5 ms·

US sues Apple and publishers over e-book prices

161 points by marklabedz 15y ago

mhaus 15y ago
Does anyone have the complaint?
- smackfu 15y ago
  http://online.wsj.com/public/resources/documents/ebooks04112012b.pdf http://online.wsj.com/public/resources/documents/ebooks04112...
  - peteri 15y ago
    Wow, that reads like a pretty good slam dunk for the govt.
    - rbarooah 15y ago
      It does look strong. I wonder what Apple is holding out for, or whether there is actually a defense.
      - fpgeek 15y ago
        Apple, like Microsoft before them, might be holding out for a change in the people who oversee the DoJ.
        rbarooah 14y ago
        If so, that seems like just as unwise strategy now as it was for Microsoft. I think it's pretty unlikely.
j_baker 15y ago
I'm curious why Google Books isn't involved one way or another in this. I suppose they may be tired of lawsuits involving publishers.
- Karunamon 15y ago
  I'm guessing due to lack of popularity and possibly inclusion in whatever collusion is going on. For most, if you think "eBooks", you think Amazon or iBooks.
  - viraptor 15y ago
    Not necessarily. If you have iWhatever you may think that. If you're running android you're thinking Amazon or Play books.
    - r00fus 15y ago
      Considering the Play Books has only been around for a few months, you sound a bit hard to believe. I'd say it's more likely the average Joe and Jane think about the Kindle and the Nook (and maybe the iPad - oh, but that's mainly for playing games + browsing) and their respective bookstores.
      - viraptor 15y ago
        Well - when you open android market, you see ebooks advertised. That's Play books. If you browse popular applications, you'll see Kindle. I'm saying this from the point of view of possibilities / easy accessibility. No, iBooks is not an option for Android users, because they have no access to it. They don't care about it unless they have an iDevice - that's all I tried to say. If you go for a Kindle device, your first option is Amazon of course. Actually a common user will probably know something about Kindle and that he can buy books on his mobile. The details about who they come from and how they work are not that important.
      - stonemetal 15y ago
        Google has been selling ebooks for about a year less than Apple (April 2010 vs Dec 2010). If Google had hit their announced release date for their ebook store it would have been with in weeks of each other. Sure Google just rebranded their store a few months ago but it has been around for much longer.
    - 15y ago
iscrewyou 15y ago
The question I have is what would be the consequence if the DOJ wins. Does Apple and others involved pay up to the government or compensate the people? What does usually happen when the government wins in a lawsuit against a private firm?
- hmottestad 15y ago
  With the antitrust cases against Microsoft by the EU I remember them getting a fine. And this fine was paid to the EU. Any companies that felt they were entitled to compensation had to sue Microsoft and point to the antitrust case.
- pagekalisedown 15y ago
  "To collect your $2.35 share of the settlement payment, please fill out this form and mail it within 10 days."
  - grecy 15y ago
    "Be sure to include a certified bank cheque for a $4.99 processing fee."
- Shivetya 15y ago
  The private firm begins to properly contribute to the fund raising efforts of selected politicians so as to have the government turn its attention to other companies who are not performing their civic duty by contributing to vibrant democracy.
- Duff 15y ago
  Usually the government gets a fine or change in behavior. Afterwards, individual claimants sue the loser, using the facts of the government case. For example, a few states have sued Intel and LCD manufacturers after an FTC ruling.
- rtrunck 15y ago
  Monetarily, the Government gets the fine. Then this money disappears into the bureaucracy and the people that were allegedly hurt receive none of it.
cletus 15y ago
I for one applaud this effort and always viewed the agency model as anticompetitive, anticonsumer and arguably outright price fixing. Ebooks have essentially zero printing and distribution costs and, from the publisher's point of view, can't be resold like paper books can. For both of these reasons they should be cheaper. On this point, Jeff Atwood actually makes sense [1]. I know the spiel about pricing having nothing to do with the cost of production, blah blah blah. I don't care. The present situation is stupid and ultimately shortsighted. Only Amazon seems to be interested in creating an ebook market rather than just gouging consumers. [1]: http://www.codinghorror.com/blog/2012/04/books-bits-vs-atoms.html http://www.codinghorror.com/blog/2012/04/books-bits-vs-atoms...
- deleted 15y ago
  [deleted]
- aiscott 15y ago
