Justice Department Calls Apple the "Ringmaster" In e-book Price Fixing Case

An anonymous reader writes "Back in April 2012, the U.S. Justice Department filed an antitrust lawsuit against Apple and a number of publishers for allegedly colluding to raise the price of e-books on the iBookstore. As part of its investigation into Apple's actions, the Justice Department collected evidence which it claims demonstrates that Apple was the 'ringmaster' in a price fixing conspiracy. Specifically, the Justice Department claims that Apple wielded its power in the mobile app market to coerce publishers to agree to Apple's terms for iBookstore pricing."

Comments

Interesting

[war4peace]

Such activities involve a pretty large number of people. It's interesting how they collectively can keep it a secret for a pretty long time.

Re:Interesting

[bws111]

Yes, Amazon and Walmart, etc have contracts that say THEY will be given the lowest cost. However, Amazon, Walmart, and everyone else can set whatever price their customer pays. Prices are not 'fixed' in that scenario. One retailer may use their lower cost to lower the price for their customers, someone else may use their lower cost to increase their profits. Even someone who was not given a lower cost can sell to the public for a lower price than Amazon or Walmart if they want. In the agency model, the PUBLISHER sets the price the final customer, not the retailer, pays. And the deal with Apple (nobody gets less of a cut than us) means that even if Amazon were to say 'Apple is getting a 30% cut, we'll take 20%, cut our customers price accordingly', they publishers can't do it. The price has been fixed.

Re:Interesting

[__aaltlg1547]

Such activities involve a pretty large number of people. It's interesting how they collectively can keep it a secret for a pretty long time.

It wasn't a secret so much as thinking the government wouldn't come after them for it. Everybody knew about it.

Re:Provide the proof

[BasilBrush]

Sounds like Amazon's monopoly was broken. What's the problem with that again?

Think of the Children

[tuppe666]

Sounds like Amazon's monopoly was broken. What's the problem with that again?

Amazon gained its market share by competing on price, Apple got forming a cartel with publishers using price-fixing.

The bottom line is non-apple customers are being hurt by this, including children.

Re:Think of the Children

[whoever57]

Amazon had a monopoly which they used to abuse the publishers. Apple made separate deals with each publisher (which is not collusion or price-fixing) which broke Amazon's monopoly.

Did you not read the article? Prices went up. Sellers agreed to only sell on an agency basis and not a wholesale basis. Please tell me how this is good for consumers? And the reason prices went up? Apple colluded with publishers to remove their books from Amazon if Amazon would not agree to sell at a higher price. How is that not price-fixing?

Re:Think of the Children

[bws111]

The collusion and price fixing was not between the publishers. The collusion and price fixing was the switch to the agency model and the guarantee that nobody could sell books to the public for a lower price than Apple. Amazon was using it's clout to force prices down. Apple was using it's clout to force prices up - for EVERYONE. As to the anti-trust aspect - there is no law against being the biggest at something. There is no law against being a monopoly at something. There IS a law against using the fact that you are dominant in one area to use anti-competitive tactics in a different area. It does not matter at all even if Apple had 0% of the ebook market. What mattered is that they used there dominant position in one market (mobile apps and iTunes) to make it impossible for anyone to compete with them in a different market (ebooks). How did they make it impossible to compete? By fixing the price.

Re:Think of the Children

[bws111]

Are you really that stupid? Price fixing is when a MINIMUM price to the public for A PARTICULAR ITEM has been set. Since two publishers do NOT sell the same books, how could they possibly be in collusion? The price was fixed because Apple had a deal that NOBODY could sell to the public at a price lower than they could. The collusion was between Apple and the individual publishers. It was collusion because Apple said 'We can sell all the books you like, at a higher price than you are getting now. Stop wholesaling to everyone else and switch to the agency model. And once you do that, make sure nobody can sell your book at a lower price than we can'. If you can't see what is wrong with that, there really is no hope for you.

The point is not that 'Book A' costs exactly the same as 'Book B'. The point is that NOBODY can sell 'Book A' for a lower price than anyone else.

Re:Think of the Children

[rahvin112]

Price fixing does not require a monopoly to be illegal. The FTC routinely targets price fixing in the DRAM market and there is no monopoly in that highly competitive market. In fact there have been at least 3 lawsuits by the FTC that I'm aware of that targeted price fixing in the DRAM market.

All your other arguments are meaningless against that one simple fact. Price fixing in collusion with others to force set prices in a market is illegal and has been for a very long time. Stop being a bloody fanboi, Apple colluded with the publishers and as a result eBook prices went up significantly. It's Apple's collusion that caused eBook prices to rise above the pricing for dead tree versions. If you had purchased eBook's before Apple's illegal market manipulation you would know that you could routinely purchase eBooks for less than half the paper price and after the manipulation paper was often cheaper. That's the height of market manipulation, This market manipulation cost the American book purchasers Billions. Apple shouldn't just have to pay money, the people behind it should be given prison terms.

Re:Think of the Children

[Colonel Korn]

Sounds like Amazon's monopoly was broken. What's the problem with that again?

Amazon gained its market share by competing on price, Apple got forming a cartel with publishers using price-fixing.

Amazon had a monopoly which they used to abuse the publishers. Apple made separate deals with each publisher (which is not collusion or price-fixing) which broke Amazon's monopoly.

This is exactly how the market is supposed to work. Where once there was one eBook provider, there are now four major providers. Apple is not even the biggest one! How can that be a monopoly or even a trust?

