. (quoting Dow Jones & Co. v. Harrods, Ltd., 237 F. Supp. 2d 394, 404 (S.D.N.Y.

2002)). Apple asserts a facial challenge here.3 The Court thus should “accept[] as true the

uncontroverted factual allegations in the complaint,” Dow Jones, 237 F. Supp. 2d at 404, but

“argumentative inferences favorable to the party asserting jurisdiction should not be drawn,” Atl.

Mut. Ins. Co. v. Balfour Maclaine Int’l, Ltd., 968 F.2d 196, 198 (2d Cir. 1992).

B. Dismissal Is Warranted Because Plaintiff Has Not Adequately Alleged Antitrust

Standing

A Section-1 plaintiff must adequately allege that it has “antitrust standing.” Associated

General , 459 U.S. at 535 n.31, 545-46; see also Gatt Communs., 711 F.3d at 75-76; Port Dock &

3 Apple reserves the right to make a factual challenge. See Moodie v. Federal Reserve Bank , 58 F.3d 879, 882(2d Cir. 1995).




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Stone Corp. v. Oldcastle Northeast, Inc., 507 F.3d 117, 121-22 (2d Cir. 2007). Plaintiff has not.

This deficiency alone warrants dismissal.

“Antitrust standing is distinct from constitutional standing, in which a mere showing of

harm in fact will establish the necessary injury.” Port Dock , 507 F.3d at 121; see also Daniel v.

Am. Bd. of Emergency Med., 428 F.3d 408, 438 (2d Cir. 2005) (“The fact that private plaintiffs

have been injured by acts that violate the antitrust laws is not enough to confer standing to sue.”).

“To determine whether a private plaintiff has antitrust standing,” courts consider several factors

identified by the Supreme Court in Associated General . Gatt Communs., 711 F.3d at 76.

Application of the Associated General factors “‘ensures that the harm claimed by the plaintiff

corresponds to the rationale for finding a violation of the antitrust laws in the first place.’” Id.

(quoting Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 342 (1990)); see also id. at 75

(“Absent such boundaries, the potent private enforcement tool that is an action for treble

damages could be invoked without service to—and potentially in disservice of—the purpose of

the antitrust laws: to protect competition.”). Thus, antitrust standing must be established even if

a per se antitrust violation is alleged and thus even “in a case involving horizontal price fixing,

‘perhaps the paradigm of an unreasonable restraint of trade.’” Atl. Richfield , 495 U.S. at 344; see

also Daniel , 428 F.3d at 437 (“the fact that the plaintiffs charge the defendants, at least in part,

with a per se violation of the antitrust laws does not absolve them of the obligation to

demonstrate standing”); Paycom Billing Servs. v. MasterCard Int’l, Inc., 467 F.3d 283, 290 (2d

Cir. 2006).

The Second Circuit has “distilled” the Associated General “factors into two

imperatives: . . . a private antitrust plaintiff [must] plausibly . . . allege (a) that it suffered ‘a

special kind of “antitrust injury,”’ and (b) that it is a suitable plaintiff to pursue the alleged




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antitrust violations and thus is an ‘efficient enforcer’ of the antitrust laws.” Gatt Communs., 711

F.3d at 76 (quoting Port Dock , 507 F.3d at 121-22). The Second Circuit has also emphasized

that “‘[a]ntitrust standing is a threshold, pleading-stage inquiry and when a complaint by its

terms fails to establish this requirement [it] must [be] dismiss[ed] . . . as a matter of law.” Id. at

75 (quoting NicSand, Inc. v. 3M Co., 507 F.3d 442, 450 (6th Cir. 2007)); see also NicSand , 507

F.3d at 450 (“it should come as no surprise that, in the seminal antitrust standing

case[, Associated General ], the Supreme Court dismissed the claim under Rule 12(b)(6)”).

1. Plaintiff Has Not Adequately Alleged Antitrust Injury

To establish antitrust standing, a plaintiff must first adequately allege antitrust injury.

Gatt Communs., 711 F.3d at 76. The Second Circuit “employ[s] a three-step process for

determining whether” antitrust injury has been “sufficiently alleged.” Id. “First, the party

asserting that it has been injured by an illegal anticompetitive practice must ‘identify[ ] the

practice complained of and the reasons such a practice is or might be anticompetitive.’” Id.