  I am at a loss to understand how the "agency" model is anti-competitive or price-fixing. I am hoping someone can just explain it rather than saying that it simply "is." The agency model is what keeps the price of apps on the app store low. Developers (agents) can charge whatever they want, but clearly that doesn't equate to automatic sales at whatever price. It is in fact a very competitive market. Nothing about the agency model, as I see it, in the example of the App Store has even a hint of being anti-competitive. How is this different for books? I just don't see it. But I am open to explanations. If anything is anti-competitive, it is selling at a loss so that nobody else can enter the market. That is what Amazon was doing. Price fixing requires collusion between the producers to all sell at the same price point. It's certainly possible this is going on with the big publishers in Apple's store, but that doesn't require Apple's participation in the collusion. It doesn't exonerate Apple either, it's orthogonal. In the wholesale model that traditional booksellers and Amazon use, it's still possible for publishers to price fix. It's possible for book sellers to price fix. It seems to me that Agency vs Wholesale doesn't really have much to do with the concept for price fixing. What am I missing?
  - gvb 15y ago
    This link makes some sense of it: http://blog.nathanbransford.com/2012/03/why-dojs-potential-lawsuit-over-agency.html http://blog.nathanbransford.com/2012/03/why-dojs-potential-l... It isn't the agency model that is the problem, it is how the Apple et al. coerced/enabled the publishers to price-fix and then allowed/enabled the publishers to impose that price fixing on Amazon. I still don't exactly understand why Apple and Google are being sued and not the publishers. [edit] It is Apple and five publishers according to the WSJ: "Three of the publishers have agreed to settle, according to court documents. Those are Hachette Book Group, Simon & Schuster and HarperCollins Publishers Inc. Under the settlement, those publishers will terminate any agreement they have with Apple regarding electronic books." http://online.wsj.com/article/SB10001424052702304444604577337573054615152.html http://online.wsj.com/article/SB1000142405270230444460457733... [/edit] Money quote: Along comes Apple and the iPad. Steve Jobs talked the publishers into the agency model - publishers set their own prices and they get 70% of the proceeds. [...] Publishers then turned around and imposed that agency deal on Amazon, which is the subject of the DOJ investigation [the agency model, not Amazon - gvb]. The end result: There really is more competition in the e-book world, but prices are higher than they likely would be if Amazon and others were able to discount as they saw fit.
rbarooah 15y ago
If they lose, it's not obvious how this would hurt Apple aside from the fine. Wouldn't they just adopt the wholesale model for books leaving the publishers high and dry? Presumably the only way Amazon was able to force the wholesale model in the first place was to threaten to stop selling paper books from those who wouldn't accept it.
- fpgeek 14y ago
  In losing, Apple is likely to wind up under significant antitrust oversight. Given some of their other business practices (like the app stores), that could be a big issue for them.
  - rbarooah 14y ago
    The app store is clearly nothing to do with any kind of monopoly, however much people would like the government to force Apple to make it what they want. However, I agree that antitrust oversight would be harmful for the Apple, and indirectly for the industry as a whole.
runeks 15y ago
Governments hand out monopolies with one hand (copyright, patents) and then sue companies for making use of these monopolies with the other hand. What a great waste of time and money!
delinka 15y ago
This whole thing is pretty complex. I'd say the crux of the issue is Apple's non-compete clause on price. You can't list your ebook cheaper on Amazon than the price with Apple. But what if you don't have control over pricing at Amazon? That's where we'd be if Amazon was still using the wholesale model. For this lawsuit, the problem is still the publishers since they insisted on the agency model with Amazon. The publishers are "price fixing," not Apple and not Amazon.
- MatthewPhillips 15y ago
  I am not a lawyer but I think the issue with Apple is that they coordinated the change. 1 publisher making demands of Amazon has no leverage, but collectively they do, and Apple is who told the publishers that they would have that support. Allegedly.
jusben1369 15y ago
I think the process is like this: - Publisher says "I want $10 for this e-book. You distributors can decide the actual 'list price'" - Amazon starts selling at $9 as losses $1 per book - to help drive Kindle sales - Publishers freak out, not about the now, but the future as Amazon has 90% market share of e-books - Enter Jobs and Apple who says "Oh here's what you do. You tell them the street price has to be $x and we'll keep 70% and you get 30%" - How do we make Amazon comply? Well, Apple insert the most favored nation clause saying that a price offered to anyone is the same price that they must Apple is selling at. - The book publishing executives also make the mistake of getting together every few months to discuss strategy and how the whole pricing thing was going (Dumb!) So Apple, getting ready to launch the iPad, saw the stress with the publishers and a way to reign in Amazon and used their business savvy to help the publishers connect the dots.
te_platt 15y ago
