From Antitrust Law Daily, December 5, 2014

Apple could be liable for foreign e-book lost profits

By Greg Hammond, J.D.

Two e-book retailers have been given the “go-ahead” to seek damages for both domestic and foreign lost sales of e-books, after Apple and five publishers engaged in a price-fixing conspiracy in 2009 and 2010. The federal district court in New York City granted the retailers leave to amend their complaints to plead damages for the loss of foreign sales of e-books, pursuant to the Foreign Trade Antitrust Improvements Act (FTAIA) (Lavoho, LLC v. Apple Inc., December 3, 2014, Cote, D.).

Background. In late 2009 and early 2010, Apple and five major American publishers conspired to raise the price of e-books by imposing agency agreements on e-book retailers. As a result of the agency agreements, the plaintiff e-book retailers—who did not have a dedicated e-reader and competed with other e-retailers by discounting—could no longer compete on price, and subsequently went out of business. Although their complaints were devoid of any allegations regarding lost foreign sales, the e-retailer plaintiffs produced correspondence between the parties debating whether they could recover damages on a lost foreign sale theory. The court treated the correspondence as a request for leave to amend the complaints.

FTAIA. According to the court, the FTAIA generally excludes wholly foreign conduct from the reach of the Sherman Act, but brings that conduct back within the statute’s scope if (1) the foreign conduct has a direct, substantial, and reasonably foreseeable effect on U.S. domestic, import, or certain export commerce; and (2) that effect gives rise to a claim under the Sherman Act. In granting the e-book retailers leave to amend, the court determined that the conduct in this case is not “wholly foreign conduct.” In addition, to the extent their claims relate to the sales or lost sales of e-books to foreign consumers, the plaintiffs must be able to allege that (1) the price-fixing conspiracy at issue involved foreign trade; (2) the conspiracy had a direct effect on export transactions in which the plaintiffs were engaged; and (3) the effect on export transactions caused the injury on which their claims are premised.

The case numbers are 14cv1768 (DLC) and 14cv2000 (DLC).

Attorneys: Maxwell M. Blecher (Blecher Collins Pepperman & Joy P.C.) for Lavoho, LLC and Abbey House Media, Inc. Theodore J. Boutrous, Jr. (Gibson, Dunn & Crutcher LLP) for Apple Inc.

Companies: Lavoho, LLC; Abbey House Media, Inc.; Apple Inc.

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