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Judge Rules Apple Colluded With Publishers to Fix Ebook Prices
Despite many publishers themselves settling with the DOJ over allegations of price fixing ebooks, Apple held firm and recently went to trial. And now the verdict is in: Apple conspired with major publishers to control ebook prices in violation of anti-trust laws. A trial for damages has been ordered. Quoting Reuters: "The decision by U.S. District Judge Denise Cote in Manhattan is a victory for the U.S. government and various states, which the judge said are entitled to injunctive relief. ... Cote said the conspiracy resulted in prices for some e-books rising to $12.99 or $14.99, when Amazon had sold for $9.99. 'The plaintiffs have shown that the publisher defendants conspired with each other to eliminate retail price competition in order to raise e-book prices, and that Apple played a central role in facilitating and executing that conspiracy,' Cote said. 'Without Apple's orchestration of this conspiracy, it would not have succeeded as it did in the spring of 2010,' she added."
Update: 07/10 16:36 GMT by U L : The ruling is now available (160 page PDF).
http://www.nytimes.com/2013/07/05/business/as-competition-wanes-amazon-cuts-back-its-discounts.html?hpw&_r=0
As Competition Wanes, Amazon Cuts Back Discounts
By DAVID STREITFELD, NY Times
Published: July 4, 2013
"Jim Hollock’s first book, a true-crime tale set in Pennsylvania, got strong reviews and decent sales when it appeared in 2011. Now “Born to Lose” is losing momentum — yet Amazon, to the writer’s intense frustration, has increased the price by nearly a third.
Jim Hollock wrote a true-crime story set in Pennsylvania.
Mr. Hollock’s first book had decent sales when it appeared in 2011, but now that it is losing momentum, Amazon raised the price.
“At this point, people need an inducement,” said Mr. Hollock, a retired corrections official. “But instead of lowering the price, Amazon is raising it.”
Other writers and publishers have the same complaint. They say Amazon, which became the biggest force in bookselling by discounting so heavily it often lost money, has been cutting back its deals for scholarly and small-press books. That creates the uneasy prospect of a two-tier system where some books are priced beyond an audience’s reach."
around here you can't have a product listed on "sale"(as in firesale or whatever) permanently.. why? because it's deceiving. if it's never at the normal price then there's never a special sale price... just the usual price. so if something is 10% or 20% off permanently, all the time, it's just a trick to fool the customer and therefore there are statuary limits on how long a sale can last..
world was created 5 seconds before this post as it is.
OK. Apple is evil. Happy?
Hard to see how this was ever going any other way when the publishers involved all settled, including admissions of guilt in the settlement. According the the BBC, Apple will 'appeal against the ruling and fight "false allegations".' Apple has now definitively departed from the reality-based community.
Slashdot - News for Nerds, Stuff that Matters, in ISO-8859-1 Has just realised that beta makes this signature redundant
Everybody who ever bought any number of books will get a single $1-5 credit toward buying another book. States and Federal government will collect
millions of dollars and fines.
Indeed a 'book' is nothing but an encumbered text document stored on paper. Which I guess you would call 'p-garbage' by the same logic, and the printing press is nothing but a big expensive copy prevention device.
First off, no company evil and it can't be. A company isn't sentient, the people are.
Group dynamics, dude.
Groups act like a single entity - case in point military. It has been shown time and time again, put a person in a uniform and have them identify with the organization and you can get them to do just about anything. The Nazis were expert at this. (I will bitch slap the first person who improperly invokes Godwin's law on this!)
It's the same with a company. When folks are working for a company, they identify with that company. That's why when speaking to a representative of a company and you slight the company - not them personally - many times they'll get irate as if you DID insult them.
If a company "culture" can be just a like a personality. I mean, why is that the cell providers, satellite tv, airlines, and cable companies, even though they are made up of individuals, treat their customers like garbage and have no problems ripping them off?
It's because of a company personality or "culture".
So, yes a company CAN be Evil.