The important question to me is will this lawsuit do more good than harm. Having the government establish when prices are too high (price fixing, Apple in this case) or too low (unfair competition, Google maps in France) is a risky situation. Consider this quote from Milton Friedman talking about the antitrust suit against Microsoft in the 90s: "Under the circumstances, given that we do have antitrust laws, is it really in the self-interest of Silicon Valley to set the government on Microsoft? Your industry, the computer industry, moves so much more rapidly than the legal process, that by the time this suit is over, who knows what the shape of the industry will be. Never mind the fact that the human energy and the money that will be spent in hiring my fellow economists, as well as in other ways, would be much more productively employed in improving your products. It’s a waste! But beyond that, you will rue the day when you called in the government. From now on the computer industry, which has been very fortunate in that it has been relatively free of government intrusion, will experience a continuous increase in government regulation. Antitrust very quickly becomes regulation." Full article at: http://www.cato.org/pubs/policy_report/v21n2/friedman.html http://www.cato.org/pubs/policy_report/v21n2/friedman.html
- jusben1369 15y ago
  I'm not sure of your point here. Your opening sentence appears to question antitrust laws? Yet your Friedman quote seems to support antitrust laws and just argue that the Valley really shouldn't get too spun up about MSFT because by the time a conclusion is reached by the processes set in place it will likely be moot. This was a pretty cut and dried case that moved rapidly (2 years) against a group of executives who were colluding to raise prices to thwart a competitor?
  - te_platt 15y ago
    Yes, I do question the value of antitrust laws. The Friedman quote was meant to show that given the existence of antitrust laws, it is still not in your long term interest to seek to have them enforced in your industry. Arguing that the government should have power to punish your competition is also an invitation for the government to regulate you.
podperson 15y ago
Speaking as someone publishing an ebook through BN, Amazon, and Apple, there's some competition in distribution. Basically Apple and BN are competitive and Amazon isn't (which is, I guess, what you'd expect given that Amazon is dominant). Apple offers 70%, as does BN. Amazon offers 70% if you sell your book for under $10, and only in some markets, and it charges you for downloads (from your 70%). If you want to price a book over $20 you get 35% royalties.
- jusben1369 15y ago
  Fascinating. I assume this is self publishing (vs this article which is about the large publishers?) When you mention 35% royalties are you saying that Amazon gives you 70% of the street price you set to them? However, if your street price is more than $20 they drop that to 35% to you? Also, do any of the agreements require you, if you sell in other locations, that the price listed must match the price you told them? Ie - are they using a MFN clause like that listed in the article above?
  - podperson 14y ago
    AFAIK Amazon doesn't have an MFN clause. (Does Apple still w.r.t. books? I thought that's past tense.) If I am willing to sell for under $10 Amazon offers a 70% royalty (less various charges -- effectively 60%) in some regions, 35% in others, and if the price is over $10 then it's 35% (with no deductions). Oh my original post is confused -- books over __$10__ are limited to a 35% royalty (which is a huge poverty trap) In all cases I'm talking percentage of my set selling price. (Perhaps Amazon wants to discount my books and still have enough margin to pay my royalty -- that's a lot of wiggle room -- they can sell my $20 book for $10 and make just as much money off it as if I'd set the cover price at $10. From Apple, Barnes & Noble, etc. it's 70% minus some admin charge -- effectively 65% or so -- across the board. Note that Apple does cap prices for "textbooks" created with iBookauthor at $14.99. I guess in the end this doesn't matter much since we can always split books into parts, but the fact is that Amazon's business model currently involves: * paying less to writers than anyone else * evading state sales taxes by fair means and foul * being the only vendor of ebook readers that can't read DRM-free ePubs out-of-the-box
- 14y ago
crazy1van 15y ago
I fail to see the problem being solved by this lawsuit. I'm sure there's some anti-competitive laws somewhere that have been violated, but I still disagree with the philosophy behind this action. Consumers are buying ebooks and ebook readers like never before -- free individuals making a choice of their own free will to pay a certain amount of money for the product. It is also hard to see how anything could be "anti-competitive" in a market where a lone person could compete by writing a book at home and selling it on their own website with paypal. Think that's an unrealistic example? You probably also thought that about the video games industry 5 years ago with big box stores, gamestops, and steam seemingly controlling all access to the market. Despite all that, a game involving digging blocks out of the ground made millions of dollars and completely side stepped the all the dominating distributors. Don't under estimate the choices of the consumer and the power of innovative individuals. They will shake things up orders of magnitudes more than a small army of government lawyers.
- jusben1369 15y ago
