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Court Bars Apple From Making Industry-Wide E-book Deals
itwbennett writes "The federal judge presiding over the U.S. electronic books case against Apple has barred the company from striking deals that would ensure that it could undercut prices of other retailers in the e-book market and also prohibited Apple from letting any one publisher know what deals the company is striking up with other publishers. For its part, Apple said it plans to appeal the ruling (PDF), denying that it conspired to fix ebook pricing. Meanwhile, Amazon is alerting customers of their potential payout, which could be as much as $3.82 for every eligible Kindle book."
There's nothing illegal about being by far the largest e-book publisher. There is something illegal about conspiring with the majority of an industry to collude in price fixing. Also, I'm amazed at the gall of being upset that an illegal conspiracy against customers is actually leading to said customers being compensated.
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Barnes and Noble is also notifying their nook owners about the payout.
Unlike you, I am glad that Amazon is able to set their prices LOWER once again without a MFN clause getting in the way.
You think Apple was "competition" when they conspired to RAISE prices for everyone, including amazon so they could lock in their 30% cut and not have to compete on price?
Crazy...
Apple has been robbed of justice. Amazon is behind this and they are the ones that should be convicted!
Robbed of justice? You know that one of the reasons they were convicted were that they had an email from Steve Jobs confirming illegal price fixing?
I do not understand. Price fixing is saying, here is the price, no one go under this price. Apple said,here is what i am paying, if you let someone else get the book for less, then this is the new price I am paying.
So why do you think Amazon is willing to sell ebooks at a loss?
Do you think they just love their customers or maybe if they can drive their competitors out of business they can raise prices later?
Really? That is what apple said? The publishers were unhappy with Amazon discounting the books for a while but were unable to do anything individually. Apple came around and said we can work on this with you. The 5 publishers all got on-board and then gave amazon an ultimatum. change your model to agency or be excluded from the market.
Apple also said this:
'We'll go to the agency model, where you set the price, and we get our 30 percent, and yes, the customer pays a little more, but that's what you want anyway.'"
See the part where Jobs acknowledged the customer (thats you and me) pays more?
Is that how competition should work?
Not correct at all. The rules stated that if any other retailer sold the book for less than what Apple was, Apple could change their price and take it out of the publisher's percentage. Apple was all about protecting their 30% and not actually competing as a retailer.
According to Jobs they were not cheaper:
'We'll go to the agency model, where you set the price, and we get our 30 percent, and yes, the customer pays a little more, but that's what you want anyway.'"
Apple always seem to do so well in court. The timeframe has dropped to 10 years to five. The remedies to include "music, movies, television shows or other content," all gone. Apple having to allow Amazon, Barnes & Noble, and others to sell content through links to their own stores in their iOS apps, thereby avoiding Apple's 30 per cent tariff.
Apple is not going to be concerned about a few $. It is becoming increasingly necessary for content to move cross platform easily, without being treated as a criminal for removing trivial DRM, for all content and I include Applications. There is no technical reason for this today.
Actually apple came in and offered a way to break the amazon monopoly.
Apple Didn't offer DRM free ebooks at lower prices than Amazon...you know compete. Apple formed a price fixing cartel with publishers which is bad for consumers, and removing the ability to compete with Apple(Even if you are not buying Apple products)...the reason why Monopolises are bad.
Steve Jobs should have gone to jail.
You weren't paying attention at all. Ebook prices went up after the iBooks thing started, both from Apple and Amazon.
That's the first hint that something shitty is going on, when you have more competitors in a market and yet the price goes up.
Don't you love it now when Apple haters get modded UP?
I am not sure they do, but the image of technical mind hippy revolutionary is long gone and replaced by a mega corporation prepared to lie, pay no tax towards hospitals and schools, steal money from consumers, proud of manufacture goods in china (including new reports this week...again) by badly treated by China's own standards workers, produce damaging to the environment products, and is incredibly litigious, on the backs of heavily marked up mid range products. if popular opinion is going against them maybe they should, I don't know..."Think Differently"
Amazon's actions are largely irrelevant because this is about Apple. The DoJ looked at Amazon and concluded their actions weren't illegal. Apple was simply uninterested in competing so they played ringleader in price fixing collusion to protect their profits and avoid having to compete - instead pushing off the costs of competition on the publishers.
The payout is a separate thing that's a result of the settlements the DoJ struck with the publishers last year. It's part of the same issue, but it was settled out of court and wasn't part of this case.
