Apple E-book Price-Fixing Trial Begins

An anonymous reader writes "Technology giant Apple is to begin its defence against charges by the US government that it tried to fix the prices of e-books. The iPad-maker is accused of working with publishers in 2009 to set prices in an effort to compete in the e-book market dominated by Amazon. Quotes from Steve Jobs' official biography have been cited as evidence in the case."

Comments

GIVE APPLE THE NEEDLE !!

[Anonymous Coward]

Don't need their kind round here no more !! No more !!

Re:GIVE APPLE THE NEEDLE !!

[Big Hairy Ian]

Ah In Jobs we trust :)

Re:GIVE APPLE THE NEEDLE !!

[Anonymous Coward]

After they pay their taxes and return the money to people who bought overpriced eBooks.

Re:GIVE APPLE THE NEEDLE !!

[Anonymous Coward]

"Technology giant Apple is to begin its defence against charges ..."

Doesn't the prosecution present their case before the defence begins?

Re:GIVE APPLE THE NEEDLE !!

[Plumpaquatsch]

"Technology giant Apple is to begin its defence against charges ..."

Doesn't the prosecution present their case before the defence begins?

Normally yes, but the DOJ has already presented its case to the public, and the judge has already decided. Might as well go right for the appeal.

Re:GIVE APPLE THE NEEDLE !!

[Anonymous Coward]

And overpriced devices.

Re:GIVE APPLE THE NEEDLE !!

[HappyPsycho]

Books I understand, the people who bought iDevices paid a premium fully knowing cheaper "viable" alternatives existed. I don't follow why they should get anything back, those were fully informed decisions.

P.S. I prefer android personally.

Re:GIVE APPLE THE NEEDLE !!

[Lumpy]

I know it's trendy to hate apple, but the fault lies at the feet of the extremely greedy publishers.

An e-book should be MAX 50% the price of the paper book.

Re:GIVE APPLE THE NEEDLE !!

[Anonymous Coward]

Apple approached the publishers not vice-versa, look it up on your ipad fanboi.
They are a greedy self-serving company more than most, there charitable donations until recently were an extremely low percentage for a company of their size.

 

Re:GIVE APPLE THE NEEDLE !!

[Anonymous Coward]

The *vast* majority of costs associated with creating a physical book are *identical* to the costs associated with creating an e-book. Additionally, you need to deal with doing (and checking) the layout for each of the *multiple* e-book formats you're going to produce, while you only need to do it once for most books (twice if it has both hardback and paperback editions). Printing and shipping costs amount to about 10% of a publisher's costs to produce a physical book and get it out to stores.

Claiming that a 10% reduction in costs should amount to a 50%+ reduction in 'shelf' price is absurd, and simply shows that you don't have the slightest idea what you're talking about.

Re:GIVE APPLE THE NEEDLE !!

[RabidReindeer]

I know it's trendy to hate apple, but the fault lies at the feet of the extremely greedy publishers.

An e-book should be MAX 50% the price of the paper book.

A lot of the troubles of the modern-day world can be credited to "should be". A lot of things "should be", but actual fact makes them impossible.

Before saying an e-book "should be" max 50% of a paper book, I'd want to see an honest breakdown of the true costs of producing the book in the abstract - paper, electronic - or whatever, totalling up the costs of creating the book, making it fit for human consumption, typesetting, marketing and so forth, all while paying all those involved a decent living wage and supplying them with the capital equipment they require. Plus enough profit to make them want to go through it all over again for the next book. If that can be done for half than the approximately $7USD/copy that seems to be about average for USA paperbacks, well and good. but leave the "should be"s out of it. A fair price for a fair product is all that I ask. There are books I haven't bought because I considered them overpriced, and no few of them are ebooks at hardback prices, and there are books that I bought because they were so cheap I didn't care if they were immortal literature or not. Very little of my purchase decision was based on what "should be" the cost of producing them.

Books are not commodities. A work by Terry Pratchett probably costs no more to produce than a bodice-ripper from Harvey Snorkwacker. Less, once purchase volumes start kicking in. However, Pratchett's work has more intrinsic value, and that's something worth paying a premium for. At least as long as it's not too high a premium. The old-fashioned "sell it hardback for a year at a high price first" model doesn't work for me. Even when it was the only game in town, I waited for the lower-cost paperback edition.

Re:GIVE APPLE THE NEEDLE !!

[CMYKjunkie]

Printing Geek here: Paperback book would be roughly $0.01 or LESS per text page (depending on the run length of total copies) and $0.04 per cover. All of this includes binding and shipping. So, let's look at a 300 page paperback: about $3.10 per printed copy. Now, think of a large run book with text page cost at $0.005 or $0.0025 per page: ~$1.54 or ~$0.79 per copy. I think the lower range of prices is even more likely considering the junk paper stock and black ink only for paperbacks.

Keep in mind these cost are assuming domestic US production of books! I don't think I can pick up one of my kids books and not see "PRINTED IN CHINA" on the back.

Re:GIVE APPLE THE NEEDLE !!

[jbmartin6]

Plus enough profit to make them want to go through it all over again for the next book

There's the rub. In other words, the price *should be* what it is now.

Re:GIVE APPLE THE NEEDLE !!

[Zaelath]

Hahahahaha, you mean scanning the paper version and stuffing it into a .mobi file after some dodgy OCR?

A lot of the legitimate ebooks I've seen should be returned as unfit for purpose.

Re:GIVE APPLE THE NEEDLE !!

[Lumpy]

And shipping those books are free? sweet!

Re:GIVE APPLE THE NEEDLE !!

[Anonymous Coward]

No it is not. I know a LOT of writers, and they all make more money self publishing Ebooks than printed. One friend has been on the NY times best seller list and made $0.25 a book sold. All the rest went to the publisher.

Re:GIVE APPLE THE NEEDLE !!

[RabidReindeer]

Plus enough profit to make them want to go through it all over again for the next book

There's the rub. In other words, the price *should be* what it is now.

I tell my employers what my salary "should be". They laugh.

Problem with e-publishing is that Apple and friends get most of the say-so in the "should be" .

Re:GIVE APPLE THE NEEDLE !!

[jbmartin6]

Since you keep going back to work there, it seems your employers have a better handle on the situation.

Re:GIVE APPLE THE NEEDLE !!

[CaptQuark]

What is the source of your information? Or is this a work of fiction too? {grin}

Re:GIVE APPLE THE NEEDLE !!

[Plumpaquatsch]

Hahahahaha, you mean scanning the paper version and stuffing it into a .mobi file after some dodgy OCR?

A lot of the legitimate ebooks I've seen should be returned as unfit for purpose.

Then you shouldn't complain about price, because free would be too expensive.

Re:GIVE APPLE THE NEEDLE !!

[Plumpaquatsch]

Plus enough profit to make them want to go through it all over again for the next book

There's the rub. In other words, the price *should be* what it is now.

I tell my employers what my salary "should be". They laugh.

Problem with e-publishing is that Apple and friends get most of the say-so in the "should be" .

You are at least as delusional about Apple's role in ebook pricing as you are about what you should get for your work.

Re:GIVE APPLE THE NEEDLE !!

[CMYKjunkie]

My per page prices figure bulk shipping. With enough lead time, shipping is cheap! With overseas production, shipping is MORE than the printing!!

Re:GIVE APPLE THE NEEDLE !!

[Macgrrl]

Given most books are likely to be printed on continuous feed machines rather than cut sheet - the cost per page is likely to be even lower, as each impression is likely to be more than one page - which is then folded into folios and guillotined.

Re:GIVE APPLE THE NEEDLE !!

[CMYKjunkie]

Spot on. My prices were on the generous side!!

cheaper books?

[zappa88]

Yes please.

Re:cheaper books?

[Anonymous Coward]

Here ya go.

Re:cheaper books?

[zappa88]

that's just theft , at least with apple the writers get a cut of the $

Re:cheaper books?

[Anonymous Coward]

No it's not, it's copyright infringement.

Re:cheaper books?

[loonycyborg]

Don't be so sure about $.

They'll be fine.

[Nerdfest]

They'll be fine, with maybe a small fine of much less than the money made from the deals. At least they won't likely get their 'pet' judge this time.

publishers

[Anonymous Coward]

are evil scum

Re:publishers

[erroneus]

To be fair and clear, publishers are scum and this seems to be consistent regardless of the material being published -- research/scholarly journals, books, music, movies/TV and video games.

They are in the business of selling someone else's work and occasionally giving some of that money back to the people who created the content. For the publishers, it's "Money forever" but for the creators, it's "work for hire" and so they don't get money forever unless they somehow managed to cheat the publishers out of it. This type of capitalist vampirism should be outlawed as they don't "represent" the content creators as they so often claim. What we need are agency type arrangements where the publishing agencies can only get like 10 to 15%.

Still confused

[MatthewCCNA]

If Apple doesn't set the prices, how can they fix the prices?

Re:Still confused

[bloodhawk]

They set an artificial floor price through contracts that ensured they can't be undercut by the competition. Price fixing doesn't just refer to the actual price, it refers to setting/fixing of minimum or maximum prices in an industry as well.

Re:Still confused

[Sockatume]

Apple's iBook publishing deals included a clause that no other eBook outlet could get a better price than Apple. So, yes, they were engaged in price-fixing that directly favoured them as a seller. In a wholesale bookselling model that's not quite so terrible - you can compete by eating into your margins - but in an agency model where the selling price is set by the publisher isn't allowed to be any lower than on iBooks, you're fucked.

Re:Still confused

[VortexCortex]

If Apple doesn't set the prices, how can they fix the prices?

Furthermore, for the sake of argument: What if Apple Loses? They'll be ordered to ... what? Fix the prices?

Re:Still confused

[Sockatume]

If it's anything like Europe, Apple will be required to end their most-favoured clause immediately, and publishers will be required to offer Amazon discounted prices on their books for a few years to offset the elevated prices that they'd been forced to accept under the anticompetitive regime that existed.

Re:Still confused

[Anonymous Coward]

Apple's iBook publishing deals included a clause that no other eBook outlet could get a better price than Apple. So, yes, they were engaged in price-fixing that directly favoured them as a seller.

The case has nothing to do with that. Do you really think that going to a supplier and saying "I'll buy huge quantities at a reasonable price, but if you sell to someone else for less then I instead get that price" is in any way illegal or even unreasonable?

Re:Still confused

[roman_mir]

Just another case of government shakedown. It's amazing how easy it is to manipulate the public to make the public believe that there is anything behind any of this than just a case of politicians forcing a company to pay more bribes through the legalised bribery system.

This is about bribes, corruption, government corruption, politicians fishing for money by using the power that they are not actually authorised to have at all. There is no place for government in the market place telling others how to price anything.

