DoJ Files Suit Against Apple, Ebook Publishers

forkfail writes "The Department of Justice has filed suit against Apple and a number of book publishers, including Hachette SA, HarperCollins, Macmillan, Penguin and Simon & Schuster, claiming that they worked in collusion to artificially rig prices on eBooks."

Comments

Re:Having solved all other problems

[oodaloop]

I think the DoJ may be able to do more than one thing at a time.

I hope they get raked over the coals for this

[Golgafrinchan]

This was such a blatant price-fixing scheme among the publishers that it's surprising to me that it took the DOJ this long to take action. That said, based on what I've read I'm not completely convinced of the extent to which Apple was involved in this. Yes, they agreed to the new agency pricing model, but it seems to me that they could try to argue, "Hey -- the publishers came to us with this idea. We didn't know they wanted to go that route to reduce competition and put pressure on Amazon! Honest!" But if there's a paper trail mentioning Amazon, I think Apple is toast.

And regardless, I hope the publishers get crushed on this one. While I won't go so far as to suggest that they don't serve any useful purpose anymore (as some people do), they _are_ dinosaurs and need to be dragged into 21st century competition. This should do it.

Re:I hope they get raked over the coals for this

[Richard_at_work]

One of the things that might bury Apple is the "you cant have your ebook priced cheaper anywhere else" requirement - with the price including Apples cut.

Re:I hope they get raked over the coals for this

[k4hg]

Apple will not be toast.

Worst case they pay a small (for them) fine without admitting wrongdoing, and promise never to do it again. What happens then?

Well, Apple can sell their books at cost or below because their profit comes from hardware. The iTunes store is a tiny blip in Apple's revenue, and ebooks a small part of that tiny bit. The publishers can raise the price Apple, Amazon, and others pay for ebooks, and will to preserve their income. Amazon gives away their hardware at cost, so somewhere they need to start making profit on media. It is widely believed that Amazon is selling many books below publisher's cost in order to drive others out of the business. Once it is clear that Apple can (and will because they have lost the agency model) match Amazon's prices and is in the ebook business to stay, Amazon won't be so anxious to lose money. Then prices will come back to where they have been, maybe even higher.

Apple still breaks records every quarter, Amazon chugs along on its slow growth curve, the publishers keep making some money, and 99% of authors still starve. Nothing's going to change.

Re:Really?

[Anonymous Coward]

Well. Since ebooks seem to be priced at higher than print book prices....no. no they are not cheap at all.

Just wrong on all counts

[etresoft]

I have a book in the iBookstore. I set the price on it. Apple sells it for that price and gives me 70%. I have the same book in the other bookstores. I have no control over the price. They give me what they want, which is half of what Apple gives me. I have no choice or say in the matter. And the Department of Justice sues Apple? That's just wrong.

I just bought a test prep book at Amazon

[gelfling]

The paperback was $38 shipped and the downloadable version was $97. Excuse me but that's insane.

Re:Having solved all other problems

[Anonymous Coward]

It has nothing to do with whoever is in office. The US has no control over an internationally traded commodity and never will. The US can only *temporarily* affect the market. The US can dump several million barrels on the market and OPEC will just cut production the same amount. No effect. So regardless of which party you hate they can do nothing and anyone claiming they can is a liar.

Until the US can import no oil at all they are subject to the international price and even then I am not certain though I would think you would have more power to control domestic prices if it is all internal. Now the subsidies are another matter, but I don't know enough about them to know whether they are having an effect, positive or negative, on domestic oil prices.

Re:Really?

[canajin56]

Don't know if the "collusion" bit is true, but Shyster and Shyster books are all $19.95 on Amazon and Kobo, even while the paper version of the same book is going for $6. They used to be less than the paperback, which is why it made economic sense to buy an ereader, since you'd eventually make the money back in book savings. Now you're paying treble for a book you cannot lend, resell, or give away.

Re:Really?

[roothog]

More text from the complaint suggesting that DOJ has hard evidence:

"Beginning no later than September 2008, the Publisher Defendants' senior executives engaged in a series of meetings, telephone conversations and other communication in which they jointly acknowledged to each other the threat posed by Amazon's pricing strategy and the need to work collectively to end that strategy. By the end of the summer of 2009, the Publisher Defendants had agreed to act collectively to force up Amazon's retail prices and thereafter considered and implemented various means to accomplish that goal."

"The Publisher Defendants directly discussed, agreed to, and encouraged each other to collective action to force Amazon to raise its retail e-book prices."

"Publisher Defendants took steps to conceal their communications with one another, including instructions to 'double delete' e-mail and taking other measures to avoid leaving a paper trail."

"They received assurances from both each other and Apple that they all would move together to raise retail e-book prices."

"All five Publisher Defendants agreed in 2009 at the latest to act collectively to raise retail prices for the most popular e-books above $9.99. [Then quotes internal email]."

"Apple concluded that competition from other retailers, especially Amazon, would prevent Apple from earning its desired 30 percent margins on e-book sales. Ultimately, Apple, together with the Publisher Defendants, set in motion a plan that would compel all non-Apple e-book retailers also to sign onto agency or else, as Apple's CEO put it, the Publisher Defendants all would say, 'we're not going to give you the books'."

"As it negotiated with the Publisher Defendants in December 2009 and January 2010, Apple kept each Publisher Defendant informed of the status of its negotiations with the other Publisher Defendants. Apple also assured the Publisher Defendants that its proposals were the same to each and that no deal Apple agreed to with one publisher would be materially different from any deal it agreed to with another publisher."

"Each publisher defendant rquired assurances that it would not be the only publisher to sign an agreement with Apple that would compel it either to take pricing authority from Amazon or to pull its e-books from Amazon. The Publisher Defendants continued to fear that Amazon would act to protect its ability to price e-books at $9.99 or less if any one of them acted alone. Apple supplied the needed assurances."

"Near the time Apple first presented the agency model, one Publisher Defendant's CEO used a telephone call, ostensibly made to discuss a marketing joint venture, to tell Penguin USA CEO David Shanks that 'everyone is in the same place with Apple'."

"On the evening of Saturday, January 23, 2010, Apple's Mr. Cue e-mailed his boss, Steve Jobs, and noted that Penguin USA CEO David Shanks 'wanted an assurance that he is 1 of 4 before signing'."

There's about 20 pages worth of evidence, with email and telephone conversations quoted. This will be a big case. It looks like Steve Jobs and the publishing companies' CEOs were personally involved in the conspiracy.