  The problem is that industry executives got together to fix prices and raise them by 20 - 30%. I'm all for innovative people but struggle with the logic of "We're ok with crony capitalism because it drives innovation!" Surely free, transparent markets are better for innovation than manipulated ones?
- deleted 15y ago
  [deleted]
- brown9-2 15y ago
  Imagine how much more disruption they would be in this market if a bunch of the largest incumbents weren't illegally colluding with each other to keep prices artificially high.
warpspeed 15y ago
It's a little hard to be up in arms about this alleged price fixing. Yes, it's anti-consumer and might end up costing us a few dollars, but if the DOJ is looking to make some real change, I'd argue that this isn't the best use of their time. Let's remember that we still have too-big-to-fail banks and an associated industry that the Dallas Federal Reserve says is on the brink of putting us into another bailout situation. To make a comparison, it's like candidates arguing over birth control issues and glossing over the 3 wars and financial crisis we're in. Yes, very important, but there are some more pressing matters that are being largely ignored.
- jusben1369 15y ago
  Parallel processing? To make a comparison, just because the siding on your house is badly in need of repair doesn't mean you stop doing the dishes for two weeks until you've replaced all your siding.
  - warpspeed 15y ago
    Maybe they just need a better PR department. From my point of view, I'd like to hear a few more headlines about how they're working to avoid the next economic meltdown before I care about being charged an extra 50 cents for an ebook. To use your comparison, if there were reports of a hurricane coming I'd use every available resource to fix that siding, because the dishes won't matter if the house is blown apart.
- brown9-2 15y ago
  Allowing some injustices and illegal behavior to go on because there exists larger injustices out there doesn't seem like a good strategy for anyone hoping to see an improvement.
  - warpspeed 15y ago
    In absolute terms, I agree. However, in the real world there are limits on resources. Imagine there was a serial killer loose in your town, and instead of seeing headlines about the police's progress in catching him, the headline reads "police bust local book store for selling books on the sidewalk without a permit." You'd be asking what the progress is on the serial killer. I'm not saying the ebooks thing isn't a problem, it just seems so trivial compared to the other crushing problems our country is facing at this moment.
azernik 15y ago
For a much longer and more involved write-up, see [1] [1]: http://mediadecoder.blogs.nytimes.com/2012/04/11/justice-files-suit-against-apple-and-publishers-over-e-book-pricing/ http://mediadecoder.blogs.nytimes.com/2012/04/11/justice-fil...
rbarooah 15y ago
Isn't the agency model exactly what enables new entrants to publishing (whether publishing houses or self-publishers) to operate on a level playing field with established publishers? It seems to me to be the best thing that's happened to the book industry for decades.
- aidenn0 15y ago
  Not really; anyone could sell an ebook to amazon under the wholesale rules as well. It probably makes things easier for self-publishers in that amazon can't sell big-name titles for as cheap, which might increase demand for small name titles at lower prices, but is that a good thing?
  - rbarooah 14y ago
    I'd say it could a good thing because it facilitates price competition between actual producers, where the feedback from the market can more directly affect the quality of actual books rather than just who gets to sell them.
brown9-2 15y ago
The government complaint is actually pretty easy-to-understand and read, for anyone who wants to understand the real issues here: http://online.wsj.com/public/resources/documents/ebooks04112012.pdf http://online.wsj.com/public/resources/documents/ebooks04112... (pages 5-9)
stretchwithme 15y ago
Dopiest thing I've seen about this is the statement that Apple "considered" fixing prices. God forbid someone should think about doing something.
flocial 15y ago
To me the bigger problem is Apple's arbitrary standards regarding the App Store. They can effectively shut out what are legitimate apps for whatever agenda they want to push (anti-competitive or otherwise) and back it up with any bogus citation of their restrictive ToS. The idea of Dell or Apple able to dictate what we can or cannot install on our computers would be absurd yet we're paving the way for such a future as smartphones get smarter while such policies remain in place. At least book/content publishers have other avenues to disseminate their content.
elliotanderson 14y ago
Where does Amazon's market influence fit into this picture? A poster below offered two valid scenarios from opposite angles: 1) Prices were illegally raised by Apple and publishers colluding in an anti-competive way 2) Prices were artificially lowered by Amazon's pricing scheme, and competition was restored by returning to price levels originally set by the market It wasn't a stretch of the imagination to think that Apple would move into the ebooks market at some point, building on their success with music and apps. Does a competitor running a loss to preemptively lock out new market entrants count as anti-competitive behaviour?