An e-book is a specially formatted text document which includes additional metadata making it easier to use on specialized e-book readers. Nothing more, nothing less. If you actually shop around, as opposed to just grabbing a Kindle, you'll notice that a lot of stores (and certain publishers in particular) do not put DRM on some books (I'm particularly impressed by Tor, who almost always have DRM-free copies available). DRM isn't fundamentally part of the "e-book", even though your post implies that publishers have successfully convinced you that it is.
So if all but one seller sets a certain price, then they are free to do so, but that last one seller is not free to set that same price - then the rules of reality change?
I also do not understand this statement - "artificially raise prices". This assumes there is a correct price for a given product, that sellers know that correct price, and have chosen not to use it. Is that what you are claiming? In a market, the "correct price" is what a buyer and seller are freely willing to agree to, so you could not determine in advance of the actual transaction what price is correct.
You don't understand what collusion is, do you? The sellers specifically conspired together to artificially raise prices, which bypasses the normal supply and demand pricing and allows them to do whatever the hell they wish. If we'd actually allow such a thing, you'd see a lot of goods suddenly inflate in price for no reason whatsoever because by colluding corporations can lock you out of any alternative. Collusion breaks the principle of a free market by removing competition.
I would argue that "monopoly power" is the ability of *one* player to reset the price above the what would normally be a market price. Since the deal Apple brokered among publishers raised the cost of ebooks across all platforms, the term should apply here.
You understand that this isn't Apple vs the "publishing biz", right? The publishers were in on it from beginning to end and were set to profit handsomely from the arrangement.
No kidding!!! What do you say at this point?
Well, its always best to know the actual details of what was going on. The problem was that Amazon was selling its "e-books" (i.e. Kindle) versions of books for well below their cost they paid to the publishers to buy them. Several years into this Amazon also started its own publishing arm. In the end, assuming Amazon would demand low pricing like they were selling e-books for or not sell them (after all other large scale sellers had been eliminated) this would likely bankrupt and destroy much of the publishing industry (the industry and Apple could see this) - leaving Amazon with sales and much of the publishing to itself (a monopoly).
Apple talked with the publishers and said we want to sell e-books, but since they are electronic they need to be cheaper than the paper based versions, but the publishers have to make enough to be around (as nobody wants to just have Amazon destroy the publishing industry and be the only large scale publisher/seller of books in the U.S. - monopolies tend to not work out well for the consumer in the end).
So Apple was proposing lower prices for e-book versions, but the publishers would force Amazon to not sell their Kindle versions at a loss. This was illegal to coordinate & price fix like this, but it didn't raise the prices of e-books the publishers were selling, it lowered them (as they were selling them for the same price as paper versions to distributors, including Amazon, before hand - Amazon was just selling their e-books at large losses, presumably to destroy their competitors in the large scale book sales market & possibly with an eye to eventually corner the market in the publishing industry).
shouldn't Amazon be free to set whatever price they choose for what they sell?
So long as they are not violating any of the voluntary agreements they made with the companies that provide them with their inventory, of course. If Amazon does not like their prices, they do not need to stock their products in its inventory.
An artificial price is one decided by fiat and not by market forces. By definition, when a trade group decides on a single price, that's an artificial price.
There are no others to set up competing services in this context; the group that decided the prices is composed of every major publisher in the United States.
No kidding!!! What do you say at this point?
I don't know what the correct shape of a potato is, but if one plopped out of a big potato-making machine in front of me I'd be quite justified in calling it artificial.
No kidding!!! What do you say at this point?
I love Apple's products (no really, I do), and I make my living supporting them, but anticompetitive behavior is a crime against capitalism itself. It hurts us all. As soon as Apple entered the market, E-book prices went UP. If Apple had truly represented more competition, as they claimed in court, prices should have gone down. The prices went up because Apple illegally colluded with others to fix a higher price (perhaps so they could get their 30% cut). The court should fine Apple something meaningful. How about the $140B they have in cash? Distribute that to everyone who bought E-books. Or put Tim Cook in jail for anticompetitive behavior. No CEO would ever do anything anticompetitive again if they knew they might personally go to jail. I would even support a corporate death penalty for Apple if it sets a precedent: engage in anticompetitive behavior, and the government will terminate your company for good. White collar criminals are different from blue collar criminals in that they usually consider the consequences of getting caught. Only with serious and meaningful punishment can we stop anticompetitive behavior going forward. Let's begin with Apple.