(quoting Port Dock , 507 F.3d at 122). Second, the court must “identify the ‘actual injury the

plaintiff alleges’” and “look to the ways in which the plaintiff claims it is in a ‘worse position’ as

a consequence of the defendant’s conduct.” Id. (quoting Port Dock , 507 F.3d at 122; Brunswick

Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 486 (1977)). And, third, the court must

“‘compar[e]’ the ‘anticompetitive effect of the specific practice at issue’ to ‘the actual injury the

plaintiff alleges.’” Id. (quoting Port Dock , 507 F.3d at 122). “It is not enough for the actual

injury to be ‘causally linked’ to the asserted violation.” Id. (quoting Brunswick , 429 U.S. at

489). “Rather, in order to establish antitrust injury, the plaintiff must demonstrate that its injury

is ‘of the type the antitrust laws were intended to prevent and that flows from that which makes

[or might make] defendants’ acts unlawful.’” Id. (quoting Daniel , 428 F.3d at 438); see also Atl.

Richfield , 495 U.S. at 334.




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Further, because Plaintiff purports to be a competitor of Apple (as well as Amazon and

Barnes & Noble) in the e-book market, Compl. ¶ 94, the Complaint’s antitrust-injury allegations

“deserve particularly intense scrutiny,” Indiana Grocery, Inc. v. Super Valu Stores, Inc., 864

F.2d 1409, 1419 (7th Cir. 1989). As the Seventh Circuit has explained, “whenever the plaintiff

and consumers have divergent rather than congruent interests”—e.g., where “the plaintiff and

defendant are competitors, [and thus] the plaintiff[, unlike consumers,] gains from higher prices

and loses from lower prices”—then “the plaintiff is a poor champion of consumers,” “there is a

potential problem in finding ‘antitrust injury,’” and “a court must be especially careful not to

grant relief that may undercut the proper functions of antitrust.” Id. (quoting Ball Memorial

Hosp., Inc. v. Mutual Hosp. Ins., Inc., 784 F.2d 1325, 1334 (7th Cir. 1986)); see also II P.

Areeda & H. Hovenkamp, Antitrust Law ¶ 348a (“[T]he courts are properly skeptical of many

rivals’ suits . . . . [because a]lthough consumers almost always have the correct incentives for

suit, rivals do not.”).

a. Plaintiff Has Not Adequately Alleged How It Is In A “Worse Position”

Because Of The Alleged Conspiracy

Plaintiff’s allegations do not amount to antitrust injury. The alleged conspiracy

supposedly “raise[d] and stabilize[d] retail e-book prices,” leading “to an increase in average

retail prices of the balance of Publisher Defendants’ e-book catalogs.” Compl. ¶ 86; see also id.

¶ 3. Plaintiff contends that, as a result, it could no longer offer, at below cost prices, an

unspecified percentage of its e-books that were covered by agency agreements. See id. ¶ 100(f)

(the alleged conspiracy “[e]liminated the ability of e-book retailers to fund retail e-book price

decreases out of their own margins”); id. ¶ 59 (retailers could no longer “price promote e-books

out of the[ir] . . . own margins”); see also supra Section II. This allegedly impaired Plaintiff’s




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“ability to distinguish itself in any meaningful way,” and Plaintiff was allegedly “crippled and

effectively put out of [the e-book] business.” Compl. ¶¶ 97, 108.

These conclusory allegations, with “no supporting facts pleaded,” George Haug Co. v.

Rolls Royce Motorcars, 1997 U.S. Dist. LEXIS 13650, at *5 (S.D.N.Y. 1997), reversed on other

grounds, 148 F.3d 136 (2d Cir. 1998), do not plausibly show that Plaintiff “is in a ‘worse

position’ as a consequence of . . . [Apple’s alleged] conduct,” Gatt Communs., 711 F.3d at 76

(quoting Brunswick , 429 U.S. at 486). Plaintiff, a purported competitor, is challenging alleged

price-fixing that resulted in higher prices. But “the law is well established that competitors lack

standing to challenge a conspiracy by their rivals to raise their own prices.” Freedom Holdings,