How about DOJ actually looks at the REAL PRICE MANIPULATION AT THE FEDERAL RESERVE BANK?

The money. The real price manipulation. Half of every transaction is fixed at an artificial level by the government and you all are confused into thinking that this illegal (AFAIC, because it's unconstitutional) shakedown is something to concentrate on.

Pathetic.

Re:Still confused

[Yoda's Mum]

Except that's not what's happening here. It's "I'll sell quantities at a higher price you choose at a fixed margin, but you can't sell via anyone else at a lower price or better margin". That's why it's anti-competitive; the new system they put in place prevents their retail competitors from ever competing on price. To me, that seems entirely unreasonable.

Re:Still confused

[Anonymous Coward]

Actually yes it is illegal and unreasonable. You can't set contract terms that prevent your competition from undercutting you with a better deal or from them being willing to make less money than you. You are in effect by establishing such a contract engaging in price fixing as you are setting a minimum price.

Re:Still confused

[Rockoon]

The case has nothing to do with that. Do you really think that going to a supplier and saying "I'll buy huge quantities at a reasonable price, but if you sell to someone else for less then I instead get that price" is in any way illegal or even unreasonable?

Apple didnt organize fixed wholesale pricing with publishers. They organized fixed retail pricing via publishers.

Not just illegal.. obviously illegal. The fact that you dont see that tells us something about you...

Re:Still confused

[Anonymous Coward]

Wrong choir, son.

Re:Still confused

[Sockatume]

In that it sets a single price across the market, it's obviously anticompetitive. Now, whether anticompetitive actions are a bad thing may be a matter of debate for you, but that's not the issue at hand.

Re:Still confused

[Daemonik]

Don't forget that Apple controls the apps through their app store and competing book reading apps can't purchase e-books through their app like Apple's, you have to open a web browser and go to their webstore to make a purchase.

Re:Still confused

[Plumpaquatsch]

They set an artificial floor price through contracts that ensured they can't be undercut by the competition. Price fixing doesn't just refer to the actual price, it refers to setting/fixing of minimum or maximum prices in an industry as well.

Which makes Amazon just as guilty, because they use the same clause - only more bend to their favour.

Re:Still confused

[Anonymous Coward]

You won't get any argument from me that Amazon isn't just as bad, but this isn't kindergarten and hence a valid excuse isn't "but muuuuum he did it first". Apple are guilty as hell here and need a huge kick in the arse, Amazon most likely need the same.

Re:Still confused

[Sockatume]

You can, in principle, sell content through your app using the in-app-purchasing API*, but Apple has to get a 30% cut. Under most "agency model" ebook deals, the publisher gets 70% of the purchase price, leaving the retailer with zero. (This is why the only thirdparty content stores you'll find on the App Store are publisher outlets like Dark Horse, and not retailers/resellers.)

*The IAP API is horribly unsuitable for that purpose, but that seems rather moot.

Re:Still confused

[Teun]

There is a place for government (you and me!) in the market place, it's about assuring fair play, a level playing field and preventing abuse by monopolies.

Would you leave it to companies like Apple or Google they could, like in this example, brute force their ways on smaller business partners.

When you don't trust your politicians, don't complain here but go voting.

Re:Still confused

[the_B0fh]

You do realize that Amazon is paying $12.99 for new ebooks, and selling them at $9.99 right?

So... what changed now that Apple has a deal with the publishers to sell the book for $12.99 and gets 30% of it?

Can amazon stop selling it at $9.99 regardless of what they paid for it? Or did something else change?

Re:Still confused

[Richard_at_work]

The difference is, there is no evidence Amazon was telling the publishers they couldn't sell their books cheaper elsewhere - that's the crux of the issue with the way Apple was doing it here.

Re:Still confused

[Sockatume]

Yes, something changed. Previously Amazon had a "wholesale" contract with most ebook publishers, meaning Amazon buy the books for $X and sell for $X+Y. The publisher gets $X, and the retailer gets $Y. After meeting with Apple, all of the major publishers - all of them - went to Amazon and stated that their ebooks would only be available on the "agency model" from then on. Under the agency model, the publisher sets a price of $Z, and the retailer and publisher each receive a share of that price (typically 30% and 70% respectively).

Re:Still confused

[Plumpaquatsch]

Actually yes it is illegal and unreasonable. You can't set contract terms that prevent your competition from undercutting you with a better deal or from them being willing to make less money than you. You are in effect by establishing such a contract engaging in price fixing as you are setting a minimum price.

http://feldmanfile.blogspot.de/2012/04/most-favored-nation-landmine.html

It's very important to understand that Apple isn't the only eBook retailer with a "Most Favored Nation" clause; both Amazon and Barnes & Noble have them as well. In fact, Amazon is far more aggressive at exercising its clause than the other two retailers. Amazon regularly scans the prices for eBooks at competitive websites and will automatically drop the price of any title that it finds lower at another site, without giving notice to the publisher (or, for a self-published eBook, the author.)

... Just getting Apple to get rid of its "Most Favored Nation" clause without doing something about Amazon and Barnes & Noble isn't going to fix the problem.

Re:Still confused

[Plumpaquatsch]

If it's anything like Europe, Apple will be required to end their most-favoured clause immediately, and publishers will be required to offer Amazon discounted prices on their books for a few years to offset the elevated prices that they'd been forced to accept under the anticompetitive regime that existed.

In reality what has happened in Europe was that Apple had to give up their most-favoured clause immediately, while Amazon got to keep theirs. And that's all that has happened.

Re:Still confused

[Sockatume]

It is the nature of punitive action that it will tend to favour the transgressor rather than the transgressed, yes. What "most-favoured" clause of Amazon's are you talking about?

Re:Still confused

[Anonymous Coward]

you don't justify one evil by showing similar evil being committed by others. They all need to be crucified. Apple is first, the others need to follow.

Re:Still confused

[Anonymous Coward]

When you don't trust your politicians, don't complain here but go voting.

And if your not given options of politicians you trust? I have not had the option of a politician I like in well over 2 decades... What is the point of voting if your only options are bad and worse?

Re:Still confused

[roman_mir]

No, I completely disagree with you, there is no place for government in any price setting decisions and schemes.

It's not up to the government to fix any of these real or perceived problems, it is up to the market place. If Apple truly charges 'too much', then it is nothing but an opportunity for an enterprising individual to start a competing business and provide better prices.

At the end of the day, if everything else fails that's what illegal sharing of copyrighted materials (piracy) is for, and again, government must not be allowed to make it illegal in the first place.

Copyrights and patents are the real monopoly provided by the governments.

The so called 'anti-monopoly' stance by any government in the world at any moment in time is nothing but corruption and abuse of power.

Re:Still confused

[Daemonik]

For non-agency titles (in other words, titles that Amazon purchases to sell under the wholesale model,) Amazon reserves the right to set and change the price as it sees fit, although it will still remit the same wholesale amount back to the publisher or author. If Amazon drops its price for a title below that of Apple or Barnes & Noble, even without the knowledge of the publisher or author, Apple and Barnes & Noble have the right to match Amazon's price.

Read that through again. The blogger you are sourcing is misrepresenting what a "Most Favored Nation" agreement is. When a retailer, such as Amazon, buys a product at wholesale, either a book or a pipe fitting, they have the right to set whatever price they wish for that item. If they're cutting into their own profit that doesn't matter and is not illegal, the manufacturer/distributor/publisher was paid their asking price. This is not a MFN clause, it's standard retail practice. Apple's deal changed that. Retailers could no longer set their own prices. If they didn't charge the price the publishers demanded then they would not be sold any books, and several publishers did withhold books from Amazon until they agreed to their scheme. They could no longer use pricing as a competitive tool against Apple, which is why Apple is in court and not Amazon.

Re:Still confused

[moronoxyd]

Amazon regularly scans the prices for eBooks at competitive websites and will automatically drop the price of any title that it finds lower at another site, without giving notice to the publisher (or, for a self-published eBook, the author.)

Ok... can you explain how Amazon cutting their own profit is price fixing?

And why Amazon should give the publisher notice?
I assume that with the big publishers, Amazon has a deal where the company pays a fixed price for any sold book.

This is different with books self-published through Amazon. Those authors probably get a percentage of the profits. In this case (and only in this case) Amazon hurts the profits of the authors.

Re:Still confused

[moronoxyd]

You do realize that Amazon is paying $12.99 for new ebooks, and selling them at $9.99 right?

Nope. Amazon sells *some* eBooks for less than cost. With most eBooks they make some profit.

Please stop spreading the misinformation that Amazon sells all eBooks below cost.

Re:Still confused

[Anonymous Coward]

How is one competitor demanding price agreements anti-competitive? Are sales anti-competitive?

Could the book mfgrs just walked away? Yes, yes they could have. But Apple offered them a better deal than any other retail outlet was and they jumped at it. That's actually called competition.

Re:Still confused

[Anonymous Coward]

Pretty sure your order of companies is ass backwards. Apple is late to the ebooks game.

Re:Still confused

[Anonymous Coward]

Every comment says 'obviously illegal'.

No comment actually says why.

Re:Still confused

[Anonymous Coward]

That doesn't sound illegal, anti-competitive or wrong. The publishers wanted to change the terms because one of their retailers pointed out the stupidity of the way they were doing business.

If $X+$Y=$Z, then there's no actual difference.

Or is the agency model illegal? Unlike it has been for the last 50+ years.

The real problem is that the other retailers are pissed they didn't think of it first.

Re:Still confused

[Anonymous Coward]

No, I completely disagree with you, there is no place for government in any price setting decisions and schemes.

You disagreement is irrelevant. What places government have is also decided by the market, not the decree of roman_mir.

If Apple truly charges 'too much', then it is nothing but an opportunity for an enterprising individual to start a competing business and provide better prices.

Likewise, if government is sticking its head into places "too much", an enterprising individual would start a competing government. Or they pick up arms and take down the oppressive government. Or some other government invades.

It is only naive idealism to think that the least meddling government will always win. In fact, most of the time it doesn't. Even the glorious 19th century US succumbed to market forces where the people say they prefer security and bread & circuses over freedom.

Re:Still confused

[Sockatume]

I can't believe I need to integrate these ideas for you, but here we go: because the publishers set the price in the agency model, and because all of the major publishers colluded to switch to an agency model simultaneously, and because Apple's deals mandated that Apple always receive the best available price, it was no longer possible for Amazon to ever sell an eBook at a price lower than that offered by Apple.

That is an illegal anticompetitive action that reduces competition.