Collusion was never shown. The publishers were never shown to get together on pricing.
Apple had conversations with each publisher individually. Reflected in the different agreements for each publisher.
So, what's the problem then?
This is 100% true. I don't think I've ever seen a Judge say something like this one did. Seem 100% guarantee of a new trial upon apeal.
Not true. His statement was at a hearing to decide if the case would be thrown out because of lack of evidence. The Judge simply stated the feds had evidence. The Judge made his statement because Apple asked for his opinion at that point. He was required by law to say something.
The way Amazon was doing business before this all went down was a sure-fire track to an anti-trust case. They priced books below their own wholesale costs to keep competitors out of the business (the margins on Kindles are pretty slim to nil; I don't think you can even call the cheap books a loss leader, since it just leads to more losses). They controlled (still control?) over 90% of the eBook business, and their DRM BS isn't even compatible with the DRM BS that other companies use. (I can buy books from the Kobo bookstore and use a Sony eReader, for instance. And vice versa. No such luck if I buy a Kindle book, though. I have to have a Kindle.)
Apple did Amazon a favour by stepping in and gathering the publishers together. Now Apple's lost a lawsuit, but as far as I know, the agency model will still persist. Amazon dodged a bullet there.
Would you have the same opinion if the oil companies together decided that you should pay $30 a gallon for gas?
No, they colluded to use a different pricing model than Amazon had forced on them through a near-monopoly position on e-books.
And now, in the end, there is more competition. Welcome to modern-day America, where breaking a monopoly is itself considered to be an anti-competitive practice.
You can sell, loan, or even copy a book easily and anonymously. You missed the point.
"When information is power, privacy is freedom" - Jah-Wren Ryel
The case had little to do with the 'correct' price of ebooks, and a whole lot to do with elimination of the word 'freely' that you used.
Prior to the agreement Apple made with publishers, the publisher could set their own price that the retailer paid. Nothing wrong with that. In turn, the retailer set their own price that the consumer paid. Nothing wrong with that either.
After the agreement with Apple, the publisher set the price that the consumer paid. Not really anything wrong with that (yet). However, the publishers were still using the retailers to 'sell' the books, but the retailers were no longer able to set the price they asked. Now we have a problem. Why should an agreement that Apple has with a publisher to collect 30% on every sale force Amazon to also take a 30% cut? Why should Amazon not be able to lower the price it's customers pay by taking less than a 30% cut? THAT is where the price fixing comes into play. Amazon used to be able to set the price it's customers pay, and no longer can. That is why the prices are said to be 'artificially' set. There no longer is any competition, as the collusion between Apple and the publishers has eliminated it.
Books are not a fungible commodity. People don't decide what book to read based on price, they decide based on the book. Yes, if they set the price too high people won't buy it, but that is not the issue here. The issue here is that if you are using other businesses (retailers) to sell your product, then those other businesses should have a say in how much they will sell the product for. That competition has been completely eliminated by this collusion. And the purpose of the collusion was not simply to set the price of the product, but to ensure that a single retailer no longer had to compete on price.
Summarized:
Apple got them to agree to sell the books to them at X percentage of the sale price.
They also negotiated that if someone else can sell the book for price N, they have to allow apple to do so, but with Apple's cost still being a percentage of a sale price.
Music Industry:
The music industry was dead-set against selling digital music, DRM or not. Period.
Apple made the heavy DRM concessions up front, but negotiated hard to get a profitable model. By the time digital music was mainstream (through Apple's active marketing/etc.), the music industry was so desperate that they had to turn to Amazon to shake stuff up, and they lost DRM in the process . . .
Amazon had the book industry by the book-bindng . . . don't you think it was just the industry trying to save itself?
Amazon is NOT lillywhite, nor are the book publishers; authors are NOT always compensated for Kindle/Nook editions, the same way that Music Artists don't get a 'fair' (meaning what they SEEMED to agree to previously) cut.