For this ruling, the judge is barring Apple from engaging in "most favored nation" clauses (i.e. "our store will always have the lowest price for your product, or will be tied for having the lowest price") and is forcing them to stagger re-negotiations with the various publishers over the next few years in order to ensure that no collusion occurs. As I understand it, and I may be mistaken, they are not barred from engaging in agency model deals (i.e. "you get to set the price and we'll take X% cut"), which was actually a large part of what led to the price increase in the first place. Prior to that, the industry standard was the wholesale model (i.e. "we negotiate a price that you sell the book to us for, but then we can sell it to consumers for whatever")
Personally, I think the lawsuit was rather ridiculous, since Amazon was poised to destroy the entire industry, and the shift to the agency model was a necessary one to ensure the long-term health of the industry. Prior to Apple showing up with iBooks, Amazon was in a position to leverage its monopsony on the eBook market (like a monopoly, except it's when someone commands the buying side of the market, rather than the selling side) to force the publishers' hands and demand lower and lower wholesale prices. The publishers recognized the threat that posed them, so they worked out an agency deal instead, which led to lower short-term profits (despite the increased cost to consumers, simply because the agency model took a bigger cut than the wholesale model was at the time), but provided them with long-term control over their own prices.
Effectively, they took away Amazon's ability to do what was best for itself at the expense of the industry as a whole. After all, Amazon wins by lowering prices regardless of what happens to the publishers: by forcing them out it becomes the de facto publisher for virtually all eBooks thanks to its self-publishing tools, and by lowering their prices to unsustainable levels it pleases consumers and locks some of them into its ecosystem through the proprietary .azw and .kf8 eBook formats. Had the publishers been colluding to increase profits by gouging customers, I'd definitely be in support knocking them around for antitrust stuff, but the fact that they were making less money per unit sold under the agency model tells me that this was a long-term play to stay alive, rather than a short-term one to turn a quick buck at the expense of the consumer, and as such, the DoJ should have left it alone, even if it did increase the cost to consumers.
(Admitted lack of citation: I did read in multiple places over the last few months that profits were down under the agency model, but I'm knocking this comment out quickly, so I don't have time to look them up. Sorry. Doubters and welcome to doubt.)
There's nothing illegal about being by far the largest e-book publisher.
I didn't say there was. Just that they have a monopoly in the ebook market, which is clear and true and definitely not illegal.
What should also be legal, is for publishers to say "you cannot sell my book for less than $X". Amazon can sell books for any price they like, down to $0, and the publisher cannot complain. Does that sound right to you? It means if a publisher irks Amazon, they can send book profits spiraling down.
It may seem good for the consumer at first until you realize what happens after years when Amazon has killed all eBook competition.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Personally, I think the lawsuit was rather ridiculous, since Amazon was poised to destroy the entire industry,
Ignoring your waffle. By Industry you mean "bleeding customers" by Middle Men who are desperate to remain relevant post paper. Raising ebooks prices has been *damaging* to the ebook industry. Hopefully these parasites will become obsolete one day, how they treat authors is appalling. hopefully we will see a rise in self publishing.
mobile apps are generally still created for their walled garden before more open platform even though it has a falling market share
Android has a larger market for Applications with Apple having only 900,000 Apps http://en.wikipedia.org/wiki/IOS_App_Store vs Androids Play store http://en.wikipedia.org/wiki/Google_Play 1+ million apps and the gap is going to get wider. The iphone is none existent in some markets, so no developers in those markets create iphone apps. The iphone also uses legacy hardware, and no gaming platform where android has many consoles, and cutting edge devices. The days of iOS exclusive or even first is long gone. Apple is in real trouble if they don't get the launch on the 10th right.
I don't want to start a holy war here, but what is the deal with you Mac fanatics? I've been sitting here at my freelance gig in front of a Mac (a 8600/300 w/64 Megs of RAM) for about 20 minutes now while it attempts to copy a 17 Meg file from one folder on the hard drive to another folder. 20 minutes. At home, on my Pentium Pro 200 running NT 4, which by all standards should be a lot slower than this Mac, the same operation would take about 2 minutes. If that.
In addition, during this file transfer, Netscape will not work. And everything else has ground to a halt. Even BBEdit Lite is straining to keep up as I type this.
I won't bore you with the laundry list of other problems that I've encountered while working on various Macs, but suffice it to say there have been many, not the least of which is I've never seen a Mac that has run faster than its Wintel counterpart, despite the Macs' faster chip architecture. My 486/66 with 8 megs of ram runs faster than this 300 mhz machine at times. From a productivity standpoint, I don't get how people can claim that the Macintosh is a superior machine.
Mac addicts, flame me if you'd like, but I'd rather hear some intelligent reasons why anyone would choose to use a Mac over other faster, cheaper, more stable systems.
Not correct at all. The rules stated that if any other retailer sold the book for less than what Apple was, Apple could change their price and take it out of the publisher's percentage. Apple was all about protecting their 30% and not actually competing as a retailer.