Re:Still confused

[Thruen]

I keep reading comments from people claiming it was a clause in the contract, but I haven't seen any such thing in actual news articles. I admit, I haven't read them all, but that's the type of thing I'd expect to see in every article about it given the general anti-apple tone I normally see. Instead, I keep seeing them quoting Steve Jobs' biography as evidence. A book published by the industry that supposedly engaged in this collusion written at the request of and about the founder of the company they colluded with is some of their strongest evidence. What the hell? From what I've seen for actual facts, it looks like Apple definitely encouraged publishers to increase prices. It also looks like publishers were already quite displeased with Amazon's practice, and that's what Apple was primarily looking to stop. I don't see any evidence that Apple went beyond encouraging publishers to do something immoral.

I'm not saying this is alright, it sounds like it's pretty shady to me. Even if Apple didn't technically break any laws, they engaged in unethical activities to boost their own profits and hurt consumers in the process.

That said, I question the ethics of Amazon's own pricing plan if it caused such a problem for publishers, and I find it hard to believe that something like that wouldn't have damaged consumers as much if not more in the long term. Here's my reasoning: Amazon, as we all know, was willing to sell titles at a loss to maintain their low prices. This sounds great for consumers, because we save money right away. But over time, the businesses that can't afford to sell titles at a loss go under. Amazon no longer needs that super-low price to be the lowest price around because their price is the only price, now they can finally sell it for a profit without fear of consumers just walking to a book store or clicking over to the next site. Book prices go back up, competition is gone with little hope of return, and Amazon stands over the corpses of Borders and B&N triumphantly.

It sounds crazy and unreasonable, until you realize we were halfway there before Apple even got into the ebook market. I know the internet spells the end for many brick-and-mortar establishments, no getting around that. What I'm trying to illustrate is that both Apple and Amazon engaged in immoral activities to create an unfair advantage for themselves. I'm actually all for punishing Apple for what they've done, as long as they did technically break the law, but people looking at them as the big kid on the playground bullying poor little Amazon have some serious tunnel vision. Amazon was the bully just a few years ago, and now Amazon and Apple are competitors. There have been plenty of times when Apple is obviously the bad guy, the same can be said for most successful businesses, I just don't think this is as cut-and-dry as people make it out to be.

DISCLAIMER: I'm not an expert. I like Apple products, but I prefer the Amazon store for anything other than music. I know I can come off as a fanboy, but that's probably because every other post that's been modded up has already found Apple guilty.

Re:Still confused

[Sockatume]

Precisely. In the EU, Apple and the publishers have settled to the authorities' satisfaction without having to do away with the agency model. The model itself is not the issue.

Re:Still confused

[Sockatume]

I don't think you know what a most-favoured-nation clause is.

Re:Still confused

[Anonymous Coward]

Fuck, you have to be one of the dumbest motherfuckers to ever put your idiot fingers to a keyboard. Fucking ignorant fascist troll moron.

Re:Still confused

[Sockatume]

...because it's illegal to collude to set inflated prices? Exactly the same reason why it's obviously illegal to steal someone's car?

Re:Still confused

[idunham]

Here's the situation:
Apple has an agreement with the publishers that says "No one is permitted to sell for less than this."
In other words, they tell potential ebook sellers "Sure you can try to compete, but don't think you can sell more / establish yourself / give consumers a better deal by selling at a lower price."
Now, here's the purpose of the Sherman Antitrust Act:
"To protect the consumers by preventing arrangements designed, or which tend, to advance the cost of goods to the consumer."
Sounds pretty obvious that what Apple is doing is an example of what the Sherman Antitrust Act is about, doesn't it?
And here's how the law starts:

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal.

http://books.google.com/books?id=biU3AAAAIAAJ&pg=PA209

Re:Still confused

[Anonymous Coward]

Wait, Apple always received the best available price WHICH WAS THE SAME PRICE AS ALL THE OTHER RETAILERS. You nicely forgot to include that.

Doesn't sound anti-competitive at all. In fact, I'd say it would increase competition as there would be many more retailers who could make a buck or two.

But, Apple, so it's bad. Or something. Or Apple pointed out to all the publishers how stupid their current model was and they all went 'oh, yeah!', and said the agency model is much better for all of us.

If they had been at a conference and heard the exact same thing, instead of from Steve Jobs, and then all moved to agency at the same time, would that be anti-competitive? OR JUST GOOD FUCKING BUSINESS SENSE?

Re:Still confused

[Anonymous Coward]

Actually, that's not quite right. The agreement says Apple will sell at the lower of a) whatever price the publisher sets or b) the lowest price elsewhere on the market, and will give the publisher 70% of that sale price.

If the publisher offers to let Apple sell the book for $45, there's absolutely nothing to prevent them from offering to let Amazon sell it for $5. Apple, however, will be able to take advantage of that $5 price due to the contract terms.

A 'most favored nation' clause doesn't say, "you can't give anyone else a better deal than you give me". It says, "If you give anyone else a better deal than me, I get to take advantage of that deal as well." There's a *huge* difference between the two statements.

Re:Still confused

[Sockatume]

If you can't see what's bad about having one retailer decide the minimum selling price for every other retailer in the market, you are beyond help in an economics discussion.

Re:Still confused

[Anonymous Coward]

I think he means "first in the line for crucifiction", not "first to sell ebooks".

Re:Still confused

[Daemonik]

Prior to Apple's arrangement with publishers, retailers like Amazon could buy e-books wholesale and offer whatever prices they chose. Apple colluded with the publishers to change from a wholesale to an agency model FORCING all other retailers to abide by agency terms and removing the wholesale option. Amazon tried to fight this and several publishers stopped selling books through Amazon until they caved, solely because of Apple's backing. If Apple hadn't supported the agency model and they hadn't colluded with the other publishers, none of them would have risked cutting off their largest customer, Amazon to strong-arm them into the new terms.

Re:Still confused

[Anonymous Coward]

Apple didn't set it. They suggested it. The publishers though it was a good idea & put it in the contracts.

If you can't see that, you're beyond help rationally discussion a business situation.

Re:Still confused

[Anonymous Coward]

Then it's your responsibility to run for office and try to fix things.

Re:Still confused

[Anonymous Coward]

So... why hasn't this prevented stuff like DVD and Blu-Ray region restrictions, music market segregation etc? Barnes & Noble, for instance, are refusing to sell me, a Norwegian, e-books of their titles, because apparently I am supposed to buy the more expensive licensed Norwegian translations, or something...

Re:Still confused

[MrMickS]

You do realize that Amazon is paying $12.99 for new ebooks, and selling them at $9.99 right?

Nope. Amazon sells *some* eBooks for less than cost. With most eBooks they make some profit.

Please stop spreading the misinformation that Amazon sells all eBooks below cost.

Isn't Amazon using their volume sales overall to discount popular books below purchase price and effectively shutout competitors that need the profits from the popular books to fund their service anti-competitive too? Sure, in the short term the customer gets a good deal, but long term Amazon's price manipulation will favour them rather than the public. Or am I missing something?

Re:Still confused

[Rich0]

Makes sense. Usually stores just set their own prices, so the store obviously has control over the minimum they sell at. That isn't a problem unless they're in collusion with other stores, or in Apple's case forcing their supplier to do the collusion for them.

Re:Still confused

[Teun]

If Apple truly charges 'too much', then it is nothing but an opportunity for an enterprising individual to start a competing business and provide better prices.

And that's exactly the problem here, Apple's exclusive contract forbids the publishers to get into a deal with anyone else.

At least not at a competitive price.

Re:Still confused

[bws111]

What possible long-term negative impact could Amazon's low prices have on consumers? The only one I see mentioned is that once they have removed the competitors they can raise prices. That, however, doesn't hold water because selling ebooks has a very low barrier to entry, so as soon as they raise prices even a little competitors will re-appear, forcing prices back down.

The current case has an obviuous and immediate short-term and long-tem negative impact on consumers.

Re:Still confused

[Anonymous Coward]

So... why does that mean Apple shouldn't be done for it?

We can't catch 100% of all crooks, this doesn't mean you don't bother catching any.

This is presuming your assertion is correct.

Which it isn't.

But even if true, it's irrelevant. It's a "Look! Monkeys!!!" distraction.

Re:Still confused

[NatasRevol]

Driving all other competition out of business isn't good for the consumer in many ways.

Re:Still confused

[Sockatume]

Oh, I'm sorry, because Apple only suggested their illegal anticompetitive scheme, and didn't dangle the book industry over smouldering cauldrons of acid until the they decided it was a good idea, clearly they're immune from prosecution for their part in an illegal anticompetitive business group that they greatly profited from.

Re:Still confused

[Daemonik]

That said, I question the ethics of Amazon's own pricing plan if it caused such a problem for publishers, and I find it hard to believe that something like that wouldn't have damaged consumers as much if not more in the long term. Here's my reasoning: Amazon, as we all know, was willing to sell titles at a loss to maintain their low prices. This sounds great for consumers, because we save money right away. But over time, the businesses that can't afford to sell titles at a loss go under. Amazon no longer needs that super-low price to be the lowest price around because their price is the only price, now they can finally sell it for a profit without fear of consumers just walking to a book store or clicking over to the next site. Book prices go back up, competition is gone with little hope of return, and Amazon stands over the corpses of Borders and B&N triumphantly.

People said the same thing about Wal-Mart, except somehow Target spanks their a** every quarter. Either way, your supposition has a few problems, notably Amazon, unlike Apple, still sells the physical copies of the books, as well as the e-books. Said physical copies are NOT covered by the Apple agreement and Amazon is free to price them as it wishes. Amazon, as a part of their business, allows other retailers to compete with them ON THE SAME PAGE. You can see other prices for both new and used books, right there next to Amazon's price. Regardless of the price Amazon chooses to sell their physical books for, THE PUBLISHER WAS PAID! They got their money, upfront. Amazon could give paperbacks away for free and put a dollar in your pocket for taking it and it would not effect the publishers at all. Lastly, it is not illegal to have a monopoly, but it IS illegal to abuse it. If some fabled day came in the future where Amazon used their control of the market to force publishers to charge less, then they are free to take them to court over it or seek a government investigation.

Let's be perfectly clear here as well. This deal was never about Apple helping out publishers either. The sales of ebooks through Apple is a rounding error on their balance sheet, they were worried about a visible chink in their 30% cut of sales through iTunes and they didn't want to have to manage an actual competing store front for books. Apple isn't a book seller, they just wanted the smoothest method they could get to a) offer books, which people wanted on their iDevices, and b) get 30% off the top of that. It was either buy books at wholesale, setup a division to manage prices and take a loss like Amazon, or collude to change how the market was structured. Guess which one they picked.

Re:Still confused

[Anonymous Coward]

Its funny because if we were discussing the price of gas and the major sellers setting prices i don't think many people would be "defending" the sellers.