624 F.3d at 52; see also Matsushita, 475 U.S. at 585 n.8 (competitors “may not complain of

conspiracies . . . that set minimum prices at any level”). This is because a conspiracy to raise

prices, “though harmful to competition, actually benefit[s] competitors by making supra-

competitive pricing more attractive.” Matsushita, 475 U.S. at 583; see id. at 583 (competitors

“stand to gain from any conspiracy to raise the market price”); Atl. Richfield , 495 U.S. at 337

(“higher . . . prices would have worked to [competitor plaintiff’s] advantage”); Ball Memorial ,

784 F.2d at 1334 (if “the plaintiff and the defendant are competitors, the plaintiff gains from

higher prices and loses from lower prices—just the opposite of the consumers’ interest”).

In light of these controlling cases, Plaintiff cannot establish antitrust injury. Indeed, as a

result of the conspiracy, not only would allegedly “supra-competitive [e-book] pricing [be] more

attractive,” Matsushita, 475 U.S. at 583, Plaintiff would necessarily have become more

profitable, regardless of any inability to discount agency e-books. Before the alleged conspiracy,

Plaintiff often sold e-books from Hachette and HarperCollins at a loss, see supra Section II, and

thus increased sales meant only increased losses. But the agency agreements ensured that




10

Plaintiff would earn a commission on each relevant e-book sold, and a money-losing proposition

became “highly profitable.” Compl. ¶ 49. Further, Plaintiff also enjoyed lower costs because of

the agency agreements. Whereas the wholesale model required Plaintiff to pay publishers a fee

for each e-book sold—usually 50% of the list price—the agency agreements required no such

expenditures and Plaintiff simply received a 30% commission for each agency e-book sold. Id.

¶¶ 16-17, 2, 4. In sum, the agency agreements afforded “[profit] margins far in excess of what e-

book retailers then averaged on each newly released or bestselling e-book sold.” Id. ¶ 49.

Moreover, the alleged conspiracy had no effect on e-books Plaintiff received from non-

Publisher Defendants. These non-agency e-books were thus left wholly untouched by the

alleged conspiracy. Plaintiff could continue to offer them at below-cost prices, bundle them with

other e-books or software, and use them in “‘Happy Hour’ promotions.” Id. ¶ 89. In other

words, Plaintiff could continue “to distinguish itself through offering attractive prices.” Id. ¶ 97.

Indeed, the increased profits Plaintiff received from its agency e-book sales would enable

Plaintiff to fund even greater discounts on its non-agency e-books. The notion that Plaintiff is in

a “worse position” because some unspecified portion of its e-book business became more

profitable and the other portion was left unaffected is simply not plausible.

Further undermining any claim of antitrust injury is the highly speculative nature of the

alleged harm. See Associated General , 459 U.S. at 542; see also infra Section III.B.2. Plaintiff

contends on the one hand that, without the alleged conspiracy, it would have “grow[n] rapidly”

and sold substantially more e-books than it actually did. Compl. ¶ 91. But on the other, Plaintiff

admits that it “had no chance of competing with several large international conglomerates

offering the same [e-books] at the same prices” as Plaintiff. Id. ¶ 97; see also id. ¶¶ 108-09.

Plaintiff does not explain why these same competitors would not have matched Plaintiff’s prices




11

absent the conspiracy—particularly if Plaintiff became as successful as it claims. In fact,

Plaintiff alleges that, even before the conspiracy, “e-book retailers often matched or approached

Amazon’s [below-cost] $9.99-or-less prices for e-book[s].” Id. ¶¶ 23-24. These retailers could

have easily matched Plaintiff’s prices as well. Plaintiff therefore “has not plausibly alleged that

in the absence of the alleged scheme,” it “would have prevailed” over other e-book competitors,

which merely had to match Plaintiff’s prices to capture its business. Gatt Communs., 711 F.3d at

79. Plaintiff’s asserted injury is thus “highly speculative” and insufficient to state a claim. Id.;

Associated General , 459 U.S. at 542; see also Willie McCormick & Assocs. v. Lakeshore Eng’g

Servs., 2013 U.S. Dist. LEXIS 178690, at *19 (E.D. Mich. 2013) (“[Plaintiff’s] allegations that it

would have been granted sub-contracts were it not for Defendants’ conspiracy is speculative as

there is no reason to believe that it would have won these sub-contracts over other

competitors.”).

