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

Posted by samzenpus on from the paying-more dept.

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."

25 of 192 comments (clear)

  1. Interesting by war4peace · · Score: 3, Insightful

    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.

    --
    ...gis sdrawkcab (usually not responding to ACs; don't bother posting as AC)
    1. Re:Interesting by bws111 · · Score: 5, Informative

      Amazon was operating under a normal wholesale/retail model. They bought from the publisher for some agreed-on price, and sold the books to the public for a price they set (which could be higher or lower than what they paid the publisher). Apple convinced the publishers to stop selling to Amazon and switch to an agency model. Under the agency model, the publisher set the price the public paid, and gave the retailers a cut of that. Apple also managed to write into the contracts that nobody could get less of a cut than Apple. That is price fixing.

    2. Re:Interesting by bws111 · · Score: 4, Insightful

      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.

    3. Re:Interesting by __aaltlg1547 · · Score: 3, Insightful

      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.

    4. Re:Interesting by hairyfeet · · Score: 4, Interesting

      Because it really only takes a couple of people at the top level, everybody else will just follow orders. See the price fixing on DRAM and LCDs to see how you had price fixing covering companies halfway across the world from each other but it really only took a handful of high level board members to get it set up.

      This is why I've been saying that while its great we're not seeing "site requires IE" anymore we have to be vigilant so we don't replace one master with another. Just look at how Apple is trying to ram through DRM into HTML V5 after killing an open codec minimum for HTML V5 for patent trolls MPEG-LA (which of course doesn't hurt them as they can pay the license fees) and how everybody tripped over themselves to kiss the ring of St Steve and cheering the death of Flash...when in reality it was simply Apple making sure nothing ran on Apple hardware that they didn't get a cut.

      So we really have to watch it, because unlike MSFT whose efforts are hamfisted and so obvious Stevie Wonder could spot them the marketing team at Apple is fucking brilliant and can sell AC units to Eskimos and as we saw with IE once you let a company get too powerful it takes ages to undo the damage.

      --
      ACs don't waste your time replying, your posts are never seen by me.
  2. Apple need to do no evil by tuppe666 · · Score: 4, Informative

    ...and customers get bent over; thank Apple

    And the rest of us have to pay a premium for its Monopolistic abuse. Call me a hater.

    What is missing from the article is this is saint Jobs corrupt to the core.

    "Jobs explained to his biographer that he told the publishers, "We’ll go to the agency model, where you set the price, and we get our 30 percent, and yes, the customer pays a little more, but that’s what you want anyway.” http://thehill.com/blogs/hillicon-valley/technology/299875-doj-accuses-steve-jobs-of-being-ringmaster-in-price-fixing-scheme.

    Thankfully Microsoft is slowly catching up so we will be back with that evil duopoly again.

    1. Re:Apple need to do no evil by __aaltlg1547 · · Score: 4, Funny

      Proposed penalty: 1. Refund customers 30% for every bit of electronic media they sold since they started this corrupt practice. 2. 2-year ban on Apple selling electronic media -- e-books, music and video.

  3. Re:Laissie Faire?? by kris2112 · · Score: 4, Informative

    The DoJ's case alleges that the agency pricing model had a clause where the publisher wouldn't sell their books in other stores for less than they were charging in the iBookstore. If true, this is Collusion, and falls under anti-trust laws. http://definitions.uslegal.com/c/collusion/

  4. Provide the proof by tuppe666 · · Score: 3, Interesting

    Did you read the article. "Under the old model, Amazon controlled about 90 percent of the market, but after the publishers instituted the new pricing scheme, Amazon's share fell to 60 percent." http://thehill.com/blogs/hillicon-valley/technology/299875-doj-accuses-steve-jobs-of-being-ringmaster-in-price-fixing-scheme

    Amazon didn't get caught because its done nothing wrong. (well its done lots of things, just not in this instance)

  5. Except its not. by tuppe666 · · Score: 3, Informative

    http://thehill.com/blogs/hillicon-valley/technology/299875-doj-accuses-steve-jobs-of-being-ringmaster-in-price-fixing-scheme "Under the old model, Amazon controlled about 90 percent of the market, but after the publishers instituted the new pricing scheme, Amazon's share fell to 60 percent."

    Its not amusing at all. Amazon dominate by competing on old fashioned things like price, Not being corrupt. I find it sick that your defending a mega corporation (again), when the illegal corrupt actions affect everyone.

    1. Re:Except its not. by Graymalkin · · Score: 3, Insightful

      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.

      --
      I'm a loner Dottie, a Rebel.
    2. Re:Except its not. by bws111 · · Score: 4, Insightful

      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.

    3. Re:Except its not. by ZombieBraintrust · · Score: 3, Insightful

      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.