Re:Still confused

[Sockatume]

You do grasp that there was a clause that specifically prohibited publishers from selling ebooks at prices that were lower than on iTunes? Do you not comprehend that this is objectionable? That whatever Apple wants people to pay for books, everyone pays for books, at every ebook store?

Re:Still confused

[BasilBrush]

If you can't see what's bad about having one retailer decide the minimum selling price for every other retailer in the market

From your own description of the agency model, no retailer decides the price. Publishers do.

It's common for people attacking Apple to stray from the facts. But It seems your zeal to put the blame on Apple exceeded your ability to keep to your own description of the facts. That's rare.

Re:Still confused

[BasilBrush]

You do grasp that there was a clause that specifically prohibited publishers from selling ebooks at prices that were lower than on iTunes?

And of course only Amazon and Walmart are allowed to do that.

If the Great Satan Apple does the same, they're EVIL!

Or can you provide a link to your previous condemnations of other companies that have lowest price guarantees in their contracts?

Re:Still confused

[BasilBrush]

Amazon, as a part of their business, allows other retailers to compete with them ON THE SAME PAGE.

It's hardly competing if it's part of the Amazon business model, performed under Amazon's terms and conditions, and contributes to Amazon's bottom line.

You might as well say Apple allows developers to compete with them ON THE SAME PAGE by letting them into the Apple App Store. Though of course in THAT case you're more aware of the conditions than you are in the Amazon case.

It was either buy books at wholesale, setup a division to manage prices and take a loss like Amazon, or collude to change how the market was structured. Guess which one they picked.

They picked neither of those. What they did was extend the existing model of selling songs, apps and movies to ebooks. The absolutely most obvious way they would start selling a new category of products, given it's success. No collusion required.

Re:Still confused

[Anonymous Coward]

That particular practice *isn't* price fixing. However, selling goods below cost in order to gain a monopoly, or prevent competitors from entering the market is called 'dumping', and is also illegal. That's what Amazon was doing.

Re:Still confused

[bws111]

The only thing Amazon was to lower prices. The consumers decided that the higher-priced 'competition' did not need to exist.

Re:Still confused

[SpiralSpirit]

Go google the Sherman Act. If the government can prove that there was collusion between the different publishers to agree to change to the agency model and raise prices, then they are a cartel that engaged in price fixing. Since the publishers already settled, apple is the "hub" of the conspiracy and the only one left to go to court. So the determination of whether apple was guilty or not basically depends on the actions of the publishers at the time. The DOJ seems to think they can prove these horizontal agreements between competing publishers was apple's idea.

Re:Still confused

[Anonymous Coward]

And that's exactly the problem here, Apple's exclusive contract forbids the publishers to get into a deal with anyone else.

At least not at a competitive price.

No, Apple didn't sign an exclusive contract with anyone. Publishers were still free to sell books through Amazon or any other dealer they wanted. The only stipulation, called the "favored nation status, was that they had to match the lowest price for Apple that they were offering to anyone else, i.e. if they were going to sell the latest chart-topping Dan Brown novel to Amazon for $15 bucks less than Barnes & Noble, they had to offer Apple that same $15 price reduction. If the publishers didn't like the terms, they were free not to sign the contracts.

Re:Still confused

[Anonymous Coward]

But the publishers couldn't sell them for less. Amazon was already selling them at a loss and killing the market for everyone else--classic case of predatory pricing to establish a monopoly. Bookstores were dying--I've watched six bookstores in a twenty mile radius around my house close up shop over the last few years--and, by extension, the publishers themselves. Amazon destroyed the bookstore ecosystem's ability to make any profit and all, but had locked up so much market share that publishers were essentially helpless to do anything about it until Apple came along and offered them a different e-book outlet.

Re:Still confused

[Anonymous Coward]

Spoken like someone who's never run a business.

You forget that there's a minimum price below which stores can't sell goods and expect to stay in business for very long. They have to make a profit and selling products at or below costs is something you can only do for short periods. But Amazon was consistently selling every book in the catalog at a loss and subsidizing the write-off with profits from all of the other stuff Amazon sells. Booksellers and publishers who didn't have other revenue streams (i.e. all of them) couldn't match Amazon's prices over the long haul and stay in business.

Amazon is guilty of classic predatory pricing. Apple was a life preserver thrown to a drowning victim who was having his head shoved gleefully under the water by Jeff Bezos.

Re:Still confused

[gnasher719]

I keep seeing them quoting Steve Jobs' biography as evidence

That's something I find weird. Anywhere else, this would be disregarded as "hearsay". First, just because it's written in Steve Jobs' biography isn't proof he said it. Second, just because he said it doesn't mean it's true. That's what "hearsay" is about.

Re:Still confused

[Anonymous Coward]

You're ignoring what Amazon was doing. The wholesale model assumes that businesses actually want to make a profit and so won't sell products at or below costs except in limited amounts for short periods (ex holiday sales) or under special circumstances (ie inventory clearance sales). But Amazon was selling every book in the catalog below costs as a permanent practice, thereby destroying everyone else's ability to price the same goods higher--classic predatory pricing. So breaking Amazon's ability to use the wholesale model wasn't a bad thing because Amazon itself was perverting the wholesale model in the first place, breaking the unspoken assumptions behind it in an effort to engage in predatory pricing.

Re:Still confused

[Thruen]

People said the same thing about Wal-Mart, except somehow Target spanks their a** every quarter.

The biggest difference here being that Amazon has already knocked out much of their competition, it was quick and brutal. I said that already, but you chose to ignore it because you're suffering from tunnel vision, too. Oh and wait, Walmart did the same thing to many businesses already, and saying Target spanks their ass every quarter when Target's net income is 1/5th of Walmart's is not just hyperbole it is an outright lie. For investors, Target might be great because there are far fewer shares and therefore a greater increase in value for them despite the company making less, but that doesn't translate in any way shape or form to Target spanking their ass every quarter. In fact, their growth per share is extremely close, too, suggesting Walmart's dominance is going nowhere.

Either way, your supposition has a few problems, notably Amazon, unlike Apple, still sells the physical copies of the books, as well as the e-books. Said physical copies are NOT covered by the Apple agreement and Amazon is free to price them as it wishes.

I don't understand what you're getting at with this, it doesn't have any relevance beyond showing that Amazon's price gouging occurred on physical books as well, which is largely why physical book stores couldn't survive, EBooks alone wouldn't have done the damage so quickly.

Amazon, as a part of their business, allows other retailers to compete with them ON THE SAME PAGE. You can see other prices for both new and used books, right there next to Amazon's price.

Yes, part of Amazon's business model is to allow other retailers to list their items on Amazon's page, and Amazon gets a cut of the sale. So while this does make it easier for users to find a better price as opposed to typing a product description into Google, it also gives Amazon a cut of the profits whenever someone does beat their price. It's fair, but the way you put it makes it seem as if Amazon did it because they were being nice, when they actually did it because it's better for their business. If you didn't figure it out already, when you're willing to take a loss selling products just to make sure you sell them instead of someone else, it actually makes life easier to have your competitors report all of their prices to you, even if the tradeoff is you show customers what it costs elsewhere. It's a game Amazon plays and usually wins, it's a rare thing that I see something sold by Amazon being sold cheaper by someone else through their site, and as I said before I actually like and use the Amazon store.

Regardless of the price Amazon chooses to sell their physical books for, THE PUBLISHER WAS PAID! They got their money, upfront. Amazon could give paperbacks away for free and put a dollar in your pocket for taking it and it would not effect the publishers at all.

Again, I'm wondering why this is relevant. The publishers always get paid. Except in the case of used books, but that's not what we're discussing. I never said they weren't paying publishers, I said publishers weren't happy with Amazon's pricing scheme, which has been made clear since these accusations began. If any of this was about making publishers happy, nobody would question Apple since it's clear the publishers wanted to go that route. As for not effecting the publishers at all, maybe knocking out the distribution methods they've used for years had an effect. I haven't looked at their numbers, but is it really crazy to think that maybe they'd have made more money if book stores were still around, too?

Lastly, it is not illegal to have a monopoly, but it IS illegal to abuse it. If some fabled day came in the future where Amazon used their control of the market to force publishers to charge less, then they are free to take them to court over it or seek a government investigation.

Th

Re:Still confused

[Anonymous Coward]

You're not getting it at all. Apple is accused of convincing the publishers to not ALLOW Amazon to sell the book to YOU for a lower price, not SELL the book to Amazon for a lower price. Amazon wanted the flexibility to lower the -retail- price to their customers, even if it meant eating into Amazon's own margins. Amazon could even sell the book for LESS than what the publisher charged and eat the loss, in order to gain market share. Retailers do this all the time (look up Loss Leaders). The accusation is that Apple and the Publishers 'conspired' to rob Amazon of this option. The publishers literally -set- the -retail- price Amazon was required to sell the book at (still leaving Amazon a profit I assume), but not giving Amazon any pricing flexibility.

Who do you think decides how much a can of Campbell's Soup costs at your local supermarket? NOT Campbell's. Each supermarket makes best wholesale deal with Campbell's it can for soup, but then decides for ITSELF what today's price on the shelves will be. Different supermarkets set their prices (and therefore their margins) based on what they think will earn them the most profit over all. This is normal commercial practice. The 'agency model' subverts that kind of competition.

http://www.macstories.net/stories/understanding-the-agency-model-and-the-dojs-allegations-against-apple-and-those-publishers/

Re:Still confused

[chrismcb]

But the GP claimed "a competing business and provide better prices." Except that no one could provide better prices. And of course the publishers liked the deal. (hence the reason they were also part of the collusion lawsuit, until ALL of them decided to settle) It isn't the publishers complaining, it is essentially the consumers.

Re:Still confused

[Anonymous Coward]

Walmart isn't guaranteed the lowest price on goods from the suppliers unless it's the suppliers THEY OWN. If you manufacture it, of course you get a better price. The lowest price guarantees is litereally just if you see it at a BETTER price elsewhere, you can take a picture/clip the ad/etc and get REFUNDED that price from walmart/best buy/etc that have those. You don't even know what the heck you're talking about, let alone have the intelligence required to speak on the topic, so leave.

Re:Still confused

[bws111]

And how exactly do Amazon and Walmart set the minimum price that another retailer can sell at? They don't.

Amazon and Walmart may well have contracts that say they can PURCHASE goods at the best price, but there is nothing that says anything about the price they SELL the good for. Any other retailer can, if they so desire, beat Amazon and Walmart on price. It may be painful, but it can be done. With the Apple deal, it is simply not possible for anyone to beat Apple on the price the consumer pays. Not 'difficult' or 'painful' to beat Apple, impossible.

Re:Still confused

[Rich0]

You forget that there's a minimum price below which stores can't sell goods and expect to stay in business for very long.

