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> Apple guilty for the high-tech employment agreements, but not for working to make the same terms for their e-book store with all the publishers. Sorry, you h

by Pyxl101 11y ago

> Apple guilty for the high-tech employment agreements, but not for working to make the same terms for their e-book store with all the publishers. Sorry, you have it all wrong. This isn't about Apple giving the same deal to all publishers. This was about Apple convincing all publishers to give all other retailers the same deal as Apple -- and all at the same time, as a single group across essentially the entire industry, thus resulting in price fixing and price increases. Imagine the absurdity if the manufacturer of a car (motor vehicle) could dictate the terms at which their cars were sold by all retailers. Essentially, the manufacturer exclusively determines the price that all auto sellers must charge. Does that analogy make better sense? No car dealership can offer a discount because the manufacturer has exclusive control. Then imagine that it's not just one auto manufacturer: it's all of them, all at once. That's what happened with ebooks - virtually the entire industry colluded. It's not just working to get the same terms for their publishers, it was also getting those publishers to, in concert all with each other, force all of their retailers to do the same thing. Only with the collusion of a cartel could they have achieved this, and the result was illegal price-fixing that harmed consumers. Competitors are not allowed to collude, and not allowed to collude to raise prices. Competitors have no legitimate business to meet and discuss with each other and make agreements about what price they'll all offer together, as that's an illegal cartel, yet that's what happened as a result of the conspiracy that Apple led. > The publishers did raise prices, but they just wanted for the possibility to do so anyway Publishers always had control over the price at which they sold their books to retailers. They just did not have control over the price at which those retailers subsequently resold them to consumers. And why should they? When books were historically sold at wholesale price for 50% of their retail price, why should a publisher stop a retailer from competing on price, by offering (say) a 190% markup rather than 200%, if the retailer has a more efficient operation? Once the book is "handed off" from the publishers to the retailer, what legitimate reason is for the publisher to control that transitive resale -- and why should the publisher have control over all of those resales among all retailers? That is the cartel that Apple brought about. Imagine if the manufacturer of a toothbrush had the power to force all stores that sell it to have the same price. Why should they have that power? Why can't stores offer a discount if they have a more efficient supply chain, or more insightful pricing strategy? And then suddenly all toothbrush manufacturers in the entire industry did the same thing at the same time? I hope this paints a better picture of what happened with Apple and ebooks, and the reason why they were convicted of illegal collusion to fix prices. The true reality of the situation, in my opinion, is that with the advent of the Internet, the incremental value of publishing has begun to drop. Authors are increasingly required to deliver fully complete and ready-to-publish manuscripts, rather than handing off a draft to the publisher for editing and typesetting. Furthermore, individual authors are better able to market themselves and generate interest online than in the older days when advertising had a higher cost, and required printing a large order of books up front and buying retail space. It's becoming cheaper and cheaper for authors to offer books online themselves. Consider what's happened with books like The Martian: it was (as I understand it) self-published as an ebook, and then gained a following, and eventually Hollywood bought the film rights. The value added by a publisher diminishes if they're not printing and distributing your physical book - they become a publicist. So, publishers saw the reality for what it was, and saw that their industry was all trending toward undifferentiated "perfect competition". They reacted to the situation by cooking up a collusion across the industry to conspire to keep prices artificially higher than they otherwise would have been, using the combined market power of their collusion to bring it about.

teh_klev 11y ago
Thank you for persisting with this. It's a shame this post isn't more visible.
acqq 11y ago
> Imagine the absurdity if the manufacturer of a car (motor vehicle) could dictate the terms at which their cars were sold by all retailers. The problem is, here it is claimed that the term in Apple's contracts that guaranteed Apple the lowest retail price was the "dictate" as you say, here's from the summary of the decision to which other pointed here: ""the use of a unique "most favored nation" (MFN) clause. Under the DOJ's reading of the Seventh Circuit's Toys "R" Us decision, the DOJ argued that this was a per se violation of Section 1 of the Sherman Act." That reading is certainly disputable, especially knowing the context: the MFN gave Apple right to sell at the lowest price on the market, and the claim was also that MFN was a pressure because Apple demanded 30% from the retail price and that was somehow bad. But that's the same percentage they took in the apps store before. I understand it was decided as it was decided, but I still claim it didn't have to be so.
- Pyxl101 11y ago
  The point is not about what percentage they take. The point was their active involvement to coordinate all major participants in an entire industry into a cartel that conspired from the beginning to raise price, as the purpose. The participants in this illegal cartel all didn't "like" the market price, and so agreed on a collective mutual action that they believed would (and did) allow them to raise prices. The thing is, conspiring with a competitor to raise prices is illegal.
  - acqq 11y ago
    But how was Apple supposed to negotiate their store deals with the publishers? Wasn't it an optimal goal offering all the publishers the deal they'd accept? Such a deal can't be made without discussing the prices. How would you make the store deals in Apple's shoes, given the goal to reach the uniform deal with the publishers, in order to avoid some of them being given "unfavorable" deal? And given that app store worked with 30%? And that publishers actually favored agency model? What would you do differently? If the answer is "not making MFN" then it's what apparently the court decided. But MFN actually guaranteed Apple lowest prices, not the highest. Would you really even think "that Toys R US case is relevant here"?

by Pyxl101 11y ago

teh_klev 11y ago

Thank you for persisting with this. It's a shame this post isn't more visible.

acqq 11y ago

> Imagine the absurdity if the manufacturer of a car (motor vehicle) could dictate the terms at which their cars were sold by all retailers. The problem is, here it is claimed that the term in Apple's contracts that guaranteed Apple the lowest retail price was the "dictate" as you say, here's from the summary of the decision to which other pointed here: ""the use of a unique "most favored nation" (MFN) clause. Under the DOJ's reading of the Seventh Circuit's Toys "R" Us decision, the DOJ argued that this was a per se violation of Section 1 of the Sherman Act." That reading is certainly disputable, especially knowing the context: the MFN gave Apple right to sell at the lowest price on the market, and the claim was also that MFN was a pressure because Apple demanded 30% from the retail price and that was somehow bad. But that's the same percentage they took in the apps store before. I understand it was decided as it was decided, but I still claim it didn't have to be so.

Pyxl101 11y ago
The point is not about what percentage they take. The point was their active involvement to coordinate all major participants in an entire industry into a cartel that conspired from the beginning to raise price, as the purpose. The participants in this illegal cartel all didn't "like" the market price, and so agreed on a collective mutual action that they believed would (and did) allow them to raise prices. The thing is, conspiring with a competitor to raise prices is illegal.
- acqq 11y ago
  But how was Apple supposed to negotiate their store deals with the publishers? Wasn't it an optimal goal offering all the publishers the deal they'd accept? Such a deal can't be made without discussing the prices. How would you make the store deals in Apple's shoes, given the goal to reach the uniform deal with the publishers, in order to avoid some of them being given "unfavorable" deal? And given that app store worked with 30%? And that publishers actually favored agency model? What would you do differently? If the answer is "not making MFN" then it's what apparently the court decided. But MFN actually guaranteed Apple lowest prices, not the highest. Would you really even think "that Toys R US case is relevant here"?