The bottom line is non-apple customers are being hurt by this, including children.

Seriously, how can you say something like this with a straight face? That's straight-up trolling.

Prices went up 50% in a single day when this agreement went into effect. Regardless of the free market principles of the thing, every consumer lost.

Re:Except its not.

[Graymalkin]

Man I fucking love using market share as metric! Since it is a unitless number it can be used to say anything you want. So under the old model, Amazon controlled 90% of the [market for eBooks]. After publishers instituted their new pricing scheme Amazons market share fell to 60% of [the market for eBooks]. That sounds absolutely terrible!

Unless of course you realize market share is a unitless number that doesnt tell us jack shit. Before publishers changed their prices we dont know what the size of the eBook market was so we dont know what Amazons unit sales or dollar sales were for that time period. After publishers changed their prices we still dont know what the size of the eBook market was so were still unable to tell what Amazons unit or dollar sales were.

Without knowing Amazons unit or dollars sales it is impossible to know if they were materially affected by the change in publisher prices. With Apple entering the eBook retailer arena and thus bringing an eBook store to many tens of millions of iPhones, iPods, and iPads they very likely increased the overall size of the eBook market. Google also entered the fray selling books and magazines in this period of time.

Google and Apple selling eBooks likely increased the total size of the eBook market which means unless Amazons sales grew in that same period at the same rate as the total market their share of that market could only decrease. This isnt rocket surgery. Market share simply cannot show that competitors ate Amazons market share or if their share decreased from market growth. As such market sahre cant possibly be used to show that publishers changing their pricing model positively or negatively affected Amazon. This isnt about defending megacorporations but about not using stupid numbers to make definitive arguments.

Re:Except its not.

[bws111]

It is dirt cheap to sell ebooks. There is almost no barrier to entry at all, especialy for an established retailer. Therefore, your scenario can't happen, because as soon as Amazon raises the price the competitors will re-appear. Yes, in some industries predatory pricing is a real problem. Ebooks is not one of those industries.

Re:Except its not.

[ZombieBraintrust]

90% is not really a valid number. Amazon had 90% market share because they had no competition. B&N and Borders didn't even have an ereader for a several years. Apple came in 5 years too late. Amazon never had a true monopoly. Of course Amazon lost share once others entered the market. And while they lost share they didn't lose customers. There were still growing like hell converting their customers from physical to digital.

Re:Provide the proof

[Colonel Korn]

Sounds like Amazon's monopoly was broken. What's the problem with that again?

One problem is that prices went up 50% literally overnight when Apple got all the publishers to agree to force Amazon and other sellers to charge more.

Re:Apple need to do no evil

[dr.g]

I sincerely hope he's getting paid.

Though his corporate overlords probably give him most of the talking points, the deviousness, straw men, subject-shifting, red herrings and misrepresentation of terms show that this shill has thrown himself into the project. He deserves his pieces of silver.

Re:Provide the proof

[chrismcb]

Sounds like Amazon's monopoly was broken. What's the problem with that again?

Monopolies aren't necessarily a bad thing. Instead of Amazon having a "monopoly" and charge decent prices. Apple and the Big 5 formed their own "monopoly" and charged higher prices... So in this case, for the consumer, it was a very bad thing

Re:Except its not.

[Omestes]

I'm 100% positive that that's absolutely not what happened. Funny sense of re-writing reality you have there. I've heard a term for that before, I'm sure you bandied it about before...

RTFA. That is exactly what happened, well at least the spirit of things. They told the publishers that they could set their own prices, but no one is allowed to sell for lower. This helped Apple, since they didn't have to fight over price (with their ridiculous mark-up) with Amazon (with their huge market share, and existing infrastructure, and contracts). It didn't do much to Amazon. But it screwed consumers.

90% to 60%, and no longer able to bully the publishers around to the same extent as before. I don't know how you can think that doesn't count as being "hurt". Perhaps if that three-letter term I referenced above would come to me, what is it?...

So basic economics is only useful as long as it doesn't hurt your favorite company? Amazon had a larger customer base, more infrastructure, more experience, more contacts, and thus more buying power. Normally this would mean they could leverage lower prices. But... being that this wasn't good for Apple, this is wrong now?

None of this really matters though, all that matters is if Apple actually engaged in price fixing. Which is illegal. And has been for a long time. Nintendo got busted for it in the 80's. The RIAA got busted in the 90's. So if Apple did the same thing, they should get busted now. Being a bully is legal. Price fixing isn't. Look up the definition of "price fixing", look up the actual facts of the case... This is all that matters, not what you feel about Amazon, or Apple.

You mean how I now have more plentiful options for eBooks? Wow, I'm soooooo hurt!

Before this there were multiple sources of ebooks. But... and this is all that matters to me, they were at different prices. Amazon might be cheaper, or Kobo, or Barnes and Noble, or... even Apple. Now we might have more sources, but who cares, they all cost the same (too much). Not that it matters to me anymore, I refuse to buy ebooks until they actually cost as much as I see their worth (less than actual books, since they aren't material, I don't own them, they aren't permanent, and I can't share them, and if Apple or whoever don't like me they can make them go away). Back before Apple screwed us, I loved them. Now... I'm waiting for the law, or publishers, to realize that the writing is on the wall.

They've offered products which I've willingly paid for.

At an artificially inflated price. And you have no choice than to pay that price, unlike almost any other product in the world. The real book, I can get cheaper, I can get discounted, I can get as a loss-leader, I can get clearance, I can get second hand, or at near wholesale... The ebook, I can't.