I was only speaking to the issues with price fixing, which are generally about gouging consumers by fixing prices higher than what would be the case with a free market. Amazon is not guilty of that particular offense, as far as I'm aware.

Selling goods as a loss-leader is an entirely different matter - one which should be illegal. Amazon may very well be guilty of that, but everything I've been hearing says that they sell their non-book items at a loss to try to establish themselves. Obviously they can't be selling EVERYTHING at a loss and still making profit.

Re:Still confused

[bws111]

Yes, that is correct. Under the agency model the publisher sets the retail price. And under the deal with Apple, the publisher can not set a lower retail price for any other retailer than they do for Apple.

Re:Still confused

[Anonymous Coward]

The money. The real price manipulation. Half of every transaction is fixed at an artificial level by the government...

[citation needed]

Re:Still confused

[Anonymous Coward]

The path of improvement has seldom been a discontinuous jump from "worse" to "good". Maybe the public gets the lesser of two evils today, then gets an okay-ish politician tomorrow, then the next day gets a good guy. But we'll never get a good politician until we start voting against the worst ones.

Re:Still confused

[the_B0fh]

You do realize that Amazon routinely buys newly released books at $12.99 wholesale and sells them for $9.99 wholesale?

Re:Still confused

[Plumpaquatsch]

I don't think you know what a most-favoured-nation clause is.

You don't think at all it seems.

Re:Still confused

[the_B0fh]

How the hell did you go from "new" to "all"?

Re:Still confused

[the_B0fh]

So... your claim is that selling below cost is a good thing?

Care to comment on all the RAM dumping charges that were rampant during the 1990s? Or any of the current anti-dumping laws out there?

Re:Still confused

[BasilBrush]

And under the deal with Apple, the publisher can not set a lower retail price for any other retailer than they do for Apple.

It's actually the other way around. If the publisher sets the price lower at another retailer, Apple is allowed to match that price.

http://www.independent.co.uk/news/world/americas/jobs-encouraged-apple-to-work-with-publishers-on-ebook-price-hike-court-hears-8642931.html

Re:Still confused

[Plumpaquatsch]

Amazon regularly scans the prices for eBooks at competitive websites and will automatically drop the price of any title that it finds lower at another site, without giving notice to the publisher (or, for a self-published eBook, the author.)

Ok... can you explain how Amazon cutting their own profit is price fixing?

Did I say it was? Do you move goal posts as a profession or is it a hobby? Did you even notice I was quoting an article?

Re:Still confused

[BasilBrush]

With the Apple deal, it is simply not possible for anyone to beat Apple on the price the consumer pays. Not 'difficult' or 'painful' to beat Apple, impossible.

Only because *IF* the book is sold at a lower price at another retailer, Apple is allowed to lower their price to match. Nothing wrong with that, it's standard practice. Anything other would be denying Apple the right to compete.

http://www.independent.co.uk/news/world/americas/jobs-encouraged-apple-to-work-with-publishers-on-ebook-price-hike-court-hears-8642931.html

Re:Still confused

[Plumpaquatsch]

For non-agency titles (in other words, titles that Amazon purchases to sell under the wholesale model,) Amazon reserves the right to set and change the price as it sees fit, although it will still remit the same wholesale amount back to the publisher or author. If Amazon drops its price for a title below that of Apple or Barnes & Noble, even without the knowledge of the publisher or author, Apple and Barnes & Noble have the right to match Amazon's price.

Read that through again. The blogger you are sourcing is misrepresenting what a "Most Favored Nation" agreement is.

Bullshit. He describes how evil Amazon's version of the MFNC is. And you are to stupid/paid to tell.

Re:Still confused

[Plumpaquatsch]

What "most-favoured" clause of Amazon's are you talking about?

Here's the one for Kindle Direct Publishing (Search for "Matching Competitor Prices")

By "price-match" we mean where we sell the Digital Book in one or more of the Available Sales Territories at a price (net of taxes) that is below the List Price to match a third party's sales price for any digital or physical edition of the Digital Book, or to match our sales price for any physical edition of the Digital Book, in any one of the Available Sales Territories.

Re:Still confused

[Plumpaquatsch]

The difference is, there is no evidence Amazon was telling the publishers they couldn't sell their books cheaper elsewhere - that's the crux of the issue with the way Apple was doing it here.

Yeah, absolutely no evidence

Both Amazon (AMZN, Fortune 500) and Apple (AAPL, Fortune 500) have agreements with those publishers that ensure they'll receive the best prices for e-books over any of their competitors, Blumenthal said in a prepared statement.

Nobody ever saw Amazon do it

An agency model combined with most-favored-nation clauses were implemented by Apple and Amazon for e-book sales
Similar models used in other markets

And Amazon most certainly doesn't have anything called "most favored nation clause" in any of their terms, only something called "price matching". https://kdp.amazon.com/self-publishing/help/search?query=price%2520matching&page=1 - it's their most favored clause in the nation.

Re:Still confused

[Anonymous Coward]

I really think that anyone that has a monopoly on something, and copyright is a monopoly, that they should be forced to sell or license whatever the thing they have a monopoly on at the same price to all buyers.

This would stop practices like those of the music industry from trying to price internet radio out of existence at the behest of the incumbents.

Re:Still confused

[Anonymous Coward]

Apple has an agreement with the publishers that says "No one is permitted to sell for less than this."

No they don't. The agreement is that if they sell to someone else at a lower price then Apple gets that too. Big difference, and one that makes irrelevant all of your subsequent argument.

Re:Still confused

[Plumpaquatsch]

You won't get any argument from me that Amazon isn't just as bad, but this isn't kindergarten and hence a valid excuse isn't "but muuuuum he did it first".

You are right, this isn't kindergarten, this is the fucking DOJ, and they shouldn't selectively prosecute in the same fucking case.

Re:Still confused

[Sockatume]

Please, flatter me with your understanding of what a clause in a contract is.

Re:Still confused

[Plumpaquatsch]

Why would I waste my time - you are either a moron or a troll.

Re:Still confused

[fuzznutz]

The sales of ebooks through Apple is a rounding error on their balance sheet [...]

Income Statement. Sales revenue is recorded on an income statement. A balance sheet records assets and liabilities.

Stupid case

[Anonymous Coward]

In other words Apple tried to do what they did with music , open up a market and allow everyone to make money and be of benefit to the users.

what I can't understand is the problem of stopping amazon from bankrupting all the publishers. Of course they couldall just decide to tell amazon to go stuff themselves and not allow their books to be sold their and set up their own site, see how amazon likes that.

Re:Stupid case

[Sockatume]

That Amazon's business model is anti-publisher does not excuse an alternative business model that is rabidly anti-consumer. They're both garbage.

Re:Stupid case

[Daemonik]

First off, Amazon built the e-book market. When e-books started they were just niche amusements people got for their Palm Pilots and Windows PDA's. Publishers didn't care about them at all and made zero effort to establish them.

Amazon laid the groundwork, connected their store to a decent e-book reader and made e-books into the market it is today.

They were also not bankrupting any publishers. They paid the wholesale price for the books that the publishers asked for and then CUT THEIR OWN PROFIT MARGIN by selling lower than what they paid. The publishers already made a profit off the hardcover, the paperback and the e-books.

The problem wasn't that publishers were getting paid, in fact e-book sales were keeping alive books that were decades out of print and creating new profit where none had existed before. It was that they didn't feel they were getting enough. These are the same publishers that have said publicly that Libraries are stealing profits from them, btw. They are the reason an e-book now retails the same price as the hardcover even when the paperback is being sold simultaneously. Publishers are the reason an e-book can retail for $9.99 when the paperback sells for $7, if it's still even in print.

The publishers jumped into Apple's arms when they proposed their deal because it gave them a way to increase their profits and if it wasn't shady they wouldn't have all settled with the government rather than stand with Apple in their defense.

Re:Stupid case

[the_B0fh]

Apple's point was that they had no deal at all in the shady part, the publishers colluded among themselves.

Re:Stupid case

[Daemonik]

Prior to e-books, when a publisher stopped printing a book, their profit from that book was done. If it was a very popular book they might order more printings, but again, when the printing stopped so did that books revenue stream. This was a problem for the publisher, the author and the reader. The publisher and author's side is easy to understand; no new income, but consider also the reader that didn't know about that author at the time, it's been 20 years and they just read an author's newest novel which is part of a series and they feel a desire to read their older books. If they are lucky they might be able to track down a copy from a library or hunt through a few used book stores for one, neither of which gets any profits back to the author. Or conversely they found a dog eared used copy in a flea market and want to read more of that author's works, but the author died and all their books are out of print.

E-books, and Amazon created a new revenue stream for publishers, buying up books at wholesale (for which they paid what the publishers asked! how is that anti-publisher??) and selling those e-books below their own costs to expand a market from a niche curiosity into every day ubiquity. E-books continue to generate revenue long after the printing presses shut down, unlike paper books. So these poor, taken advantage of publishers went from zero profits after print to "some" profits. Oooo, evil Amazon, how could you mistreat them so???

It was the publishers with Apple's help that decided "some" profit wasn't enough, they wanted moar! So now you get numerous cases where the e-book's price is HIGHER than the paperback!! I've seen e-books listed for the hardcover price years after the book was released and used paperback copies were selling for $1 right beside it.

I swear, the only publisher that ever really understood e-books was Baen. Give the old books away for free as advertising for the new books, it's not like they were making money sitting on a hard drive waiting for a new print run!

Re:Stupid case

[Daemonik]

Except Steve Jobs approached the publishers and suggested the arrangement to begin with.

Re:Stupid case

[moronoxyd]

In other words Apple tried to do what they did with music , open up a market and allow everyone to make money and be of benefit to the users.

This model kept the ebook prices artificially high and removed competition on price.
How would that be to the benefit of the users?

Re:Stupid case

[rwise2112]

Apple's point was that they had no deal at all in the shady part, the publishers colluded among themselves.

Ignorance is no excuse for breaking the law!

Re:Stupid case

[Anonymous Coward]

A business model that keeps publishers in business, and thus ebooks flowing, doesn't really seem anti-consumer.

Yes, yes, some authors publish their own ebooks. So what? They wouldn't be affected by this. Most authors still go through publishers for the up-front payday. You want ebooks? Keep publishers in business.

Re:Stupid case

[Anonymous Coward]

Because it allowed publishers to stay profitable and keep producing ebooks.

Regardless of some authors self publishing, most authors still go to publishers for distribution & the front loaded payoff.

Re:Stupid case

[Anonymous Coward]

Do you have evidence the publishers were not profitable and nearing bankruptcy?

Its amazing to see people argue FOR a system which costs them money personally.