Statements by Plaintiff’s counsel further confirm how farfetched Plaintiff’s claims of

harm are. Although the Complaint expressly alleges that Plaintiff “entered the [e-book] market[]

and . . . successfully begun selling e-books on its various websites,” Compl. ¶ 88; see also Exs.

A-H,4 Plaintiff’s counsel made a number of statements suggesting that Plaintiff had not entered

the e-book market but was merely “on the brink” of doing so. See Ex. J at 4 (Plaintiff “was on

the brink of entering into the eBook retail market.”); id. at 5 (“[Plaintiff’s] claim revolves around

its intention, which it was on the verge of doing, of entering into the retail part of the eBook

business.”). But if Plaintiff was only “on the verge” of entering the e-book market, the notion

that it would have captured anything more than a de minimis share of the market is even more

implausible. Plaintiff had no e-reader, no “international brand recognition,” and “no chance of

4 Unless otherwise noted, the Exhibits cited herein are attached to the concurrently-filed Declaration of CynthiaE. Richman.




12

competing” with retailers that matched its prices. Compl. ¶¶ 3, 94, 97. It sold e-books for only

two of the Publisher Defendants, even though the Complaint alleges that an e-book retailer

“would not be able to forgo profitably the sale of the Publisher Defendants’ e-books.” Id. ¶¶ 92,

105. On top of all that, Plaintiff was only a “one-man show in terms of meaningful business

operations.” Ex. J at 8 (emphasis added); see also id. at 4 (“DNAML is [Plaintiff’s] corporate

title. It’s basically a one-man show by the name of Adam Schmidt.”). Given these

circumstances, there is “no reason why [Plaintiff] would have been more certain than [other e-

book retailers] to win [over customers].” Gatt Communs., 711 F.3d at 79.

Plaintiff’s allegations regarding its eBook.com domain name also do not show that

Plaintiff is in a “worse position” because of Defendants’ alleged conduct. Plaintiff claims that

because of the alleged conspiracy and Apple’s App-Store policies, Plaintiff had “no reasonable”

choice but to sell “its industry-defining domain name—eBook.com,” which was offered “for sale

in 2010.” Compl. ¶¶ 95-96. But this wholly conclusory claim makes no sense given the

increased profitability of Plaintiff’s e-book business. Further, Plaintiff expressly alleges that

eBook.com was “offered . . . for sale in 2010,” id. ¶ 96 (emphasis added), but changes to Apple’s

App-Store policy allegedly occurred “in 2011,” id. ¶ 95 (emphasis added). The decision to sell

eBook.com thus was made long in advance of any changes to Apple’s App-Store policy, and

Plaintiff’s own allegations thus confirm that the App-Store policy could not have swayed

Plaintiff’s decision to sell eBook.com. In any event, neither Apple’s App-Store policies nor the

alleged conspiracy inflicted antitrust injury on Plaintiff, see Section III.B.1, so even if they did

influence Plaintiff’s decision to sell eBook.com, that is of no consequence. Moreover, if the

eBook.com domain name truly was “industry-defining,” it presumably would not have sold for a

pittance, which Plaintiff does not allege and which the Court should not presume. See




13

Associated General , 459 U.S. at 526. Finally, Plaintiff disregards the other “industry-defining

domain name[]” identified in the Complaint: eBook.biz. Compl. ¶ 87. Plaintiff does not allege

that it sold or ceased operating eBook.biz. In fact, Plaintiff continues to sell e-books from

eBook.biz—and from a host of other sites. See Exs. A-H (relevant portions of Plaintiff’s

websites from which e-books are sold).

b. Plaintiff’s Alleged Injury Does Not Flow From Any Anticompetitive

Effect Of The Alleged Conspiracy

(i) Plaintiff’s Alleged Lost Profits Do Not Arise From The

Anticompetitive Effects Of Price Fixing

Plaintiff’s failure to adequately allege antitrust injury is also evident from a

“‘compar[ison]’ [of] the ‘anticompetitive effect of the specific practice at issue’ to ‘the actual

injury . . . [P]laintiff alleges.’” Gatt Communs., 711 F.3d at 76 (quoting Port Dock , 507 F.3d at