    4. Re:Except its not. by Omestes · · Score: 3, Insightful

      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.

      --
      A patriot must always be ready to defend his country against his government. -edward abbey
  6. Re:But Amazon is of course a saint by lucm · · Score: 4, Informative

    I find it amusing the Apple is accused of being a "ringmaster" when it's Amazon that is in total dominance of the electronic book market and pricing.

    This story is about collusion with publishers, not about market share. Read the article, there is a part where they discuss Amazon.

    --
    lucm, indeed.
  7. Re:Laissie Faire?? by aaarrrgggh · · Score: 4, Informative

    It is all in how you say it; if you say that if the publisher offers a better price to another outlet, they must match that price for Apple, then it is ok. The tricky part is that if Apple's clause says that Apple can match any other retailer's price and give the publisher 30%, but that would seem like it still isn't collusion; it creates a situation where selling to Amazon at wholesale is better than selling to Apple at an Agency model. Hence the publisher's collusion amongst themselves to force Amazon to the agency model.

    What I understand of the agreement seems pretty clean from Apple's perspective, but not as much for the publishers.

  8. Think of the Children by tuppe666 · · Score: 4, Insightful

    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.

    1. Re:Think of the Children by whoever57 · · Score: 5, Insightful

      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?

      --
      The real "Libtards" are the Libertarians!
    2. Re:Think of the Children by bws111 · · Score: 5, Insightful

      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.

    3. Re:Think of the Children by bws111 · · Score: 5, Insightful

      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.

    4. Re:Think of the Children by rahvin112 · · Score: 5, Insightful

      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.

    5. Re:Think of the Children by whoever57 · · Score: 5, Informative
      And you have the gall to call others posters fanbois!

      That's not a fixed price.

      No, but it is "price fixing".

      1. Apple does not have an app monopoly (required for this to be illegal)

      This is something you have made up. Price fixing can be illegal in the absence of a monopoly.

      2. App "dominance", even monopoly, has no bearing on book sellers (how is Apple supposed to leverage this against them?).

      Again, you failed to RTFA:

      When Random House ultimately signed on the dotted line, Eddy Cue sent an email to Jobs stating that one of the reasons Random House agreed to Apple's terms was because "I prevented an app from Random House from going live in the app store."

      Looks like a clear example of Apple using its app store to leverage agreements on prices.

      3. Even assuming they have a monopoly (they don't, but just for argument's sake), in what way did they exploit this?
      4. It's funny how supposedly "Android is winning", but somehow Apple is a monopoly.

      Your frequent remarks about monopolies are pure strawman arguments. Probably invented by you because of your blind support for Apple.

      5. Publishers could have easily not gone with Apple's offer. Amazon was eBook monopoly at the time (which is exactly why they went with that deal, to leverage against Amazon!), and are still the dominant eBook seller (60% market share).

      That claim is refuted by the facts. Publishers were able to do exactly what you claim they could not: "gone with Apple's offer".

      This was just a shrewd business deal which gave power back to the publishers and busted the Amazon monopoly (which they were actually abusing against other book sellers, and even the publishers themselves!).

      Yeah, great monopoly busting: resulting in increased prices. Yeah, that's the way to go. Don't want those dirty monopolies that result in lower prices.

      Honestly, do you realize how stupid your posts are?

      --
      The real "Libtards" are the Libertarians!
    6. Re:Think of the Children by Colonel+Korn · · Score: 4, Insightful

      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.

      --
      "I zero-index my hamsters" - Willtor (147206)
  9. violations of Section 1 of the Sherman Act, 15 U.S by tuppe666 · · Score: 3, Interesting

    http://online.wsj.com/public/resources/documents/ebooks04112012b.pdf from the filing

    "The purpose of this lawsuit is to enjoin the Publisher Defendants and Apple from further violations of the nation's antitrust laws and to restore the competition that has been lost due to the Publisher Defendants' and Apple's illegal acts. Defendants'
    ongoing conspiracy and agreement have caused e-book consumers to pay tens of millions of dollars more for e-booksthan they otherwise would have paid"

    ...it could be that I'm irrational :)

  10. Re:But Amazon is of course a saint by ZombieBraintrust · · Score: 3, Informative

    Amazon "dominance" was totally a result of them converting their existing physical book customers into digital customers. They were doing this years before Apple even put out the IPad. B&N, and Kobo were also late. They were out there with only Sony as a competitor. So they had 90% share when it was them vrs Sony. Sony didn't have a huge website with millions of book sales. So of course Sony was clobbered. When Amazon main physical book rival B&N came out with the Nook their share went down. Then the Apple launched IBooks and prices went up on best sellers. Then their was the lawsuit. Then prices went down.