As an ebook buyer i want to pay the lowest price, not a backroom dealing anti-competitive price.

Re:Stupid case

[Daemonik]

The publishers were doing fine, and continue to do fine. They still continue to make most of their profits from physical books, btw, which they seem to have no problem selling through Amazon and allowing Amazon to set the price for. In the vast majority of e-book listings, in fact, the PHYSICAL PAPER BOOK COSTS LESS THAN THE E-BOOK, and yet e-book sales account for only 25%-30% of publisher profits.

How exactly, does that work btw? I can buy a CD for $15, but download the album in MP3 format for $9.99. A DVD costs $20, buying the download is $15. Yet only in books is the digital copy routinely priced higher than the physical copy. Yet you want to tell me the publishers are going bankrupt? The same publishers who would gleefully close down all public libraries and have openly accused them of theft? How do you defend these a-holes and feel good about yourself?

Re:Stupid case

[chrismcb]

In other words Apple tried to do what they did with music , open up a market and allow everyone to make money and be of benefit to the users.

I'm not sure what you mean by "open up a market." If you mean by making me boycott the big 6 and spending my money on independents, then yes I guess they did. But it seems to me that there was a healthy ebook market before Apple got involved... In fact that was WHY Apple got involved and did what they did.

Re:Stupid case

[david_thornley]

Book vs. ebook pricing isn't comparable to CD vs. MP3 pricing. Format shifting is easy with music: I can burn MP3s or whatever to CDs or rip songs from CDs into MP3 form easily. Since I can use music I buy either physically or digitally as I please, the MP3 is going to be cheaper than the CD.

That doesn't apply for books, which come either as physical books or digital books. Both formats have advantages and disadvantages, so if I buy one I'd like the other too. However, I can't easily print and bind a physical copy of an ebook, and I can't easily OCR a paper book into an ebook, so I generally pick one format or the other. (Or yet another; I have a few audiobooks I have "read" while commuting.)

For most purposes, I want my fiction as ebooks, because they're easier to read that way, so the ebook has more value to me than the paperback.

Re:Stupid case

[the_B0fh]

If you have evidence of this, the DoJ would love to see it.

Re:Stupid case

[the_B0fh]

Are you really that stupid or do you just like to troll on the Internet?

Apple claims they had no part in the shady deal, so what fucking law did they break?

Re:Stupid case

[Macgrrl]

As a smart consumer I want to pay a reasonable price that is sustainable for the vendor. If they can't make enough of a profit they will go out of business and then there is no product, regardless of how much or how little I'm willing to pay.

Comments

[puddingebola]

Fascinating comment at the end of one of the stories linked to here. The writer claims that Amazon's model is unsustainable and equivalent to the Standard Oil play of selling at a loss to drive competitors out of business. In his opinion, Apple should be commended for raising prices by a few dollars per book? What say you Slashdot? What I have trouble determining in this shift from physical media to digital is how the artists are making out in this brave new world.

Re:Comments

[Sockatume]

Amazon's ridiculously thin margins aren't a short-term tactic to eliminate competitors. If they were, Amazon would've started hiking up prices in things like books and videogames where they've all but eliminated the competition. Slim margins are the entire (incredibly dubious) business model, and they'll continue with that process, bringing in fractions of cents of profit per dollar of sales, indefinitely.

It ain't healthy for anybody.

Re:Comments

[Anonymous Coward]

Ii all Amazon are ever interested in doing is making purchasing / delivery ever more efficient, then isn't that what we'd like to happen? [I don't believe they will restrict themselves to that, but it's pretty hard to see why it would be a problem if they did.]

If not can you explain
-what is the problem
-what you want to see happen
-what does Amazon have to do with it?

Is it "damage to competitors"? The public prefer to buy things for cheaper. The value of a shop floor where they can see or try certain goods is not enough to buy the public's loyalty or to use your loyal core of customers to offset the higher costs. For items which ship in standard sizes/qualities or guessable forms it's even less of a deal (you don't need to "try" a book by your favorite author, just pick paper or hardback).

Is it "the high street"?
For all of the supposed value middlemen always claim they add, a lot of retail stores do or did add add little value - high prices, nothing in stock, little knowledge about their products , crap environments to visit, no used etc - they deserve to go bust. Who should miss years of being gouged on simple things, and paying list price for stuff simply because manufacturers wouldn't ship products or their glossy catalogues direct to consumers?

Is it "warehouse/retail/packing jobs"?
If we end up needing less manual labor - it's hardly fair to blame Amazon, or to expect them to subsidise non-jobs simply because their competitors are crap. We don't need people to carry shit in wheelbarrows through city streets any more either, and I can't see anyone misses that.

Is it a general antipathy towards large corporations? If so it's perfectly understandable, but please don't claim that makes it correct, reasonable, or actionable.

Re:Comments

[Sockatume]

Monoculture, essentially, is the issue. If Amazon was one of a half-dozen ultra-low-margin online retailers, we wouldn't be having this conversation.

Re:Comments

[fuzzyfuzzyfungus]

Monoculture, essentially, is the issue. If Amazon was one of a half-dozen ultra-low-margin online retailers, we wouldn't be having this conversation.

What I find curious, given the fear of monoculture, is how publishers continue to let fear of pirates(who, at last writing, don't seem much deterred by current DRM schemes, and who often have access to scanned versions in any case) drive them right into the same mistake that Team Music made.

While there effect on pirates is muted, DRM schemes certainly do help encourage a winner-take-all market by tying a customer more heavily to a given store the more he has used it in the past. With computers and high-capability tablets it's more of a nuisance(since most of the DRM flavors have clients for them, and you have the resources to run 6 different shitty storefront apps if that's what it takes); but the e-ink reader market is damned barren unless you either have a DRM-free format or are using the vendor's own store.

Re:Comments

[Sockatume]

No argument here.

Re:Comments

[Plumpaquatsch]

Amazon's ridiculously thin margins aren't a short-term tactic to eliminate competitors. If they were, Amazon would've started hiking up prices in things like books and videogames where they've all but eliminated the competition. Slim margins are the entire (incredibly dubious) business model, and they'll continue with that process, bringing in fractions of cents of profit per dollar of sales, indefinitely.

It ain't healthy for anybody.

So it's actually a long-term tactic to fuck over their shareholders. And I wouldn't call losing 20% on most ebook sales "slim".

Re:Comments

[Daemonik]

" What I have trouble determining in this shift from physical media to digital is how the artists are making out in this brave new world."

A couple of artists that sell e-books direct through Amazon have become millionaires actually. http://blog.nathanbransford.com/2011/03/amanda-hocking-and-99-cent-kindle.html

The problem with e-book prices, in the main, is the perception of value. When they are listed next to the retail prices for the paperback version and it's still cheaper to have a paperback shipped to your home, then something is very very wrong. When the e-book version of a book that has been out of print for a decade or more hits the market for $9.99, you know that's not a fair price.

Re:Comments

[Sockatume]

It would not surprise me if a majority of Amazon's sales on everything came out at a loss, with enough big profit items to shift it back across the other side of the line. They're playing a dangerously volatile game.

Re:Comments

[udachny]

Standard Oil NEVER SOLD AT A LOSS, it's a fairy tale for the ignorant and unintelligent. Standard Oil operated for half a century, lowering prices from about 60 cents to under 6 cents in that time period, the same exact time period that made Rockefeller one of the wealthiest people that ever lived (equivalent of 600,000,000,000 dollars).

I comment on this site that government is the only entity that truly creates monopolies and all of its activities aimed at supposedly 'making market fair' are just corruption and racketeering.

I get moderated 'off-topic', that to me is fascinating.

Re:Comments

[udachny]

Oh really? They are a profitable company, saying that what they are doing 'isn't healthy' is just another way to say that you can't compete.

That's exactly what was done to Standard Oil, Alcoa Aluminium, etc. who were always lowering prices, once they were eliminated, the prices never went down again.

Here is the good thing: if Amazon fails, you don't have to bail them out, if they don't fail, they are providing the consumers with lowest prices available.

The idea that this is 'not healthy for anybody' is something from an alternative universe of the bizarro world, yet it is sold successfully to the public at large by charlatans running the biggest monopoly and ponzi scams on this planet at the time - central banks and governments.

Re:Comments

[bws111]

Standard Oil didn't get in trouble because they had low prices, they got in trouble because they created a trust. They not only sold oil, but they either owned or controlled most of the oil transportation system. Because of that control, nobody could compete with them in the oil market because it would have been too expensive for a competitor to build their own transportation system. Therefore, competitors could not arise, and SO could in fact raise prices to very high levels.

Ebooks are not remotely like that. Sure, Amazon could drive competitors out of the ebook market by having very low prices, but as soon as they try to raise prices competitors will pop up, as it is stupidy cheap to retail ebooks.

Re:Comments

[ZombieBraintrust]

Artist without a publisher are making lots of money. They can now get 70% royalty instead of a 10-15% royalty and be just a available as Harry Potter to the consumer.

Re:Comments

[Anonymous Coward]

Standard Oil wasn't "always lowering prices". They *regionally* lowered prices to below the *cost to produce* of themselves and their competitors, using the *massive* business they had across the rest of the country to offset those losses. When the competitor could no longer *sell* anything because they were 'so much more expensive than Standard Oil', but their sale price was already at or below their costs, Standard Oil swooped in, bought the competitor (often for well below rational market value), and either absorbed or closed down the production facilities. Then they raised their prices. Often to *above* what the competitor was originally selling for.

This is similar behavior to what Amazon was doing, except that their 'regions' were categories of e-books, not sections of a country.

Re:Comments

[Anonymous Coward]

Agree with that, but the largest issue with monoculture is usually the abuse of a monopoly position. The problem with Amazon is that they won't flag up as abusing their monopolistic (just their economy of scale), but are too far ahead for an efficient small competitor to catch up.

The second problem is the lack of politicians and civil servants with the balls to make several baby Amazons.

Re:Comments

[Anonymous Coward]

How do you 'know' that's not a fair price? Because the book has been out of print for a decade or more?

Heck, that means the book very likely needs to have all the original publishing work done on it again, from the ground up. A decade ago, fully electronic publishing processes were still rare in the book industry. Two decades ago, they were virtually unheard of. Even if they were used originally, it's unlikely that the original electronic files would still be useable with modern software and equipment. That means the book must be recreated in electronic form, even to the point of having to retype the book from a physical copy. That electronic copy has to go through rounds of editing to ensure that no errors are introduced. Then it has to go through the layout process, often multiple times since the e-book formats and readers differ dramatically.

Re:Comments

[bws111]

There is a very simple formula for deciding if the price of a luxury item (like a book) is fair: If the seller is willing to accept the price, and the buyer is willing to pay the price, then the price is fair.