122). The anticompetitive effect of a price-fixing conspiracy is the higher prices charged to

consumers. See id. at 77; Yong , 2013 U.S. Dist. LEXIS 136995, at *26-27; see also Willie

McCormick , 2013 U.S. Dist. LEXIS 178690, at *15 (citing Gatt Communs.); Compl. ¶ 3

(“Consumers have paid tens of millions of dollars more for e-books.”). And the ultimate injury

Plaintiff alleges is its loss of profits. See Compl. ¶ 108 (Plaintiff “was crippled and effectively

put out of business”). But lost profits do not flow from higher prices charged to consumers, and

this is clear from Gatt Communications and Yong , both of which held that a competitor’s loss of

profits from a price-fixing conspiracy “is not an injury that flows from that which makes [price-

fixing] unlawful.” Gatt Communs., 711 F.3d at 77; see also Yong , 2013 U.S. Dist. LEXIS

136995, at *26-28. “[H]orizontal price-fixing schemes are illegal under the antitrust laws ‘only

because of the harm [they] may cause—increased prices—to purchasers’ of the product for

which prices have been fixed.” Yong , 2013 U.S. Dist. LEXIS 136995, at *26-27 (quoting Gatt

Communs., 711 F.3d at 77). Thus, to adequately allege antitrust injury from such a scheme, a




14

competitor plaintiff must show that its alleged harm results from payment of artificially-

increased prices—and not from lost revenues or profits. See Gatt Communs., 711 F.3d at 77

(“[Plaintiff’s] lost revenue . . . is not an injury that flows from that which makes bid-rigging

unlawful. [Plaintiff] has not been forced to pay higher prices for a product, as customers who are

victimized by price-fixing schemes might.”); Yong , 2013 U.S. Dist. LEXIS 136995, at *26-27

(no antitrust injury where, although plaintiffs suffered “lost profits,” they “never paid higher

prices . . . as a result of the alleged price-fixing arrangement”); see also Willie McCormick , 2013

U.S. Dist. LEXIS 178690, at *15-16 (“The direct harm in this case is to the [consumer] which

had to pay increased prices for its work as a result of [the] fraudulent activity . . . . In contrast,

[plaintiff’s] injury stems from its exclusion from [certain] contracts, and is thus better stated as a

harm to a competitor, rather than to competition itself.”).

Here, Plaintiff has not alleged that it was “forced to pay higher prices” for e-books. Gatt

Communs., 711 F.3d at 77. Rather, Plaintiff’s alleged “injury [is] profit, not price.” Yong , 2013

U.S. Dist. LEXIS 136995, at *28. That is inadequate. See id. (“lost profits, though an economic

injury, is simply not the type of injury that confers antitrust standing on a claimant”). Further,

Plaintiff continues to sell e-books from a variety of websites, with only an unspecified portion of

its total e-books affected by any agency agreements. See supra fn. 2; Exs. A-H. Any harm

experienced by Plaintiff has thus affected only a sliver of the market, and there is “no cognizable

harm to competition as a whole.” Bookhouse of Stuyvesant Plaza, Inc. v. Amazon.com, Inc.,

2013 U.S. Dist. LEXIS 171871, at *16 (S.D.N.Y. Dec. 5, 2013); see also Willie McCormick ,

2013 U.S. Dist. LEXIS 178690, at *15-16 (business allegedly lost because of conspiracy

amounted to “harm to a competitor, rather than to competition itself”).




16

its software products and to bolster its position in the software market. Nor has Plaintiff alleged

anything suggesting that Apple’s “actions caused ‘adverse effects on price, quality, or output of

the relevant [software products].’” Bhanusali, 2013 U.S. Dist. LEXIS 113974, at *31. Instead,

Plaintiff’s counsel candidly admitted that “the activities involving the software with the

publishers was not impacted, either by the alleged conspiracy or Apple’s [App-Store policy].”

Ex. J at 9. Competition has not been restrained in the least, and Plaintiff thus cannot show

antitrust injury. Port Dock , 507 F.3d at 123. Further, any claim of harm suffered in the

software-product market would still be based on allegedly lost profits. But lost profits resulting

from an alleged horizontal price-fixing scheme do not amount to antitrust injury.