I dont think there was a clear point to have missed. The statement "eBooks are bullshit" is hyperbole and subject to a lot of interpretation, so I interpreted that as 1) eBooks being text documents should not be encumbered in any way 2) by inference print books are better because they are not encumbered, and 3) Anyone that disagrees is ignorant. To which I replied 2) ebooks and pbooks are both encumbered although in different ways 3) I dont think we are all ignorant because some lamer says so, and 1) eBooks and eReaders are more than text documents. I dont think I missed the point at all.
But perhaps you miss mine. You say that the DRM used for eBooks has more practical restrictions than print books. I would agree. We might even have a constructive dialog about how eBook/eReader DRM could be modified to better serve customer and authors and distributors. But OP's statement that, in effect, converting a paper book to digital form somehow relieves the author and publisher of any right to recoup their investment, well I dont get it. My point was that in paper form people seem to accept that copying is prevented (from the simple aspect of being impractical), yet unleash all this angst when eBooks cant be copied because of DRM, when the practical upshot is about the same. Given that eBooks can in fact be borrowed and loaned for free, that leaves your privacy concern, and I agree strongly. But thats a far far cry from "eBooks are complete bullshit".
Amazon sent out an email a while back when this case first started, basically saying that the expected result will be $1-3 credit per book purchased over their preferred $10 price point. How that actually works in terms of who pays who what I have no idea; but I doubt Amazon would send that out if they weren't pretty sure that would be the end result.
There is one fundamental difference from books vs ebooks: ebooks can be cloned perfectly in a split of a millisecond. Books cannot. This was a limitation of the analog world. Now, in the digital age, this limitation has vanished.
Meh. There's no technology that favors pirates more than it does legitimate publishers. At most there is parity; a publisher can whip up millions of ebooks with minimal effort and cost just as easily as a pirate can. At worst the publisher will have an advantage if only due to being able to work openly.
Before ebooks, pirates could operate printing presses. Before presses, pirates could employ scribes. Before literacy, pirates could memorize the epic poems that were passed down orally.
I fail to see how the landscape has changed so radically. All that's changed is that the up front costs to publish a book quickly and easily -- legitimately or as a pirate -- have dropped a lot.
-- This and all my posts are in the public domain. I am a lawyer. I am not your lawyer, and this is not legal advice.
From Wikipedia, Groupthink is a psychological phenomenon that occurs within a group of people, in which the desire for harmony or conformity in the group results in an incorrect or deviant decision-making outcome. So, the fact that a group of people can result in deviant outcomes that would not result from the individuals alone seems to indicate that a "group" (or company) can be evil (or more evil) while the individuals may not be (or be less evil).
Your argument defeats itself. As you pointed out (as the court determined), it took many players working together to raise the price of ebooks. That's the definition of collusion. Not a monopoly.
I would argue that "monopoly power" is the ability of *one* player to reset the price above the what would normally be a market price. Since the deal Apple brokered among publishers raised the cost of ebooks across all platforms, the term should apply here.
I disagree. In this market, you had en extremely dominant player with 80-90% market share selling products at a loss. One of the benefits of this was extending and maintaining the market share of the Kindle eco system, thus raising the barrier to entry to the market. Another was to train customers into a certain price range. Combining these, it is likely that they could later impose these prices on the suppliers.
Apple entering this unstable market gave the unhappy suppliers an option, which they took advantage of. A new player entering a previously almost monopolized market, and still being a by far smaller player - Kindle still has 50-60% of the market - and being hit by anti-trust laws sounds strange to me. Sure, they probably guessed that prices would increase but that was caused by the intrinsics of this specific market with the 800 lb gorilla selling at a loss. While I think Apple's MFN tactic should be disallowed - at least as far as MFN being applied to the customer price, rather that what Apple would be paying - Amazon also had MFNs in their contracts.
It's laughable that you don't even realize that anti-trust laws are protecting your "individual rights".
"Growing old is inevitable; growing up is optional."