Re:Comments

[NatasRevol]

You might want to go look at their profit statements over the life of the company.

They've always been playing this game.

Making millions while selling billions.

Re:Comments

[Sockatume]

That's why I referred to them as Amazon's long term strategy in the earlier post.

Re:Comments

[tlhIngan]

Standard Oil didn't get in trouble because they had low prices, they got in trouble because they created a trust. They not only sold oil, but they either owned or controlled most of the oil transportation system. Because of that control, nobody could compete with them in the oil market because it would have been too expensive for a competitor to build their own transportation system. Therefore, competitors could not arise, and SO could in fact raise prices to very high levels.

Ebooks are not remotely like that. Sure, Amazon could drive competitors out of the ebook market by having very low prices, but as soon as they try to raise prices competitors will pop up, as it is stupidy cheap to retail ebooks.

Except by then, everyone would have been using Kindles for ebooks and have significant investments in Kindle ebooks.

Remember, books have DRM, and unless an upstart platform were to offer them DRM-free (try getting publishers onside for that), then people won't bother. The barrier to entry is extremely high and people with Kindles won't want to buy your book reader because it won't read their Kindle books.

Remember what happened a few years ago with iTunes? Prior to it going DRM-free, it was all DRM'd and even worse, no one could sell DRM music that worked on the iPod (the most popular music player at the time). Sure there were competitors, but they were related to crap "PlaysForSure" style stores who more often than not closed shop because of low traffic.

With DRM, once a platform has achieved critical mass, there's no way to break it, short of going DRM-free. It happened for music, but publishers seem reluctant to adopt that model.

And ebooks were sold prior to Amazon releasing the Kindle - Sony did it. But once the Kindle came out, it was pretty much over - the Kindle was superior - easier to get books on it (no PC required), you could get books from anywhere with 3G, etc. So it legitimately took over the market. Except the publishers (like the music industry) were getting unhappy with Amazon's tactics. Apple offered them an alternative that they readily adopted, which pressured Amazon into switching models as well. Of course, the Apple model didn't really do much - other than allow other bookstores to open (besides Amazon's store, there's also the Barnes and Noble Nook, Kobo and iBooks. Even though iBooks is probably the smallest, the fact that other stores have popped up is generally a good thing).

Of course, Amazon isn't in the clear - I come across many "kindle only" books where the author typically takes the "amazon exclusive' offer and with no print option... the only alternatives would be to do without (better) or pirate (I don't have any Kindle books).

Re:Comments

[chrismcb]

Fascinating comment at the end of one of the stories linked to here. The writer claims that Amazon's model is unsustainable and equivalent to the Standard Oil play of selling at a loss to drive competitors out of business. In his opinion, Apple should be commended for raising prices by a few dollars per book?

Selling at a loss is not sustainable. Although I think Amazon was doing it more to drive up the sales for ebooks and create a market, than to drive anyone out of the nonexistent market.
When I first looked into ebooks, the books were too expensive. A little while later, they prices started to drop to something I felt was reasonable, that was slightly less then a mass market paperback. Then not long after I bought a Kindle Apple came along, and all of the prices jumped to the same or more as a mass market. Considering I can usually get a mass market for 10% off the suggested retail price. I did not feel like paying a 10% (or more) premium for an ebook. So I stopped buying them from the big 6 publishers.
Of course the publishers are screaming that it costs money to make an ebook. I'm not looking for a free ebook. But if I have a choice between $7.25 for a mass market, or 7.99 for an ebook (or more) I'll just pick up the mass market.

Re:Comments

[jbmartin6]

How is this not healthy for the consumer? Goods available at almost no markup on cost sounds like a great deal to me. Whether this works long term for Amazon isn't my problem. I hope it does, because I benefit from lower prices.

Re:Comments

[Anonymous Coward]

For more, here's Charlie Stross's post on why DRM is bad for publishers.

Re:cheeper bookes?

[Anonymous Coward]

PH is Vietnam. Expect it. No. Demand it. Damn it? Any who do not condom island country. It is not like it has a choice. Is it not better to steal from rich and give away than to not and pay? Obladiobladumlifegoesondadadadada.

i wonder how the defense will play out

[Anonymous Coward]

"We decided Amazon had an illegal monopoly, so we illegally conspired to set prices instead of talking to the DoJ. The increase in our 30% cut didn't hurt either."

Who is the victim here?

[trout007]

I can never understand laws like this. In every voluntary trade each side benefits otherwise there would be no trade. If Apple wants to set up deals with publishers to set prices nod the customers agree to pay those prices who is actually the victim? If you don't want to pay the price the seller is asking there is no sale. The only argument I might understand is that since they get a monopoly via copyright they are subject to regulation. But that is just another reason to get rid of IP laws entirely.

Re:Who is the victim here?

[Anonymous Coward]

There is also another side. People who are screwed.

Re:Who is the victim here?

[ledow]

Smaller competitors who want to get into the market. Effectively, price controls like this will freeze out the competition. How? Well, say Apple are making 200% profit on everything they sell because they have price-fixed. You now can sell at 200% profit and compete with them (and thus become part of the cartel yourself), or you can try to undercut them. But they have a huge market, to themselves, with huge profit margins, complete control of the market (because they are all agreeing to price at whatever they want) and lots and lots and lots of spare cash to keep you out / buy you up.

Because of this, you also get a lack of competition (what's the point of competing if you can all agree to just set prices to X and no-one "wins" the market for having a better product?), the market stagnates and the customer gets screwed - not by the raised prices (as you say, that's up to the customer) but because the market is so closed that they either pay lots or DON'T get the products at all. It's also a pretty good way to kill off the technology and (thus) competitors who rely on book sales to sell reading devices, etc.

A company sets its own prices. That much is certain. But they should not be getting into groups and DECIDING how much the customer pays between them collectively, with no reference to how much it costs to supply the product itself, and no consumer interest. It's illegal for a reason. It destroy markets, stifles innovation, removes competition, and makes everything a big game to make money with no regard to consumers at all. And, at the end of the day, it becomes "pay lots, or get nothing", which isn't a technique that benefits taxpayers either. Yes, you get greater tax revenue from profits (you hope!), but you also get less people spending money and less money available to spend on other things for those that do.

The point is that the market is bigger than a company, even a government. Harming the market DIRECTLY harms the stability of the economies of world governments. Thus it is illegal.

There's nothing stopping a company with a patent licensing its patent ONLY for 10 bajillion dollars even though it costs next to nothing to manufacture. That's just business. Nobody's stopping that. But colluding with competitors to price other competitors and your own customers out of the market is in nobody's interest - not even the companies that do it, or their shareholders!

Re:Who is the victim here?

[Rockoon]

In every voluntary trade each side benefits otherwise there would be no trade.

True.

If Apple wants to set up deals with publishers to set prices nod the customers agree to pay those prices who is actually the victim?

Everybody but Apple.

The reason its not so simple is because its not a single-variable problem. The optimal price for each retailer to sell at is different.

A simple example of this sort of thing are price differences between the prices at convenience stores and grocery stores.

What Apple was doing was conspiring with the publishers so that the minimum price that anyone could sell at was a close approximation of only Apples optimal price. The publishers have already plead guilty. Apple is trying to claim innocence. Fuck Apple.

Re:Who is the victim here?

[ZombieBraintrust]

Enforcement of the contracts Apple wrote would be government action. The government is sueing so it doesn't have to enforce anti consumer contracts. If Apple wants to fix prices they can do so without the force of law behind them.

Re:Who is the victim here?

[trout007]

But this is the publisher (owner of copyright) licensing it's copyright for some price they and Apple agreed to.

Re:Who is the victim here?

[chrismcb]

Who is the victim? The consumers.

Purchasers.

[Anonymous Coward]

You. Unless you get more money from the publishers than you spend on books.

Because the contract is that the publishers cannot sell to a distributor without telling the distributor that they cannot reduce their prices.

So unless Apple are having a sale on some book, nobody else can have a sale on that book.

Which means that you pay more, because there's no point to shopping around looking for a better deal.

Re:Purchasers.

[trout007]

They could price the book at $10,000 if they want I don't have to buy it. If I agree to buy something only to find it cheaper elsewhere doesn't mean I was ripped off.

Re:Purchasers.

[Sockatume]

The point is that under Apple's iBooks publishing contracts, you're not supposed to be able to get it cheaper elsewhere. (As an ebook, anyway.)

Re:Purchasers.

[Anonymous Coward]

The point is that noone else is allowed to offer a lower price. You are a supplier that paid 3 dollars for a book, I want to pay you 5 dollars, you want to accept it, but we are not allowed to make the deal because of a price fixing agreement.

Re:Purchasers.

[Anonymous Coward]

Don't waste your time. Trout007 is an Apple apologist and will never see the company in a bad light, no matter how obviously illegal and anti-consumer their behavior is.

Re:Purchasers.

[trout007]

I'm not an Apple apologist I just don't see a problem with this.

Re:Purchasers.

[trout007]

You are not allowed to make the deal because you previous agreed not to. You had a contract to do something so if you violate it you are subject to whatever is in the contract.

Re:Purchasers.

[Sockatume]

You don't see the problem with publishers being able to directly set a single price for their product across all retail outlets? A product for which no secondary market exists?

Re:Purchasers.

[trout007]

That's what you get when you allow the monopoly of IP.

Re:Purchasers.

[Sockatume]

I would love for you to explain how that argument makes the least bit of sense.

Re:Purchasers.

[Anonymous Coward]

I think as others point out you are clearly an apple fanboi but i will try to enlighten you anyhow.

You do realize that these sort of "deals" are against the law dont you?

It doesn't matter if you agree with why its illegal or not, the fact is under the current framework it is. If you (Apple) disagree there are mechanisms to have the laws changed but collusion isn't the right way. and this is collusion plain and simple. In fact its so clear that EVERYONE else involved has already settled for millions of dollars.

Also this isnt about "IP", its about price fixing, a law which has existed for a very long time.

This is about Apple making sure they get their 30% margin. Whereas Amazon is able to compete by lowering its margins on some books Apple wont consider this option and elected for collusion and price fixing instead.

Re:Purchasers.

[bws111]

Wrong. You can't make the deal because APPLE has a contract with the publishers that prevents YOU from setting your prices.

You: Mr Publisher, I would like to lower the prices to my customers. To do this, I will take only a 20% cut, you will still make the same money.

Publisher: No can do. We have this deal with Apple that says nobody gets a lower price than their customers. However, since you offered to take only 20%, you will get only 20%, but your customers will pay the same. We will keep the difference.

Re:Purchasers.

