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Sherman Anti Trust Law and Apple

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What is the Sherman Anti Trust Law?

US history books tell that Senator John Sherman, an Ohio Republican, was the main author of the Sherman Anti Trust Act of 1890. Originally, Robber Barons of oil, steel, banking and railroads created “trusts.” These trusts were similar to today’s “cartels” where wealthy principals use hostile buyouts of companies to form “trusts.”

The Sherman Anti Trust Act’s chief aim was to destroy monopolies by outlawing every business contract or combination, or conspiracy in “restraint of trade.” The Sherman Anti Trust Act was supposed to expose the evils of big business and to control big business in the public interest. In 1914, The Federal Trade Commission Act created a five-man Federal Trade Commission whose primary duties were to prevent unfair methods of competition in trade and business that included:

  • Miss branding and adulterating goods
  • False and misleading advertising
  • Spying and bribery to secure trade secrets
  • Closely imitating competitors’ products

Court Decides Apple is in Violation of Sherman Anti Trust Law

The circumstances surrounding court decision that Apple is in violation of Sherman Anti Trust Law are based on the Supreme Court case, the United States of America v. Apple Inc., et al., 12 Civ. 2862 (DLC). The court upheld the violation that Apple and five book publishing companies had conspired to increase the prices on e-books. The lawsuit was filed April 2012. The five co-conspirator publishers with Apple were: Harper Collins Publishers, Penguin Group, Inc. Simon & Schuster, Inc. Hachette Book Group, Inc. and Macmillan Publishers.

According to US Court records, these publishers sold these books from $9.99 to $14.99 as recommended in a meeting with the five publishers and Eddy Cue, Sr. VP of Apple’s Internet Software and Services for which Apple would receive a 30% commission. When Amazon.com discovered this Apple agreement with these publishers, it tried to discourage authors from selling their books directly to online buyers. Amazon later sent another letter to the US Federal Trade Commission regarding the agreements between Apple and the five publishers.

As the case proceeded, the court determined that the Sherman Anti Trust Act had been violated as a result of Apple creating an agreement that created unfair competition due to publishers withholding books from Amazon and fixing the prices to appear equal to that of the prices Amazon was selling their e-books.

The entire premise of the Apple and five publishers’ agreement was based on a mutual adoption of an agency “model.” Amazon hadn’t adopted the agency modeling allowing the publishers to withhold e-books from sale on Amazon. This is where the crux of the violation of the Sherman Anti Trust Act lies. By disallowing Amazon to sell the publishers’ e-books, this created unfair methods of competition in trade and business for related e-book sellers.

The Verdict by the Court

The court uncovered considerable evidence that clearly showed that Apple and five publishers had, as a result of their meeting with Eddy Cue, joined together in “a horizontal price-fixing conspiracy.”

Evidence also showed that “Apple violated Section 1 of the Sherman Act by conspiring with the Publishers to eliminate retail price competition and raise the price of e-books.” The court concluded through evidence that “Apple was a knowing and active member of the conspiracy, proving by the Plaintiff, “a per se violation of the Sherman Act.”

President Obama’s Overtime Pay Proposal: The Ups and Downs

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For more and more American workers, putting in work weeks longer than 40 hours is becoming the norm. However, working more than 40 hours per week has not necessarily meant getting paid for more than 40 hours per week. Yet with President Obama’s recent proposal to change the rules concerning overtime pay, many more people may find themselves with bigger paychecks as a result of their extra hours.

What the Law Will Do

In essence, the overtime pay proposal will make workers who earn less than $50,440 annually eligible for overtime pay. Under the current rules, the salary threshold is $23,660, which means millions of workers would be eligible for extra pay. According to the Labor Department, the change could give back to workers more than $1.3 billion per year. However, before everyone starts to assume they will be receiving bigger paychecks, there are many factors that must be taken into consideration.