Dont nail them for some arbitrary amount that will be isolated and written off by the accountants. Hit them where it really hurts them: deny them the right to compete in a market. That would be a real punishment for them.
After all, they cheated. Let them be forced out of the game for a while. Then when they try to come back in, they will be so far behind they may actually have to offer some benefit to the consumer.
You have got to be kidding. For a couple years, the entire entry way for a B&N was crowded with Nooks. They were shoving them down peoples' throats more than a Krisha at an airport.
They are not even in the same market. There's no competition. Putting an e-reader on the iPad was even a last-minute thought. Eddie Cue convinced Steve Jobs to do it just before the iPad's launch. Then the idea to couple it with a store hit, and Cue had two months to have the app, the store and the publisher deals done because Jobs wanted to demo them on stage.
Seriously, it's not a grand conspiracy, it's a hastily-constructed afterthought that ended up being successful.
I take it that you've never gone in and unbound a book, scanned each of the pages, run through OCR Software, fixed any interpretation errors, and then gotten the new document converted to an appropriate digital format for further use.
I cut paperbacks into 2-3 sections then chop 400 pages (200 sheets) at a time with something like this:
http://www.amazon.com/Professional-Guillotine-Desktop-Stack-Cutter/dp/B003D6JQ62/ref=sr_1_1?ie=UTF8&qid=1373486777&sr=8-1&keywords=stack+cutter
I then drop it into this:
http://www.amazon.com/Kodak-1147925-Scanmate-I1120-Scanner/dp/B002N0QJ0K/ref=sr_1_1?ie=UTF8&qid=1373486701&sr=8-1&keywords=scanmate+i1120+scanner
You can easily get 50 sheets at a time in, with room to drop another 50 in when it's almost done. Takes about 5 minutes per hundred "pages" and you only need to pay attention every fifth minute or so. I get a 300dpi full color, full text search PDF in about 10 minutes per 100 pages - 5 mins to scan, 5 mins to process/OCR/PDF. BnW text only (ocr text searchable) in half that. Once in a while I need to blow dust off the scanner and rescan a stuck page. I put the scanner on top of a box that catches the paper for me in case there's any "2 for 1" pages sticking to each other so I don't have to do more than toss in the next stack when it runs low.
When I'm done, I take half a minute to check if the page numbers are accurate and find any missing pages. Usually happens about 2 in 12 magazines with super-thin glossy paper, maybe once per half dozen novels.
You can do it while watching TV/youtube/netflix/debunking others on slashdot...
Let me clarify: a publisher can whip up copies of a book as easily or more easily than a pirate can. Yes, the initial creation of the book is difficult and costly, but the marginal cost of each copy thereafter is not greater for the publisher than the pirate merely due to the state to which technology has advanced. I was never addressing the issue of paying for the labor needed to get the book ready to publish to begin with; those sunk costs are not going away and are not too closely linked to publishing technology. Hell, some authors still write books longhand.
For example, if the cheapest way to print a paper book is to use a huge offset press, publishers likely have an advantage over pirates who will either have to conceal their huge illegal printing operation or use inferior techniques, such as xeroxing books one at a time. OTOH, if xeroxing books one at a time somehow happened to become a cheaper means of printing than anything else, the legitimate publishers would have the offset press hauled away, install a bunch of xerox machines, and still not be behind the curve of the pirates.
Digital distribution has greatly reduced the risks, while digital copying has eliminated the investment and greatly increased the profit margin
That only brings pirates toward technological parity. Legitimate publishers are not prohibited from using the latest tools. It may be difficult for them to figure out how to make money whilst selling books over Bit Torrent or whatever the kids are using these days, but they needn't be shackled to the old ways.
-- This and all my posts are in the public domain. I am a lawyer. I am not your lawyer, and this is not legal advice.
"I disagree. In this market, you had en extremely dominant player with 80-90% market share [cnn.com] selling products at a loss."
How can this possibly true given that the paperback versions were pretty much always cheaper again and producing a paperback product is always drastically more expensive than producing a digital version.
I think the publishers might have been telling a little white lie about the whole "loss" thing.