161 points by marklabedz 15y ago

mhaus 15y ago

Does anyone have the complaint?

smackfu 15y ago
http://online.wsj.com/public/resources/documents/ebooks04112012b.pdf http://online.wsj.com/public/resources/documents/ebooks04112...
- peteri 15y ago
  Wow, that reads like a pretty good slam dunk for the govt.
  - rbarooah 15y ago
    It does look strong. I wonder what Apple is holding out for, or whether there is actually a defense.
    - fpgeek 15y ago
      Apple, like Microsoft before them, might be holding out for a change in the people who oversee the DoJ.
      - rbarooah 14y ago
        If so, that seems like just as unwise strategy now as it was for Microsoft. I think it's pretty unlikely.

j_baker 15y ago

I'm curious why Google Books isn't involved one way or another in this. I suppose they may be tired of lawsuits involving publishers.

Karunamon 15y ago
I'm guessing due to lack of popularity and possibly inclusion in whatever collusion is going on. For most, if you think "eBooks", you think Amazon or iBooks.
- viraptor 15y ago
  Not necessarily. If you have iWhatever you may think that. If you're running android you're thinking Amazon or Play books.
  - r00fus 15y ago
    Considering the Play Books has only been around for a few months, you sound a bit hard to believe. I'd say it's more likely the average Joe and Jane think about the Kindle and the Nook (and maybe the iPad - oh, but that's mainly for playing games + browsing) and their respective bookstores.
    - viraptor 15y ago
      Well - when you open android market, you see ebooks advertised. That's Play books. If you browse popular applications, you'll see Kindle. I'm saying this from the point of view of possibilities / easy accessibility. No, iBooks is not an option for Android users, because they have no access to it. They don't care about it unless they have an iDevice - that's all I tried to say. If you go for a Kindle device, your first option is Amazon of course. Actually a common user will probably know something about Kindle and that he can buy books on his mobile. The details about who they come from and how they work are not that important.
    - stonemetal 15y ago
      Google has been selling ebooks for about a year less than Apple (April 2010 vs Dec 2010). If Google had hit their announced release date for their ebook store it would have been with in weeks of each other. Sure Google just rebranded their store a few months ago but it has been around for much longer.
  - 15y ago

iscrewyou 15y ago

The question I have is what would be the consequence if the DOJ wins. Does Apple and others involved pay up to the government or compensate the people? What does usually happen when the government wins in a lawsuit against a private firm?

hmottestad 15y ago
With the antitrust cases against Microsoft by the EU I remember them getting a fine. And this fine was paid to the EU. Any companies that felt they were entitled to compensation had to sue Microsoft and point to the antitrust case.
pagekalisedown 15y ago
"To collect your $2.35 share of the settlement payment, please fill out this form and mail it within 10 days."
- grecy 15y ago
  "Be sure to include a certified bank cheque for a $4.99 processing fee."
Shivetya 15y ago
The private firm begins to properly contribute to the fund raising efforts of selected politicians so as to have the government turn its attention to other companies who are not performing their civic duty by contributing to vibrant democracy.
Duff 15y ago
Usually the government gets a fine or change in behavior. Afterwards, individual claimants sue the loser, using the facts of the government case. For example, a few states have sued Intel and LCD manufacturers after an FTC ruling.
rtrunck 15y ago
Monetarily, the Government gets the fine. Then this money disappears into the bureaucracy and the people that were allegedly hurt receive none of it.

cletus 15y ago

I for one applaud this effort and always viewed the agency model as anticompetitive, anticonsumer and arguably outright price fixing. Ebooks have essentially zero printing and distribution costs and, from the publisher's point of view, can't be resold like paper books can. For both of these reasons they should be cheaper. On this point, Jeff Atwood actually makes sense [1]. I know the spiel about pricing having nothing to do with the cost of production, blah blah blah. I don't care. The present situation is stupid and ultimately shortsighted. Only Amazon seems to be interested in creating an ebook market rather than just gouging consumers. [1]: http://www.codinghorror.com/blog/2012/04/books-bits-vs-atoms.html http://www.codinghorror.com/blog/2012/04/books-bits-vs-atoms...

