Alison Frankel

On Wednesday, Reuters confirmed what it first reported last month: Apple and four book publishers have offered to settle a European Commission investigation of price-fixing in the market for e-books. That’s particularly notable because Apple and two of those publishers – Macmillan and Viking – have refused to settle with the U.S. Justice Department’s antitrust division, which reached an agreement last April with three other publishers accused of conspiring with Apple to change the pricing model for e-books. Neither the DOJ settlement nor the proposed EC deal involve a financial penalty, so why would Apple, Viking and Macmillan agree to settle with antitrust regulators from the European Union but not their U.S. counterparts?

Two reasons: EC procedure and U.S. liability.

First, a caveat. I reached out to Macmillan’s lawyers at Sidley Austin, Penguin’s counsel at Akin, Gump, Strauss, Hauer & Feld and Apple’s lawyers at Gibson, Dunn & Crutcher, but none would comment, nor did Apple respond to a request for comment. In other words, I’m offering informed speculation rather than from-the-horse’s-mouth reporting.

That said, consider the way antitrust cases proceed at the EC, which is the trade section of the European Union. After regulators complete their investigation and conclude that defendants have engaged in anti-competitive behavior, they have the power to levy a fine before there’s any court ruling on liability. Those fines, moreover, can be huge. In 2008, the EC levied a $1.3 billion penalty against Microsoft for failing to comply with a previous EC directive to permit competitors to run programs on Windows. The following year European regulators set a new record with a $1.4 billion fine for the accused chip monopolist Intel.

Unlike in the United States, where the Justice Department’s allegations can be tested in court before there’s any presumption of liability and assessment of damages, defendants in EC proceedings can only go to court after the EC announces its penalties. According to Reuters’ account of Intel’s argument this summer to the General Court in Luxembourg, where it hopes to overturn the EC’s 2009 penalty, Intel’s lawyers said essentially what they would have said to a U.S. judge on a motion to dismiss or motion for summary judgment; indeed, Intel settled the same allegations that led to the EC fine with the Federal Trade Commission in 2010 for no monetary payment. But because this was an EC case, Intel has had to deal with the overhang of a billion-dollar penalty for the last three years. And proceedings to overturn or reduce EC antitrust fines are anything but a sure bet. This summer, Europe’s second-highest court upheld Microsoft’s 2008 penalty, though it reduced the fine slightly. The leverage that the EC enjoys simply by virtue of the process has also changed Google’s approach to negotiations with European regulators, according to a Reuters special report in June.

I’m assuming that Apple wasn’t at risk for a billion-dollar penalty in the EC’s e-books case, considering that the settlement it’s offering merely calls for Apple and the publishers to suspend most-favored-nation agreements that prevented other e-book sellers from undercutting Apple’s prices. But the company has an incentive to seem like a good corporate citizen to European antitrust regulators, who just happen to be investigating Apple’s allegations that Motorola is illegally blocking competitors from standard-essential technology in the smartphone wars.

There’s a new entry in the category of no-brainers: A holder of Barclays American Depository Receipts has brought the first of what is sure to be a string of Libor-related securities fraud class actions. The 47-page complaint, filed by Wolf Haldenstein Adler Freeman & Herz in federal court in Manhattan, asserts that Barclays and its former CEO, Bob Diamond, and outgoing chairman, Marcus Agius, lied to shareholders when they failed to disclose the bank’s manipulation of reports to the authorities who calculate the daily London interbank offered rate (or Libor), a benchmark for short-term interest rates.

Barclays told shareholders that it was a model corporate citizen even though since at least 2007 it was “participating in an illegal scheme to manipulate rates in a way that would allow defendants and other bankers to exploit the market,” the complaint asserted. On the day Barclays’ settlements with U.S. and British financial regulators were announced, the complaint said, the price of its ADRs fell 12 percent; the next day the ADRs tumbled an additional 5 percent. (If you’re wondering why the complaint was filed by ADR holders, it’s because Morrison v. National Australia Bank bars claims in the United States by common stockholders in the British-listed bank.)

Barclays obviously has far bigger problems than a securities class action, what with Libor hearings in Parliament, talk of criminal actions, and billions of dollars in potential exposure in a Libor antitrust class action that’s already under way in federal court in Manhattan, plus the recently filed antitrust class action based on Barclays’ admitted manipulation of the European interbank offered rate.

In a really smart piece last month, my Reuters pal Dan Levine wrote that Steve Jobs’ promise to kill Google’s Android operating system has not been fulfilled. Instead, wrote Levine and co-author Poornima Gupta, Apple’s patent war against Android users Motorola, Samsung, and HTC had become “a costly global war of attrition.” Both sides have won skirmishes, but no battle has been decisive. The Reuters story quoted Judge Richard Posner of the 7th Circuit Court of Appeals, who is overseeing a Motorola case in U.S. District Court in Chicago. “You’re not going to shut down the smartphone,” Posner told Apple’s lawyer. “[And] they’re not going to shut down the iPhone.”

The exact same thing could be said of Microsoft’s patent war with Google and its Android acolytes. When the smartphone patent infringement cases launched in 2009 and 2010, maybe it was feasible that one or two of the big three could kill off another of them. But since then, with Apple and Microsoft teaming up to buy Nortel patents and Google countering with its purchase of Motorola Mobility, this war has become a standoff that can only be resolved with cross-licensing deals.

That’s why antitrust arguments — as opposed to patent infringement claims — have been creeping into the spotlight over the last few months. On Tuesday, the European Union announced that it has opened antitrust investigations of Motorola’s demands for licensing fees on standard-setting patents, following complaints by both Microsoft and Apple. (Google’s Android partners, of course, have lobbed similar allegations of patent extortion at Microsoft.) The goal of such claims is to drive down the cost of licensing one another’s patents. In other words, if you can’t beat ‘em, pay as little as possible to join ‘em.

Remember the Cold War military doctrine of Mutually Assured Destruction? The idea was that if the United States and the Soviet Union both knew the enemy had enough weapons to wipe the entire country off the map, neither would actually use those weapons. Mutually Assured Destruction got the entire world through the age of fallout shelters and Barry Goldwater. So the doctrine should be powerful enough to get Google, Apple and Microsoft past Justice Department antitrust regulators.

It’s a given that Google’s $12.5 billion Motorola bid is going to be scrutinized for its antitrust implications. Google’s law firm on the deal, Cleary Gottlieb Steen & Hamilton, has conceded that point; the firm announced that David Gelfand – who previously escorted Google unscathed through antitrust reviews of its DoubleClick and AdMob acquisitions — will be antitrust counsel on the Motorola bid. The $4.5 billion acquisition of Nortel’s intellectual property by a consortium led by Microsoft and Apple is already under review by the DOJ’s antitrust division. I’m betting that each patent plays will have an easier time passing regulatory muster because of the other.

Before I get to why, there’s the issue of which agency will be investigating the Google deal. Both the Federal Trade Commission and the Justice Department have the power to conduct premerger antitrust reviews. They’ve both looked at Google acquisitions in the past: the FTC green-lighted the 2007 DoubleClick and 2010 AdMob deals; the DOJ rejected Google’s proposed advertising partnership with Yahoo in 2008 and approved, with some modifications, its deal with ITA Software in 2011. The FTC is also reportedly conducting a widespread antitrust investigation of Google’s search engine business. But I have it on good authority that the Justice Department will be handling the Motorola review, partly because DOJ has historically overseen competition in the telephone industry and is already reviewing the AT&T merger with T-Mobile and the Nortel IP sale.