6

Gatt

Communs., 711 F.3d at 77-78; Yong , 2013 U.S. Dist. LEXIS 136995, at *26-28.

c. Plaintiff’s Allegations Regarding Apple’s App-Store Policies Do Not

Amount To Antitrust Injury

Plaintiff’s allegations regarding Apple’s App-Store policies cannot survive a motion to

dismiss. Plaintiff alleges that Apple “specifically modified” its App-Store policy and began

charging “e-book seller[s that] wanted to sell an e-book through [an] App.” Compl. ¶ 95. This

supposedly amounted to an “effective prohibition of entry to the iPad and iPhone platform,” and

Plaintiff thus “ceased production of its . . . Reader 2 App.” 7 Id. ¶¶ 95-96.

These allegations cannot support Plaintiff’s claim under Section 1 of the Sherman Act. A

Section-1 claim requires “some form of concerted action between at least two legally distinct

6 Moreover, injuries Plaintiff allegedly suffered in markets for “other software products” are irrelevant to the

antitrust-injury issue. Compl. ¶ 3. This is because “[a]ntitrust injury requires the plaintiff to have suffered itsinjury in the market where competition is being restrained ,” In re Digital Music Antitrust Litig., 812 F. Supp. 2d390, 404 (S.D.N.Y. 2011) (emphasis added). Injuries occurring in markets for “other software products” thusdo not amount to antitrust injury here. Compl. ¶ 3; Reading Indus. v. Kennecott Copper Corp., 631 F.2d 10, 12(2d Cir. 1980); Granite Partners, L.P. v. Bear, Stearns & Co., 58 F. Supp. 2d 228, 244 (S.D.N.Y. 1999) (“‘Thedifficulty with [plaintiff’s] case is that its injury does not match either the mischief about which it complains orthe markets in which it occurred.’”).

7 As noted supra, Plaintiff also claims that the 2011 changes to Apple’s App-Store policy caused Plaintiff to“offer[] its [eBook.com] domain name for sale in 2010.” Compl. ¶¶ 95-96 (emphasis added). This isnonsensical on its face.




17

economic entities.” Capital Imaging Assocs., P.C. v. Mohawk Valley Med. Assocs., Inc. , 996

F.2d 537, 542 (2d Cir. 1993) (emphases added); see also Bookhouse, 2013 U.S. Dist. LEXIS

171871, at *11 (“‘[i]ndependent action is not proscribed’ under section 1”) (quoting Monsanto

Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 760 (1984)). Plaintiff, however, has not alleged any

concerted action as to Apple’s App-Store policy. In addition, Plaintiff fails to explain why

Apple waited until 2011 to change its App-Store policy, even though the agency agreements

were implemented nearly a year earlier in 2010. Compl. ¶¶ 67, 95. Such a delay makes no sense

if Apple truly did seek to further the alleged conspiracy with its App-Store policy.

The App-Store allegations also fail because Plaintiff’s objection—that Apple has

“effective[ly] prohibit[ed]” sales of e-books on the “the iPad and iPhone platform[s],” id. ¶¶ 95-

96—has already been rejected by this District. In Bookhouse, plaintiffs raised the same

allegations with respect to e-books sold on Amazon’s devices and apps. See 2013 U.S. Dist.

LEXIS 171871, at *23-24 (“In essence, plaintiffs complain that Amazon has not allowed them to

sell e-books on Amazon’s devices and apps.”). In dismissing these claims, the Bookhouse court

applied the black-letter antitrust principle that “no business has a ‘duty to aid competitors.’” Id.,

at *24 (quoting Verizon Communs. Inc. v. Law Offices of Curtis V. Trinko, LLP , 540 U.S. 398,

411 (2004)). The same is true here: Apple has no “duty to aid” Plaintiff’s purported endeavors

on the iPad and iPhone platforms, and Plaintiff has alleged nothing suggesting otherwise. The

App-Store allegations thus provide no support to Plaintiff, do not suggest antitrust injury, and are

entirely superfluous.