deleted 15y ago
[deleted]
aiscott 15y ago
I am at a loss to understand how the "agency" model is anti-competitive or price-fixing. I am hoping someone can just explain it rather than saying that it simply "is." The agency model is what keeps the price of apps on the app store low. Developers (agents) can charge whatever they want, but clearly that doesn't equate to automatic sales at whatever price. It is in fact a very competitive market. Nothing about the agency model, as I see it, in the example of the App Store has even a hint of being anti-competitive. How is this different for books? I just don't see it. But I am open to explanations. If anything is anti-competitive, it is selling at a loss so that nobody else can enter the market. That is what Amazon was doing. Price fixing requires collusion between the producers to all sell at the same price point. It's certainly possible this is going on with the big publishers in Apple's store, but that doesn't require Apple's participation in the collusion. It doesn't exonerate Apple either, it's orthogonal. In the wholesale model that traditional booksellers and Amazon use, it's still possible for publishers to price fix. It's possible for book sellers to price fix. It seems to me that Agency vs Wholesale doesn't really have much to do with the concept for price fixing. What am I missing?
- gvb 15y ago
  This link makes some sense of it: http://blog.nathanbransford.com/2012/03/why-dojs-potential-lawsuit-over-agency.html http://blog.nathanbransford.com/2012/03/why-dojs-potential-l... It isn't the agency model that is the problem, it is how the Apple et al. coerced/enabled the publishers to price-fix and then allowed/enabled the publishers to impose that price fixing on Amazon. I still don't exactly understand why Apple and Google are being sued and not the publishers. [edit] It is Apple and five publishers according to the WSJ: "Three of the publishers have agreed to settle, according to court documents. Those are Hachette Book Group, Simon & Schuster and HarperCollins Publishers Inc. Under the settlement, those publishers will terminate any agreement they have with Apple regarding electronic books." http://online.wsj.com/article/SB10001424052702304444604577337573054615152.html http://online.wsj.com/article/SB1000142405270230444460457733... [/edit] Money quote: Along comes Apple and the iPad. Steve Jobs talked the publishers into the agency model - publishers set their own prices and they get 70% of the proceeds. [...] Publishers then turned around and imposed that agency deal on Amazon, which is the subject of the DOJ investigation [the agency model, not Amazon - gvb]. The end result: There really is more competition in the e-book world, but prices are higher than they likely would be if Amazon and others were able to discount as they saw fit.

rbarooah 15y ago

If they lose, it's not obvious how this would hurt Apple aside from the fine. Wouldn't they just adopt the wholesale model for books leaving the publishers high and dry? Presumably the only way Amazon was able to force the wholesale model in the first place was to threaten to stop selling paper books from those who wouldn't accept it.

fpgeek 14y ago
In losing, Apple is likely to wind up under significant antitrust oversight. Given some of their other business practices (like the app stores), that could be a big issue for them.
- rbarooah 14y ago
  The app store is clearly nothing to do with any kind of monopoly, however much people would like the government to force Apple to make it what they want. However, I agree that antitrust oversight would be harmful for the Apple, and indirectly for the industry as a whole.

runeks 15y ago

Governments hand out monopolies with one hand (copyright, patents) and then sue companies for making use of these monopolies with the other hand. What a great waste of time and money!

delinka 15y ago

This whole thing is pretty complex. I'd say the crux of the issue is Apple's non-compete clause on price. You can't list your ebook cheaper on Amazon than the price with Apple. But what if you don't have control over pricing at Amazon? That's where we'd be if Amazon was still using the wholesale model. For this lawsuit, the problem is still the publishers since they insisted on the agency model with Amazon. The publishers are "price fixing," not Apple and not Amazon.

MatthewPhillips 15y ago
I am not a lawyer but I think the issue with Apple is that they coordinated the change. 1 publisher making demands of Amazon has no leverage, but collectively they do, and Apple is who told the publishers that they would have that support. Allegedly.

jusben1369 15y ago

I think the process is like this: - Publisher says "I want $10 for this e-book. You distributors can decide the actual 'list price'" - Amazon starts selling at $9 as losses $1 per book - to help drive Kindle sales - Publishers freak out, not about the now, but the future as Amazon has 90% market share of e-books - Enter Jobs and Apple who says "Oh here's what you do. You tell them the street price has to be $x and we'll keep 70% and you get 30%" - How do we make Amazon comply? Well, Apple insert the most favored nation clause saying that a price offered to anyone is the same price that they must Apple is selling at. - The book publishing executives also make the mistake of getting together every few months to discuss strategy and how the whole pricing thing was going (Dumb!) So Apple, getting ready to launch the iPad, saw the stress with the publishers and a way to reign in Amazon and used their business savvy to help the publishers connect the dots.