[Anonymous Coward]

If the copyrights expired after say five years, that would force publishers to compete against the future (which is certain in so far that if it won't exist, books won't matter), allowing an efficient market to emerge where any collusion over a particular good is at the very least time limited (for real, not the "2^256 years is also a time limit").

Re:Purchasers.

[Sockatume]

And if the US had a better banking system there wouldn't be any loan sharks, but we still have an obligation to prosecute Johnny Thumbs for breaking people's knees when they miss a payment.

Re:Purchasers.

[Anonymous Coward]

How would this prevent them from price fixing which is what the article is about?

Re:Purchasers.

[trout007]

Lots of things are against the law. I am trying to figure out the logic why.

Re:Purchasers.

[Anonymous Coward]

Because laws are generally "for the people" and not "for a companies bottom line".

Price fixing = higher prices = bad for consumers.

Do you try to figure out why other things are against the law, or just price fixing?

Start here: http://en.wikipedia.org/wiki/Sherman_Antitrust_Act

Re:Purchasers.

[Thruen]

Funny story, this is completely wrong. I've seen everyone saying that's how it works in comments, but if you actually look into what they're being accused of, this isn't it. You could still set your own prices to whatever you like, but after doing so Apple will lower their prices. The thing that apparently makes this non-competitive is that Apple still gets their 30% instead of taking the cut that you would have to in order to sell the book for less. From all of the actual facts I've been able to find, other retailers could still actually set whatever price they wanted. Of course, you could only find this out by actually reading whole articles, which apparently nobody does because at the end of articles explaining this, readers still claim it's what you describe. It's kind of scarey how many people think they fully understand the case but have no idea what an MFN clause actually is or how Apple included it in their contract. Most people even assume a MFN clause is illegal, which isn't true unless it violates other laws, same as any other clause of a contract. Apple just took it from the usual wholesale system and applied it to the agency system they wanted to use, and this supposedly makes it illegal. Mind you, the most important piece of evidence in the case I've been able to find is a quote from Jobs' biography that doesn't admit to any wrongdoing or collusion at all, it only shows how they felt about Amazon's price model and what they wanted to do themselves.

Re:Purchasers.

[CCarrot]

Lots of things are against the law. I am trying to figure out the logic why.

Because it prevents fair competition. It's like NewEgg trying to dictate to their suppliers that nobody else that the supplier provides the widget for can offer it for a lower price than NewEgg has it posted for, ever. Nobody else can offer that same widget on a 24-hour sale, or for a Black Friday sale, or whatever.

Pricing should be based on market demands and the internal business models of whomever is offering the widget (or ebook) to the end user, not arbitrarily dictated by one supplier in the market. If supplier B wants to offer a week long half off sale or something to drum up traffic, they should be able to if it meets their business goals and as long as the manufacturer (or publisher) is still getting their agreed upon price. Likewise, the manufacturer or publisher should be free to drive the best negotiated deal they can with various suppliers, and if that means a lower cost per unit (but many more units) for supplier B, then that is in their best interest, even if supplier A(pple) doesn't like it...

The only thing that is tricky in this case is the 'per unit' evaluation. Since ebooks are not physical objects, I'm pretty sure that suppliers don't pre-pay for a fixed number of them, then have to go back and purchase more when they 'run out'. Regardless, though, price determination should ultimately rest with the supplier, and if they want to offer the ebook (or widget) as a loss leader (i.e., at a lower price than they actually paid for it) in order to bring more traffic to the site and potentially drive up sales in other areas, that should be entirely up to them, not at the discretion of some random, third party competitor.

Basically it comes down to this: if supplier B's business model is more competitive than supplier A's, then they can and should win the battle for customers in an open and free market, whether that be through better advertising (e.g., Nike), selling in bulk quantities (e.g., Costco), better quality (e.g., DeWalt) or offering reduced retail pricing through bulk purchase agreements and warehousing by the supplier (e.g., Amazon and WalMart). Price fixing breaks this model, so it is considered anti-competitive, and therefore illegal in a nominally free market society.

Re:Purchasers.

[goose-incarnated]

The most important piece of evidence that you should have found is the fact that what you describe is illegal (not only in the US), and that all the other parties have settled this matter admitting guilt rather than proceed with a hearing. You keep ignoring that this practice is illegal, in more countries than the US.

Re:Purchasers.

[Sockatume]

If that's the case then I've been painfully misled and have badly misled others as to the severity of the issue, although it'll take a more authoritative source than Jobs' bio quote to demonstrate it. Their receiving their preferred cut regardless of the selling price would be a distortion of the market, but a slight one.

Re:cheeper bookes?

[marsu_k]

I think the word you're looking for is "condone". Condoming an island country could prove to be extraordinarily difficult.

Apples price fixing

[Anonymous Coward]

This just reinforces my belief that ownership of any Apple device is an indicator of low intelligence.

Name any Apple product over 20 seconds old and you can go buy three of the competitor's product and use two of those for target practice and still come out cheaper with a better product that you don't have to load media through their stupid iStore (is that what it's called?)

Apple products are NOT immune to virus infections, either.

Can you say "Pirate Bay"? I knew you could!

Good! Now what abut banks?

[mauriceh]

Glad to see they have enough evidence to go after Apple.
It seems fairly obvious that they are guilty.

Now how about some banks?

Re: cheeper bookes?

[niftydude]

Condoming an island country could prove to be extraordinarily difficult.

How hard could it be? It's a reasonably small island, and latex grows on trees!

Re: cheeper bookes?

[enrevanche]

It would be easier if it was hard!

Re:cheeper bookes?

[moronoxyd]

What island country are you talking about?
If you mean Vietnam, let me be the first to tell you that Vietnam is not an island. Vietnam lies on mainland asia, just south of China.

Not about damages

[ZombieBraintrust]

The Department of Justice is not seeking financial damages from Apple if the government wins the case.

http://www.tuaw.com/2013/06/03/apple-doj-ebook-price-fixing-trial-begins-today/
Not really a shakedown for bribes. Your forgetting government power also include contract law. Apple was seeking to control prices with contracts. If the courts enforced those contracts then they would be shutting down competition.

Re:Not about damages

[Anonymous Coward]

The *only* price control Apple got through the contracts was the ability to set the price *they* are selling the book for to the *lower* of a) the price set by the publisher, or b) the price set by the publisher for one of Apple's competitors.

It's a standard (and frankly, *COMMON*) 'most favored nation' contract clause. It that arrangement amounts to a valid 'price fixing' complaint, then half of the companies in the *world* (at a low estimate) are guilty of price fixing.

Re:Not about damages

[Anonymous Coward]

You've got it wrong. Explanation here:

http://www.macstories.net/stories/understanding-the-agency-model-and-the-dojs-allegations-against-apple-and-those-publishers/

There was one other important aspect to the agency model that Apple established with the publishers — it included a most-favored-nation (MFN) clause. An MFN provision will frequently appear in contracts between wholesalers and retailers and it ensures that the wholesaler will provide the retailer with the best wholesale price. But Apple adopted it in the agency model to require that the publishers adjust e-book prices in the iBookstore to match the lowest price offered by any other retailer — regardless of whether the publisher controlled the pricing in that retailer. This meant that the iBookstore would always have the e-book at the cheapest price. It also meant that if a retailer was offering the book for a cheaper price, the publisher would have to lower the retail price to match it. If that meant the price was below what it cost to produce, the publisher would take the loss, not Apple — they would still get their 30% cut.

As I understand it after reading all of this, this is not a -normal- MFN clause at all, and it effectively coerced the publishers into requiring the Agency model for -ALL- retailers. The normal retail model becomes a kind of Poison Pill the publishers could not swallow, because a situation could arise where the publisher was forced to sell books to Apple for a loss. Consider a likely example: Amazon prices a book at 99 cents (that's probably a money-losing price but they don't care in this case). The Publisher is FORCED to make this the Retail Price in the Apple Store, and no they don't get to keep the 'wholesale' price higher. Apple sells you the book for 99 cents, keeps 30 cents and sends the publisher 69 cents. If this is less than the book cost to produce, the publisher is screwed. The only way to prevent this is for the publisher to push all its retailers to the Agency Model.

Quotes from Steve Jobs Official Biography?

[houbou]

Wow, I guess it does pay to keep a low profile, especially when, after you died, your biography can be used against the company you built! :) Cautionary Tale for those who like to showoff? :)

Re:cheeper bookes?

[cpt kangarooski]

Condoming an island country could prove to be extraordinarily difficult.

It might be easier if it were a penisula.

Wrong. Hella-wrong.

[Anonymous Coward]

They made a contract that stated that a publisher could not use a distributor who sold books less than Apple did.

So, for example, no sales. No special offers. No "Buy these two books, get one free". Unless it's a book that Apple are doing the same thing on.

If the publisher agreed a contract with Apple and Amazon to sell their books, and the publisher DID NOT require Amazon to sell ONLY for the sale price the PUBLISHER has set, and that set price was no lower than Apple, then Apple could sue them for breech of contract and stop paying on sales whilst the dispute was ongoing.

Nature: online science papers 1/2 printed cost

[peter303]

Nature had a breakout of costs of publishing science papers on line compared to print versions. Its not an exact comparison, but overlaps. This included editor salaries, office overhead, printing, mailing, computer servers, etc. If you paid for the time PhD/professors spent peer-reviewing each others work for free, then the online cost would be more like 2/3rds.

Re:Nature: online science papers 1/2 printed cost

[dgatwood]

That's way low for traditional commercial publishing. Scientific publishing is cheaper because somebody else has done the design work, all the papers look alike, and they aren't publishing in multiple formats. Unlike scientific papers, commercial publishing houses typically don't use PDF, and they typically design each book or book series with its own look and feel.

Electronic publishing is only cheaper if you limit yourself to a single output renderer, e.g. "We're only going to support iBooks" or "We're only going to support PDF output". As soon as you try to generalize your publishing process, you're in for great pain, because there are dozens of readers, and each one implements the specifications slightly differently. Right now, eBook publishing makes 1990s-era web design seem completely standardized by comparison. When you're actually trying to design a book or book series for EPUB and KF8 and KEPUB and sometimes Mobi, particularly if you factor in testing costs on dozens of different devices, your design costs can easily be more than an order of magnitude higher for an electronic edition.

With sufficiently large distribution, all those up-front costs get lost in the noise, but most books don't sell nearly enough copies for that to happen, so for a typical book those much higher up-front costs mostly cancel out the savings from avoiding the printing cost and from the slightly lower typical channel cost. I wouldn't be at all surprised if the average eBook were actually more expensive to produce, in terms of per-unit cost, than traditional dead-tree-and-ink books.

Re:cheeper bookes?

[Macgrrl]

It would be easier on an island country than a landlocked one.

the trial is in nyc

[Anonymous Coward]

so let's try "defense"