How the Law Will Affect Businesses

Needless to say, most businesses are not happy at the proposed rules changes. By making more employees eligible for overtime pay, employers will then be faced with a decision. They can either pay their employees the extra money, or possibly reduce hours or lay off employees in an effort to keep their costs down. In addition, businesses can reduce an employee’s rate of pay in order to keep them from earning any more in salary, even if they are working more than 40 hours per week. While this may sound as if it’s illegal, the fact is employers cannot be told to pay employees any certain amount of money. So long as they are following state and federal laws by paying at least minimum wage, they are free to do as they choose.

Upsides

For employees, there are many potential upsides to this proposal. For example, lower-paid managers who had previously been classified as “exempt” would now be considered “non-exempt,” meaning any hours they work over 40 would be subject to overtime pay. Some employees may also get a raise, since their employers may decide it is cheaper to do this than pay them for overtime. And for those who may be looking for part-time jobs, the overtime pay proposal could work in their favor as well. If employers choose to stop letting employees work overtime, they may instead hire part-time workers to make up the difference, which could inadvertently lead to job growth.

Downsides

As with any type of proposal, there is always a downside for someone, and this proposal has many potential downsides for employees. In addition to hours being reduced, employers could also decide to lower a person’s base rate of pay to make sure they don’t make any more money despite still working more than 40 hours. Along with a possible reduction in pay, benefits packages could be greatly altered. Workers who find themselves reclassified as non-exempt employees may find it harder to accrue vacation or leave time, have fewer health benefits and no longer be eligible for profit-sharing or other bonus programs.

So as lawmakers begin the process of discussing the overtime pay proposal, both employees and employers will find themselves very interested in the results. No matter what the ultimate ruling may be, both sides are sure to feel both positive and negative effects.

Patent Trolls

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What is a Patent Troll?

The most basic definition of a patent troll is an individual or company that obtains patents in bad faith and then proceeds to misuse them to assist with business strategy. Often, they gain their patents through purchasing them; the most common sellers are companies facing bankruptcy. They will then use the patents they’ve obtained to launch infringement lawsuits against companies in order to gain a profit. Patent trolls also commonly lay on their patents in hopes of halting the productivity of other establishments.

History of the Term

Although not definite, other common terms for patent trolls are patent-holding companies (PHCs), patent assertion entities (PAEs), or non-practicing entities (NPEs). The term “patent troll” itself gained notoriety in the early 1990s when a video depicting a troll rushing into offices and swiping patents from their original owners was released to companies. The goal of the film was to alert people to the growing presence of unethical litigants in the business world, and how it may harm them.

The Effect of Patent Trolls on Business

Patent trolls are a hot topic of debate, but their effect on companies and the overall economy of the United States is no mystery. Not only are they a plague to large corporations, but they have played a big part in discouraging start-up businesses. People grow fearful of the infringement lawsuits perpetrated by trolls, and for good reason. In 2011 alone, they cost U.S companies over $27 billion in cost. Not only that, but a study out of MIT’s Sloan School of Business indicated that investment in startups and otherwise smaller establishments would have been $21.772 billion dollars higher if it had not been for the frequency of patent trolls’ litigation.

Laws Regarding Patent Trolls

There has been a variety of legislation, both proposed and passed, with goals of limiting the power of these companies. A notable example is the Innovation Act of 2013, which would have made it more difficult for non-practicing entities to file frivolous or vague lawsuits. It passed in the House, but was put on indefinite hold in the Senate in 2014 and left to collect dust.

New Horizons

A version of a bill known as the Patent Act has recently been approved by the Senate Judiciary Committee. Although it has the same goal as the Innovation Act, its proposals are a little different. First, it raises the requirements necessary to file a legitimate patent lawsuit. Plaintiffs must clearly indicate which of their patents are being infringed upon and explain why, among other things. Not only that, but it lays out conditions stating that the loser in an infringement suit must pay for the winner’s legal fees. This will weed out the patent trolls who like to file lawsuits despite knowing they will lose in court. Furthermore, it sets limits to the amount of “discovery” that occurs during lawsuits. Discovery is the amount of work that either side involved in a lawsuit must do to produce evidence in their favor. Startups and smaller businesses must often settle during infringement lawsuits because they cannot afford to produce favorable evidence. If passed, this legislation will hopefully put an end to a lot of unsavory patent abuse and improve economical conditions.