te_platt 15y ago

The important question to me is will this lawsuit do more good than harm. Having the government establish when prices are too high (price fixing, Apple in this case) or too low (unfair competition, Google maps in France) is a risky situation. Consider this quote from Milton Friedman talking about the antitrust suit against Microsoft in the 90s: "Under the circumstances, given that we do have antitrust laws, is it really in the self-interest of Silicon Valley to set the government on Microsoft? Your industry, the computer industry, moves so much more rapidly than the legal process, that by the time this suit is over, who knows what the shape of the industry will be. Never mind the fact that the human energy and the money that will be spent in hiring my fellow economists, as well as in other ways, would be much more productively employed in improving your products. It’s a waste! But beyond that, you will rue the day when you called in the government. From now on the computer industry, which has been very fortunate in that it has been relatively free of government intrusion, will experience a continuous increase in government regulation. Antitrust very quickly becomes regulation." Full article at: http://www.cato.org/pubs/policy_report/v21n2/friedman.html http://www.cato.org/pubs/policy_report/v21n2/friedman.html

jusben1369 15y ago
I'm not sure of your point here. Your opening sentence appears to question antitrust laws? Yet your Friedman quote seems to support antitrust laws and just argue that the Valley really shouldn't get too spun up about MSFT because by the time a conclusion is reached by the processes set in place it will likely be moot. This was a pretty cut and dried case that moved rapidly (2 years) against a group of executives who were colluding to raise prices to thwart a competitor?
- te_platt 15y ago
  Yes, I do question the value of antitrust laws. The Friedman quote was meant to show that given the existence of antitrust laws, it is still not in your long term interest to seek to have them enforced in your industry. Arguing that the government should have power to punish your competition is also an invitation for the government to regulate you.

podperson 15y ago

Speaking as someone publishing an ebook through BN, Amazon, and Apple, there's some competition in distribution. Basically Apple and BN are competitive and Amazon isn't (which is, I guess, what you'd expect given that Amazon is dominant). Apple offers 70%, as does BN. Amazon offers 70% if you sell your book for under $10, and only in some markets, and it charges you for downloads (from your 70%). If you want to price a book over $20 you get 35% royalties.

jusben1369 15y ago
Fascinating. I assume this is self publishing (vs this article which is about the large publishers?) When you mention 35% royalties are you saying that Amazon gives you 70% of the street price you set to them? However, if your street price is more than $20 they drop that to 35% to you? Also, do any of the agreements require you, if you sell in other locations, that the price listed must match the price you told them? Ie - are they using a MFN clause like that listed in the article above?
- podperson 14y ago
  AFAIK Amazon doesn't have an MFN clause. (Does Apple still w.r.t. books? I thought that's past tense.) If I am willing to sell for under $10 Amazon offers a 70% royalty (less various charges -- effectively 60%) in some regions, 35% in others, and if the price is over $10 then it's 35% (with no deductions). Oh my original post is confused -- books over __$10__ are limited to a 35% royalty (which is a huge poverty trap) In all cases I'm talking percentage of my set selling price. (Perhaps Amazon wants to discount my books and still have enough margin to pay my royalty -- that's a lot of wiggle room -- they can sell my $20 book for $10 and make just as much money off it as if I'd set the cover price at $10. From Apple, Barnes & Noble, etc. it's 70% minus some admin charge -- effectively 65% or so -- across the board. Note that Apple does cap prices for "textbooks" created with iBookauthor at $14.99. I guess in the end this doesn't matter much since we can always split books into parts, but the fact is that Amazon's business model currently involves: * paying less to writers than anyone else * evading state sales taxes by fair means and foul * being the only vendor of ebook readers that can't read DRM-free ePubs out-of-the-box
14y ago

crazy1van 15y ago

I fail to see the problem being solved by this lawsuit. I'm sure there's some anti-competitive laws somewhere that have been violated, but I still disagree with the philosophy behind this action. Consumers are buying ebooks and ebook readers like never before -- free individuals making a choice of their own free will to pay a certain amount of money for the product. It is also hard to see how anything could be "anti-competitive" in a market where a lone person could compete by writing a book at home and selling it on their own website with paypal. Think that's an unrealistic example? You probably also thought that about the video games industry 5 years ago with big box stores, gamestops, and steam seemingly controlling all access to the market. Despite all that, a game involving digging blocks out of the ground made millions of dollars and completely side stepped the all the dominating distributors. Don't under estimate the choices of the consumer and the power of innovative individuals. They will shake things up orders of magnitudes more than a small army of government lawyers.