2. Plaintiff Has Not Adequately Alleged That It Is An Efficient Enforcer Of The

Antitrust Laws

Plaintiff also fails to adequately allege antitrust standing because it has not shown that it

is an “efficient enforcer” of the antitrust laws. See Port Dock , 507 F.3d at 121 (“antitrust




18

standing for a private plaintiff requires a showing of a special kind of ‘antitrust injury,’ as well as

a showing that the plaintiff is an ‘efficient enforcer’ to assert a private antitrust claim”); Tommy

Lee Handbags Mfg. v. 1948 Corp., 2013 U.S. Dist. LEXIS 129125, at *42 (S.D.N.Y. 2013). “To

determine whether a putative antitrust plaintiff is an ‘efficient enforcer’ of the antitrust laws,” the

Second Circuit examines the following:

(1) the directness or indirectness of the asserted injury; (2) the existence of anidentifiable class of persons whose self-interest would normally motivate them tovindicate the public interest in antitrust enforcement; (3) the speculativeness ofthe alleged injury; and (4) the difficulty of identifying damages and apportioningthem among direct and indirect victims so as to avoid duplicative recoveries.

Gatt Communs., 711 F.3d at 78 (quoting Paycom, 467 F.3d at 290-91). Courts routinely

consider these factors on Rule 12(b)(6) motions and dismiss complaints where plaintiffs fail to

show that they are efficient enforcers. See id. at 74-75, 78-80; Paycom, 467 F.3d at 285, 293-95;

Tommy Lee, 2013 U.S. Dist. LEXIS 129125, at *5-6, *42-43; Willie McCormick , 2013 U.S. Dist.

LEXIS 178690, at *17-21. This Court should do the same.

First, as in Gatt Communications, Plaintiff’s “purported injuries are at best an indirect

result of the primary asserted antitrust violation: price-fixing.” 711 F.3d at 78. The harm from

price fixing arises from increased prices. See id. at 77; Yong , 2013 U.S. Dist. LEXIS 136995, at

*26-27. Plaintiff, however, “did not pay higher prices by virtue of the [alleged] conspiracy,”

Gatt Communs., 711 F.3d at 79, and, in fact, benefitted from the alleged higher prices, see supra

Section III.B.1.a. Whatever Plaintiff’s harm, it was thus “far more remote and conjectural than

the losses,” if any, suffered by those actually affected by the allegedly higher prices. Gatt

Communs., 711 F.3d at 78-79.

The “other potential plaintiffs” factor also weighs heavily against Plaintiff. Id. at 79; see

also Paycom, 467 F.3d at 294. Here, consumers, the United States, and thirty-three states have

brought suit against the Defendants for the conspiracy alleged here. See United States v. Apple




22

Further, where anticompetitive conduct has both domestic and foreign effects, to recover

for injuries caused by the foreign effects, a plaintiff must show that the foreign harm by itself has

a direct effect on domestic commerce. See Empagran I , 542 U.S. at 159 (a plaintiff “c[an]not

bring a Sherman Act claim based on foreign harm” where the “foreign effect giving rise to the

claim” was “independent” of any “adverse domestic effect”); In re Rubber Chems. Antitrust

Litig., 504 F. Supp. 2d 777, 784 (N.D. Cal. 2007) (“courts vetting allegations of antitrust injury

have not permitted the FTAIA to extend jurisdiction over foreign injury independent of domestic

effects merely because the same plaintiff is also able to allege domestic injury caused by the

same anticompetitive conduct”). Absent a showing that the foreign harm had a direct effect on

domestic commerce, any claim for lost foreign sales will be dismissed. See In re Intel Corp.

Microprocessor Antitrust Litig., 452 F. Supp. 2d 555, 563 (D. Del. 2006) (dismissing plaintiff’s

claims “to the extent those claims are based on foreign conduct and foreign harm” because the

foreign effects of defendant’s conduct were unrelated to the domestic effects).

2. The Court Lacks Subject Matter Jurisdiction Over Any Claim For Lost

Foreign Sales

Plaintiff’s allegations fall squarely within the scope of the FTAIA. Plaintiff alleges that

the Defendants, two of which are foreign companies, forced agency agreements upon Plaintiff,

an Australian corporation. See Compl. ¶¶ 5-10, 93. This amounts to “trade or commerce with

foreign nations” under the FTAIA. See Turicentro, 303 F.3d at 301-02 (“The phrase ‘trade or

commerce with foreign nations’ includes transactions between foreign and domestic commercial

entities.”); Intel , 452 F. Supp. 2d at 559. To recover for any foreign harm from the alleged

conspiracy, Plaintiff thus must show that the harm had a direct effect on domestic commerce.

