Obama's victory spells bad news for Apple, Macmillan and Pearson

Historically, Republican administrations have been far less aggressive in prosecuting antitrust cases than Democratic ones. Had Mitt Romney won last night, it's likely that the eBook price-fixing case against Apple, Macmillan and Pearson would have been settled on terms far more favorable to the companies, or would have been dropped altogether. That may have been one reason why the three companies refused to settle with the U.S. Justice Department--they thought that they could get far better terms by waiting a few months for a Romney administration. However, with President Obama's reelection, the Justice Department will continue to pursue its case, and will almost certainly make settlement on the same or similar terms as Hachette, HarperCollins and Simon & Schuster a condition for approval of the Penguin-Random House merger. All of this makes a settlement by Macmillan much more likely. At that point, Apple won't matter, because all of the Big 6 will be prohibited from accepting Apple's terms.

Stop SOPA

Many websites, including Wikipedia, BoingBoing, Mozilla, WordPress.org and Reddit, are going to go black tomorrow to protest the Stop Online Piracy Act (SOPA) under consideration in the U.S. House of Representatives, and the Protect Intellectual Property Act (PIPA) that's being considered by the U.S. Senate. Mashable has posted an excellent summary of SOPA, and rather than rehash those arguments, I've linked to it for your reference.

The stated purpose of SOPA is to cripple non-U.S. websites that distribute unlicensed copyrighted content, and to prevent U.S.-based sites from hosting, or even linking to, unlicensed content. The problem with SOPA is that it imposes a "death sentence" on websites that haven't been proven to have done any infringement whatsoever. SOPA front-loads the prosecution and punishment of copyright infringement cases. In the case of foreign websites, the U. S. Justice Department can request a court order to seize their domain name(s), order advertising networks and financial processing services to stop doing business with them, order search engines such as Google and Bing to drop them from their indices, and order Internet Service Providers to stop connecting to them. All of this is supposed to take place within five days after the court gives the order, and most importantly, without any notice given to the website. In short, the website can be put out of business before it has any opportunity to defend itself.

SOPA gives content owners the power to do the same things to domestic websites that encourage or facilitate copyright infringement. The Justice Department doesn't need to be involved at all. This part of the bill imposes the same "death penalty" on domestic websites, and doesn't require them to be informed until the penalty has been imposed. Even worse, the owner or operator of the site isn't required to have been the one who posted the infringing content. Infringing content could be in the form of a comment or an uploaded video posted to a user-generated content site like YouTube. It could even be a link to another website that posts infringing content.

SOPA means that every website that allows any kind of third-party content or comments would have to review everything before it's posted. It would make a service such as YouTube, which receives 24 hours of uploaded content every minute, impossible to operate. (Correction, January 23, 2012: According to its blog, YouTube is actually receiving 60 hours of video every minute.) Content providers would no longer need to give notice of infringement as required under the Digital Millennium Copyright Act, and websites would no longer be protected by the law's "safe harbor" provision if they don't knowingly encourage or participate in copyright infringement.

Let me be clear: I defend content companies' right to protect their property. However, SOPA effectively eliminates due process for website operators and creates a poisonous climate of prior restraint, where every post has to be considered infringing unless proven otherwise. An analogy would be if I, believing that a movie used some of my intellectual property, could get a court order seizing every copy of the movie from every theater playing it, or from every store and service distributing it, without giving notice to the film's distributor. By the time the studio answered the charges and got the movie back into theaters and stores, the financial damage would be incalculable.

SOPA would be fair if it required the Justice Department and content owners to give notice to the website operator before any action was taken. It would be fair if it allowed website operators to remedy the infringement, if it exists, without court action. It would be fair if it allowed website operators to defend themselves in open court before they lost their income, domain name and audience. As written, SOPA tilts the playing field decisively in favor of the content providers, most of which already have a massive advantage in legal and financial resources over website operators.

LCD prices were fixed...did you notice?

According to CNBC, the U.S. Justice Department just announced a $585 million dollar settlement of a price-fixing case against LG Electronics, Sharp and Chunghwa Picture Tubes. By far the biggest portion of the fine, $400 million, will be paid by LG. Price-fixing is illegal, of course, but the price of LCD displays has been on a downward spiral for years. I haven't heard anyone complain that LCDs are too expensive recently; if anything, the problem has been whether the prices would stay high enough to keep some of the manufacturers in business.

I can't imagine that resolving this collusion is going to make LCD prices drop any faster than they've already been going down, but it will put a half-billion dollars into the U.S. Treasury. More bailouts, perhaps?