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Week in Review

By Chris Helsel

Apple E-Books Antitrust Settlement Approved

Late last week, a federal judge in Manhattan approved a highly unusual settlement in which Apple has agreed to pay $400 million to as many as 23 million e-book consumers, in the form of cash and e-book credits.

In 2012, the U.S. Department of Justice and 33 states brought a civil antitrust action against Apple and five leading publishers, alleging that the defendants had conspired to raise e-book prices by restraining retail price competition. The government alleged that in 2010, as the tech giant prepared to introduce the iPad, Apple CEO Steve Jobs persuaded the publishers to switch to the so-called agency model, which let publishers - rather than retailers - set e-book prices. Apple, the suit alleged, was keenly aware of the publishers' growing frustration with market leader Amazon's steeply discounted e-book prices. The company used this knowledge, as well as the contingent opportunity to sell books through Apple's new e-book retail outlet, iBookstore, as leverage to pressure the publishers into artificially inflating e-book prices across the board.

The publishers quickly settled for $166 million, which was distributed in the form of store credit to consumers who had overpaid for e-book purchases with Apple's leading e-book retail competitor, Amazon, following the universal price hike. Following trial, the court held last year that Apple was complicit in the conspiracy. In her opinion, Judge Denise L. Cote conceded that Apple had "seized the moment and brilliantly played its hand" - though in doing so, it had unlawfully conspired with the publishers, in violation of the Sherman Act.

A damages trial was set for August of this year, but in June Apple agreed to settle for $400 million (plus $50 million to the attorneys). That settlement, approved last week, is subject to change pending the outcome of Apple's appeal, which is scheduled for December 15th. If the judgment is overturned and the case returns to district court, Apple has agreed to pay $50 million to consumers and $20 million to the attorneys.


Swiss Museum Accepts Nazi-Era Art Trove, Vows to Return Any Looted Pieces to Heirs of Rightful Owners

After deliberating for six months, a Swiss museum has announced it will accept the bequest of an enormous art trove amassed by one of Hitler's art dealers. The collection, which includes masterpieces by Monet, Matisse and Renoir, was left to the Kunstmuseum Bern by Cornelius Gurlitt, the Nazi-era dealer's son, shortly before he died in May. Much of the immense collection, with an estimated valued in the hundreds of millions of dollars, was accumulated by Gurlitt's father, Hildebrand, who was commissioned by the Fuhrer to purchase pieces for a proposed museum in Linz, Austria (Hitler's hometown).

The Swiss museum declared that before it takes possession of the collection, a team of experts will analyze each work to determine whether it was improperly looted or bought from Jewish owners under duress during the Nazi era. Any improperly obtained works are to be promptly returned to the heirs of the rightful owners, at the expense of the German government. If no owner can be identified, the looted works will be put on public display in Germany, in the hopes that potential claimants will eventually come forward. In a further effort to identify potential claimants, this week the museum made ledgers kept by Hildebrand Gurlitt from 1937 to 1941 publicly available on a German government website.

Of the collection's 1,280 pieces, 240 are believed to have been obtained improperly. Mr. Gurlitt stashed another 238 works at a vacation home in Salzburg, which have yet to be scrutinized.

Christoph Schäublin, president of the museum's Board of Trustees, stressed that the decision to accept the trove was immensely difficult, given the origins of much of the collection. He said at a news conference on Monday that the museum would adhere to the 1998 Washington Conference Principles on Nazi-Confiscated Art, which govern the investigation and return of art obtained under Hitler before and during the Second World War. Schäublin vowed to work with German officials to ensure that all looted art contained within the collection is returned to its rightful owners, and described the museum's undertaking as an "exceptionally complex responsibility."

Since the end of World War II, the handling of looted art has been a highly contentious issue in Europe and around the world. It is estimated that up to 20% of Europe's great art was obtained by Hitler's agents during his time in power, and that tens of thousands of pieces are still outstanding. Observers hope that the Kunstmuseum Bern's openness in handling the Gurlitt bequest, and its willingness to work with German authorities, will set a new standard for dealing with future discoveries of Nazi-era looted art. According to Christopher A. Marinello, director of Art Recovery International, the handling of the Gurlitt trove "could be a game changer for the way cultural institutions handle this in the future."


For NJ, All Bets Are Off (Again)

For the second time in two years, a federal judge has curbed New Jersey lawmakers' attempts to legalize sports betting in the state. Judge Michael Shipp of the District Court of New Jersey issued a permanent injunction late last week, declaring that New Jersey's latest effort - the 2014 Sports Wagering Law - violated a federal statute, the Professional and Amateur Sports Protection Act of 1992 (PASPA), which prohibits state-sponsored sports betting everywhere except Nevada, Delaware, Montana and Oregon.

The issue dates back to 2011, when voters approved a ballot measure supporting a bill passed by the state legislature amending the state constitution and authorizing the legislature to enact laws to allow sports betting. Governor Chris Christie signed the bill into law in 2012. The federal government, NCAA and the four major sports leagues filed suit to block the legislation, arguing that it violated PASPA, and that legalized sports gambling would irreparably harm the leagues by damaging fans' perception of the integrity of their games. New Jersey responded that PASPA violated the 10th Amendment anti-commandeering principle by compelling state officials to enforce a federal law. The state argued that PASPA violated equal sovereignty by allowing sports wagering in some states, but not others. (It should be noted that at the time PASPA was enacted, New Jersey was offered the opportunity to legalize sports betting, but declined to do so).

Judge Shipp granted summary judgment to the leagues, finding that the New Jersey law was preempted by the federal statute, and that Congress had the power under the Commerce Clause to enact PASPA. He also rejected the anti-commandeering and equal sovereignty claims. On appeal, the Third Circuit upheld the decision, but noted that states are free to repeal sports betting laws and decide "the contours of the prohibition." The U.S. Supreme Court denied certiorari.

In response, in October 2014 New Jersey enacted new legislation, once again attempting to legalize sports wagering. State lawmakers reasoned that while PASPA banned states from licensing and regulating sports betting, nothing required them to actively prohibit it. Therefore, they concluded, a state should be free to decriminalize sports betting, so long as the government did not directly regulate it. The 2014 Sports Wagering Law partially repealed the state's existing ban on sports betting, but restricted the activity to casinos and racetracks. This, they believed, comported with the Third Circuit's language allowing states to decide "the contours of the prohibition."

Once again, the NCAA and the leagues sued in federal court to block the legislation. They argued that the appellate court's "contours" language meant only that the state could determine the proper penalties related to sports betting, and that setting parameters like limiting the wagering to only casinos amounts to regulation. The leagues did concede, however, that federal law would allow a state to lift its ban on sports betting entirely - but not to determine where and when bets could be made, or to impose age restrictions.

Judge Shipp agreed with the petitioners, and granted summary judgment. Immediately, state officials declared that they planned to appeal once again. It now appears that the outcome of this saga will be determined by the Third Circuit's clarification of what exactly it meant by saying a state can decide the contours of the prohibition.

Unsurprisingly, legislators around the country are following this case closely. To date, Virginia, West Virginia, Kansas and Georgia have already publicly supported New Jersey's efforts. Should Governor Christie prevail, expect a wave of sports betting decriminalization to follow. Stay tuned.


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This page contains a single entry from the blog posted on November 28, 2014 8:07 AM.

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