See Empagran I , 542 U.S. at 159.




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Plaintiff cannot do so. The alleged conspiracy supposedly restricted e-book prices that

Plaintiff could charge foreign customers. Plaintiff, however, has failed to link the alleged

foreign price restrictions and resulting foreign harm to domestic commerce. There are no

allegations in the Complaint suggesting any domestic effect, let alone the “direct” effect required

by the FTAIA. In fact, the Complaint expressly states that “[e]-book retailers typically present a

unique storefront to U.S. consumers, often with e-books bearing different retail prices than the

same titles would command on the same retailer’s foreign websites.” Compl. ¶ 104. In other

words, prices charged abroad have no relation to the domestic market, and the alleged

international price restrictions had no effect on domestic commerce.

Additional case law confirms this conclusion. “Courts discussing the ‘direct effects’

requirement of the FTAIA,” for example, “have recognized that ‘direct effect’ means that there

must be an ‘immediate consequence’ of the alleged anticompetitive conduct with no ‘intervening

developments’”: mere “‘but-for’ causation” is not enough. Intel , 452 F. Supp. 2d at 560-61

(quoting United States v. LSL Biotechnologies, 379 F.3d 672, 680 (9th Cir. 2004)); see also

Empagran S.A. v. F. Hoffmann-Laroche (“ Empagran II ”), 417 F.3d 1267, 1271 (D.C. Cir. 2005);

Lotes, 2013 U.S. Dist. LEXIS 69407, at *26. Thus, even if here there were some “‘ripple

effects’ of [Defendants’] foreign conduct on the U.S. market” that would “not have arisen ‘but

for’ [Defendants’] alleged conduct”—and Plaintiff has not alleged any such effects—that would

not be “the type of direct causation contemplated by the FTAIA.” Intel , 452 F. Supp. 2d at 561.

Further, courts have rejected the argument that a plaintiff’s lost foreign sales give rise to a

domestic effect by weakening the plaintiff’s ability to compete domestically. Id. at 560

(rejecting plaintiff’s contention that defendant “has kept [plaintiff] ‘from selling [products]

abroad with the purpose and effect of weakening [plaintiff] as a domestic rival’”); see also




24

Information Resources, Inc. v. Dun & Bradstreet Corp., 127 F. Supp. 2d 411, 417 (S.D.N.Y.

2001); Optimum S.A. v. Legent Corp., 926 F. Supp. 530, 533 (W.D. Pa. 1996). Nor can a

plaintiff claim a direct effect on domestic commerce merely because “certain of Defendants’

actions were taken or overseen in the United States.” CSR Ltd. v. Cigna Corp., 405 F. Supp. 2d

526, 546 (D.N.J. 2005); see also Turicentro, 303 F.3d at 305. In addition, a domestic-effect

theory “based on the [alleged] global interrelatedness of the [e-book] markets” is also

insufficient. Boyd , 544 F. Supp. 2d at 246; see also Intel , 452 F. Supp. 2d at 559 (FTAIA barred

claim even though plaintiff alleged “a single, unitary world-wide market”). Thus, the foreign

effects of the alleged conspiracy here are completely independent of any domestic effects and,

under the FTAIA, cannot give rise to a Sherman-Act claim. To the extent Plaintiff seeks to

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recover for lost foreign sales, its claim should be dismissed.

IV. CONCLUSION

For all of the foregoing reasons, the Complaint should be dismissed with prejudice as to

Apple.

Dated: January 17, 2014 Respectfully submitted,

\s\ Theodore J. Boutrous, Jr.______Theodore J. Boutrous, Jr.Daniel G. SwansonGibson, Dunn & Crutcher, LLP333 South Grand AvenueLos Angeles, CA 90071(213) [email protected]

Lawrence J. ZweifachGibson, Dunn & Crutcher, LLP200 Park Avenue New York, NY 10166-0193(212) 351-4000

Cynthia Richman

Gibson, Dunn & Crutcher, LLP1050 Connecticut Avenue, N.W.Washington, DC 20036(202) 955-8500

On behalf of Defendant Apple Inc.


dnaml v. apple - ebook antitrust - apple motion to dismiss

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