jusben1369 15y ago
The problem is that industry executives got together to fix prices and raise them by 20 - 30%. I'm all for innovative people but struggle with the logic of "We're ok with crony capitalism because it drives innovation!" Surely free, transparent markets are better for innovation than manipulated ones?
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brown9-2 15y ago
Imagine how much more disruption they would be in this market if a bunch of the largest incumbents weren't illegally colluding with each other to keep prices artificially high.

warpspeed 15y ago

It's a little hard to be up in arms about this alleged price fixing. Yes, it's anti-consumer and might end up costing us a few dollars, but if the DOJ is looking to make some real change, I'd argue that this isn't the best use of their time. Let's remember that we still have too-big-to-fail banks and an associated industry that the Dallas Federal Reserve says is on the brink of putting us into another bailout situation. To make a comparison, it's like candidates arguing over birth control issues and glossing over the 3 wars and financial crisis we're in. Yes, very important, but there are some more pressing matters that are being largely ignored.

jusben1369 15y ago
Parallel processing? To make a comparison, just because the siding on your house is badly in need of repair doesn't mean you stop doing the dishes for two weeks until you've replaced all your siding.
- warpspeed 15y ago
  Maybe they just need a better PR department. From my point of view, I'd like to hear a few more headlines about how they're working to avoid the next economic meltdown before I care about being charged an extra 50 cents for an ebook. To use your comparison, if there were reports of a hurricane coming I'd use every available resource to fix that siding, because the dishes won't matter if the house is blown apart.
brown9-2 15y ago
Allowing some injustices and illegal behavior to go on because there exists larger injustices out there doesn't seem like a good strategy for anyone hoping to see an improvement.
- warpspeed 15y ago
  In absolute terms, I agree. However, in the real world there are limits on resources. Imagine there was a serial killer loose in your town, and instead of seeing headlines about the police's progress in catching him, the headline reads "police bust local book store for selling books on the sidewalk without a permit." You'd be asking what the progress is on the serial killer. I'm not saying the ebooks thing isn't a problem, it just seems so trivial compared to the other crushing problems our country is facing at this moment.

azernik 15y ago

For a much longer and more involved write-up, see [1] [1]: http://mediadecoder.blogs.nytimes.com/2012/04/11/justice-files-suit-against-apple-and-publishers-over-e-book-pricing/ http://mediadecoder.blogs.nytimes.com/2012/04/11/justice-fil...

rbarooah 15y ago

Isn't the agency model exactly what enables new entrants to publishing (whether publishing houses or self-publishers) to operate on a level playing field with established publishers? It seems to me to be the best thing that's happened to the book industry for decades.

aidenn0 15y ago
Not really; anyone could sell an ebook to amazon under the wholesale rules as well. It probably makes things easier for self-publishers in that amazon can't sell big-name titles for as cheap, which might increase demand for small name titles at lower prices, but is that a good thing?
- rbarooah 14y ago
  I'd say it could a good thing because it facilitates price competition between actual producers, where the feedback from the market can more directly affect the quality of actual books rather than just who gets to sell them.

brown9-2 15y ago

The government complaint is actually pretty easy-to-understand and read, for anyone who wants to understand the real issues here: http://online.wsj.com/public/resources/documents/ebooks04112012.pdf http://online.wsj.com/public/resources/documents/ebooks04112... (pages 5-9)

stretchwithme 15y ago

Dopiest thing I've seen about this is the statement that Apple "considered" fixing prices. God forbid someone should think about doing something.

flocial 15y ago

To me the bigger problem is Apple's arbitrary standards regarding the App Store. They can effectively shut out what are legitimate apps for whatever agenda they want to push (anti-competitive or otherwise) and back it up with any bogus citation of their restrictive ToS. The idea of Dell or Apple able to dictate what we can or cannot install on our computers would be absurd yet we're paving the way for such a future as smartphones get smarter while such policies remain in place. At least book/content publishers have other avenues to disseminate their content.

elliotanderson 14y ago

Where does Amazon's market influence fit into this picture? A poster below offered two valid scenarios from opposite angles: 1) Prices were illegally raised by Apple and publishers colluding in an anti-competive way 2) Prices were artificially lowered by Amazon's pricing scheme, and competition was restored by returning to price levels originally set by the market It wasn't a stretch of the imagination to think that Apple would move into the ebooks market at some point, building on their success with music and apps. Does a competitor running a loss to preemptively lock out new market entrants count as anti-competitive behaviour?