What is a Limited Liability Company?

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One of the challenges that most entrepreneurs face is choosing the most suitable business entity. The entity that one chooses has its repercussions. It determines how taxes are paid, the regulations that come along with it as well as personal liability. A limited liability company is one of these entities. Before making a decision, it is important for one to understand what is entailed in the entity.

The Definition and Categories of LLC

An LLC is a hybrid kind of a legal structure that has limited liability features and also provides operational flexibility and tax effectiveness of a partnership. Its structure majorly depends on the state that one is in. However, broadly, it is possible to choose one of the three types of LLC’s:

  • Professional LLC– It is organized with the aim of providing professional services. In most states, the individuals involved are required to have their respective licenses, such as architects, doctors or lawyers. The members are usually individuals within a similar profession. They must operate within the profession’s code of practice.
  • L3C– This is an enterprise that should not be aimed at maximizing income, but rather for performing socially beneficial activities. It combines the benefits of nonprofit organizations, the market position of a social enterprise and the legal flexibility of a traditional LLC.
  • Series LLC– It allows a single LLC to separate its assets into separate series. This is advantageous in that in case the lender forecloses on one series, the others are not affected.

Advantages of LLC

Fewer Compliance Requirements– whereas corporations are required to have annual reports, regular meetings with shareholders and the board of directors as well as have written corporate minutes, LLCs do not have to hold frequent meeting. This largely reduces the paperwork that ought to be done.

  • Tax Flexibility– The members do not experience double taxation. The IRS does not regard an LLC as a separate entity. Thus, it is not taxed directly. Instead, the members decide on how they will be taxed. The can choose to be partners, single members, or as corporations.
  • Limitless Members– There are no restrictions on the number of members required. Thus, the LLC can have many or as few members as desired. However, the IRS recognizes LLCs, which have at least two members.
  • Protected Assets– They provide limited liability to the members. Therefore, the members are not regarded to be personally responsible for the business debts. This means that their creditors cannot pursue their personal assets.

 

Disadvantages of LLC

  • Transferring Ownership– It is quite difficult to transfer ownership. The owners must first approve the addition of new members or altering of the existing member percentage.
  • Additional Taxes– In some states such as New York and California, these companies are required to pay capital values tax or franchise tax.
  • Raising Capital– It is harder to raise money due to two reasons. One of them is that some people find it difficult to put their money in the company because of lack of a strict corporate structure. The other reason is that it cannot be easily converted into a tradable stock company.
  • Less Precedent– This form of business is a new concept. Therefore, there is not much law precedent for the limited liability companies, unlike corporations.

What Are Confidentiality Agreements?

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Definition

A confidentiality agreement, also known as a non-disclosure agreement, is a legal agreement between at least two parties that stipulates that specific confidential material that can be shared only with the agreeing parties and none outside. There are two forms of a confidentiality agreement: a unilateral agreement is a one-way share of information from one party, and the other party must keep it secret, and in a bilateral agreement both parties supply confidential information, such as during a merger.

Uses

A confidentiality agreement can be used in several different situations. A common usage is for strategic business meetings where sensitive information may be shared between companies but not be accessible to a competitor or the general public. The agreement creates a confidential partnership to guard trade secrets or proprietary information. Often when individuals are exposed to sensitive information through work, they are required to sign a confidentiality agreement as both a legal guard for the company they work for and a way to impress upon them the need for secrecy. Whether the agreement is between two companies or an individual employee and employer, a confidentiality agreement makes any potential legal issues much easier to deal with.

Pertinent Cases

One well-known confidentially agreement court case was RRK Holding Company v. Sears, Roebuck & Co, decided on May 27th, 2008. RRK had entered into a confidentiality agreement with Sears in 1997 when RRK agreed to produce a next generation spiral saw under Sears store brand, Craftsman, and sold exclusively in Sears stores. The two companies signed a confidentiality agreement that prohibited the disclosure of the prototype concept. When negotiations eventually failed and the two companies parted ways, Sears manufactured a similar product two weeks before RRK, and with a lower price. In court, Sears argues that the product designs fell within the general knowledge of the industry and was not a trade secret. A jury found that the product was innovative and that Sears had breached the confidentiality agreement, and Sears was hit with a $25 million judgement.

Consequences of Violation

For employees who breaches a confidentiality agreement with their employers, their jobs could be terminated immediately even with an employment contract, and that is just the start. An employer can sue and if successful, obtain monetary damages from the employee. In some cases, the employee can be charged with criminal activity (by the government, but instigated by the employer) for intellectual property theft or other similar crimes. Outside the law, a fired employee may have trouble finding another job in the same field if it is a specialized and close-knit industry.

That being said, sometimes a confidentiality agreement can be hard to prove in court. The suing party must prove that they suffered monetary damages and that the agreement was not overly broad in regards to what could not be revealed – and no matter how much money they potentially gain back, the once-secret information is out there and can never go back to being confidential. Any competitive advantage that those secrets once held is now gone.

What Are Antitrust Laws?

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With the current antitrust case brought by European regulators against Google moving forward, there is renewed interest among investors in learning about the laws that control anticompetitive practices. In the most general sense, antitrust laws are intended to prevent any one company or group of companies from unfairly controlling a market. In recent years, antitrust laws have also been increasingly used to correct perceived market inefficiencies. The vagueness of this regulatory mission is one of the primary sources of angst for business leaders regarding these laws, as it can be challenging to plan for future growth in an uncertain regulatory environment.

What is antitrust law?

The vagueness of antitrust laws is what makes them so tricky to understand. At a gut level, most people feel that it’s wrong to leverage one’s own position to extract disproportionate amounts of wealth from the system by discouraging competition. In practice, however, it can be hard to state clearly when a company has begun to operate in bad faith against the public good and the market.

In the late 1800s, several companies in the United States founded trusts that acted as what we would today call holding companies. These trusts owned shares from a number of corporations in order to skirt the letter of laws established in the 1600s by the English to prevent monopolies from being formed. The goal was to create the appearance of multiple corporations operating within an industry while in fact centralizing control within a single board of trustees.

From the 1880s to the 1930s, American legislators passed a series of laws aimed at breaking up these trusts, giving rise to the term “antitrust” that we use today to describe a whole host of activities that extend beyond the original model. With the emergence of American financial power in the aftermath of World War II, the American version of antitrust became the global standard. Ultimately, the European Union adopted its own version of these laws in its early decades.

In the modern view of regulators, there are three primary concerns about the power of corporations to control a market. There is market allocation, where companies carve up different territories and decide not to compete with each other. Regulators also worry about bid rigging, where companies agree not to bid contracts lower. Finally, there is price fixing, where companies agree to maintain artificially high prices for goods sold to the public.

The case against Google

On April 15, regulators from the European Union made official claims that Google is using its search engine to direct customers to its own products and services. The E.U. had previously made unsuccessful attempts to reach an agreement with Google regarding its search operations in Europe. The company believed that it had reached an agreement with the E.U. in February and that the matter was largely behind them.

Google controls about 92-percent of the market share for search queries in Europe, meeting almost any accepted standard for a monopoly. The main thrust of the complaint is that Google uses its search engine to redirect people who are looking for specific products and services to its own shopping site. Google, however, contends that it treats all search results equally and is only serving consumers search results that are considered most appropriate by its algorithm to their queries.

4 Things to Consider When Deciding to Start a Business

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After losing a job (or even quitting a job), the thought of how fulfilling and satisfying owning and running your own business would be tends to cross your mind. While taking on self-employment can be the most rewarding decision of your life, it can also be a costly one. Here are some questions to consider before you decide to forego applying for new jobs in exchange for starting your own business.

  1. Do you have passion and motivation?
    • Starting your own business is going to have several ups-and-downs, if you do not have the passion or motivation to roll with the punches, then you will sink with your business. Having passion means that this business may have been on your mind for several years now. Your idea should not only be something that you believe in, but something that you think others will want to be a part of. Once you recognize your own vision for the future of your business, you have to take action. Your motivation will give you the strength to overcome obstacles because as a new business owner, you are the one responsible for its success or failure.
  2. Do you have a business plan?
    • All the passion in the world means nothing if you do not have the right business model, plan, and skills to get the job done. Do the research and master your understanding of the field that you want to enter. Many models have been tested and proven, but now you have to develop your own business plan that will be able to standout and compete in the market. Take classes in business management or teach yourself how to read and understand financial reports, best practices, legal requirements, and marketing. All of these skills will help you to be better prepared in business meetings, employee interviews, and any court situations that may arise (lawsuits or patent-filing).
  3. Do you have financial resources?
    • Having the right financial backing is key to getting a start-up off the ground. You may already have some savings for the venture or a great credit score/history, but money goes fast. It is hard to find people that will recognize your vision and be willing to work for free, so you be will have to give your employees their paychecks, pay for all of your resources, and probably start paying rent or developing a store location. If you think your family or friends are willing to contribute, don’t be afraid to ask. Some of them might even want to form a partnership. If you do form a partnership, be specific on the terms and thoroughly explain the role you want to have and the role you want them to have.
  4. Do you have an exit strategy?
    • Whether your business becomes a huge success or it doesn’t quite reach its potential, you are going to want to have an exit strategy. An exit strategy will help you to better understand your goals and aspirations, which in turn will help you to make important decisions. For example, if you want to keep it a family business and exit on your own one day, you will have to choose and train your protege. If you plan to sell if for a large profit, you have to document everything to back its history, have signed and valid contracts, and keep good relationships with customers and clients. Most importantly, if your business is not turning the profit you expected, you have to have a strategy in place that keeps a roof over your head.

What is Common Law?

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The Influence of Common Law

In the American court system, common law is also referred to as case law or precedent. It is a type of law that has been developed by using court decisions handed down by judges. This is very different than statutory law. This law is created by legislative bodies contained within a government or action from an executive branch.

History

Common law is the legal system that originated in England. It was adopted in the United States by the colonies. The phrase “common law” started being used during the 1100s. It was a legal system developed during the rule of Henry II of England. This was a time when law was based on cultural systems. Resolving disputes often involved local customs. The early English tribes all had their distinctive customs. Once the tribes came together and became organized, they needed to develop a common system of resolving disputes. At this time, it was essential a decision-maker view previous cases and how they had been decided. These legal decisions were used to establish legal traditions and guidelines. Some are still followed today.

Precedent

Common law is designed to bind future decisions to previously decided cases. Opposing parties often disagree which law applies to their case. A common law court would search past precedential decisions from similar courts for an answer. If a dispute has been previously resolved, the court is required to follow the reasoning used in the past case. The Latin term for this is asstare decisis. Should a judge determine the case they are addressing is different from all previous cases, they have the authority and obligation to create new law by making a new precedent. This decision will then become precedent and bind future court decisions.

Practice

When common law is practiced in its pure form, it becomes very complicated. One of the problems is that decisions are only binding in a specific jurisdiction. Within each jurisdiction are courts with different levels of authority. In most jurisdictions, the decisions of an appellate court are followed by lower courts in only their jurisdiction. Decisions based on the same set of case facts could provide a different result in a different jurisdiction.

Common Law Benefits

The wording of legislation is often written in very broad terms. Laws provide only the most general type of instruction on how to follow them. Common law provides a way for a court to carefully examine the specific facts of each case. The facts can be more accurately interpreted. This makes it easier to administer a law more in line with the intended result.

Politics

The court system and judges should not be influenced by politics. Common law makes it possible for a court to implement important legal reforms. These reforms may not be possible with legislators who are concerned with reelection. The courts are able to provide essential precedent without considering how it will impact of an election.

Legal Change

Common law is a way to provide legislative statutes when no legislative statute authority exists. When there is a need for adapting laws to meet a new situation, common law makes it possible. Changing or creating a new law with the legislative process takes time and will be influenced by politics. Initiating a precedent can provide an opportunity to address a legal situation so essential legislation can follow it. Common law is able to quickly address important changes in society.