That just means that Apple is guaranteed to get the same price as any other vendor. I'm still not seeing how this is price fixing, that is, keeping a price artificially low or high when you have total control of a product. There's gotta me more to it.
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Worse, because Amazon was acting like an efficiency monopoly, not a coercive monopoly. It's like complaining about Google's dominance in search when it was due entirely to being better.
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I'm going to try and make a nuanced argument here, so stick with me to the end before assuming that I'm dismissing something.
There's nothing illegal about being by far the largest e-book publisher.
There is when you're using your size in an anticompetitive manner, which Amazon was on the verge of doing.
They were leveraging their monopsony on the wholesale side of the market to drive prices down. Their doing so was effectively a form of price fixing, since they essentially controlled the entire buyer's side of the market prior to Apple's arrival (and perhaps even since their arrival, for that matter) and were thus able to dictate their own prices. Furthermore, by driving prices down to levels that would be unsustainable for the publishers, Amazon would be using their monopsony to procure an unfair advantage for their own self-published eBooks business, potentially even leaving them as the de facto publisher for all eBooks if they succeeded in driving the current publishers out of business.
Either of those would be cause for alleging antitrust violations, and I have no problems with the publishers changing their business model from wholesale to agency in order to protect against such a future. And, notably, that change in and of itself would not be an example of price fixing, since the publishers were still free to set their own prices and would not have made agreements with anyone else to lock prices at any particular points. That the prices for consumers went up could be explained as simply being a factor of the costs for the agency model being higher than the then-current costs for the wholesale model (i.e. the retailer took a bigger cut of the pie with the agency model than with wholesale, so they passed some of that cost onto consumers, but it was worth it to them, since they were concerned that the pie would get smaller if they stuck with wholesale).
But before you think that I'm suggesting the publishers and Apple didn't do anything wrong and are being unfairly persecuted, I want to point out that I'm definitely NOT in support of the "most favored nation" (MFN) clause Apple had in their contracts, which is at the crux of the price fixing allegations. That clause, at least as it was used in this case, was a form of price fixing, and that's the reason Apple has been barred from using it in its new negotiations with the publishers, whereas it isn't barred from pursuing an agency model with them again. In fact, Amazon has already negotiated agency model contracts with all of the publishers, which means that the publishers got what they wanted out of this (hence why they settled, rather than fighting it) and won't be in danger of seeing Amazon's monopsony threaten their survival again (at least for awhile).
Also, I'm amazed at the gall of being upset that an illegal conspiracy against customers is actually leading to said customers being compensated.
I haven't yet seen it demonstrated that the MFN clause was what actually led to the increase in prices, which is what prompted the DoJ to pursue this case in the first place. In fact, it seems obvious that the increase in prices was predominantly (though not entirely) caused by the larger cut the retailers were taking as a result of the publishers' shift in business model. That, by itself, is not a form of price fixing, nor should it be punished as such, which means that while I do believe that price fixing occurred here in the form of the MFN clause, I do not believe that it was as significant as the DoJ is alleging, hence why I still object to the size of the compensation being demanded from the publishers (and likely from Apple as well, though we have yet to see about that). Some compensation definitely should be demanded, but only inasmuch as it is demonstrable that the MFN clause was the result of the increase, and that amount is doubtless far less than what is currently being demanded.
Seems like Apple is getting let off very easy after carefully organizing the screwing-over of consumers.
So they get to try this again in 5 years?
And shouldn't the solution be forward looking? Is Apple actually doing the same thing with movies or other content besides books now and getting away with it?
No, it does not mean Apple gets the same price. It means that nobody could SELL for less than Apple.
yes you are right. that's not price fixing, it's extortion.
The problem is that self-publishing only solves one of the problems that traditional publishers have historically addressed.
Editing and Triage are other major issues, and the traditional publishing industry seems to be helping to close the gap by skimping on both....
I don't see why those can't be solved without traditional publishers, but there's probably always going to be a need for someone to edit, and for someone to front the money for that to happen (and, choose what gets edited and what gets ignored, by extension...) for authors who are new and aren't already wealthy enough to cover the costs.
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That actually can make you a monopoly. It's just that being a monopoly isn't necessarily illegal.
"There is when you're using your size in an anticompetitive manner, which Amazon was on the verge of doing."
So they weren't using it in an anti competitive manner, but you think they were on the verge of doing so?
1) You are not the arbiter of law. We have the justice system for that.
2) You have to commit a crime first to be a criminal (or at least be accused of one and committed for it). When even you say "they haven't yet", then there's no crime.
Did you even read the link you referenced? The first line shows the problem with your claim of monopsony. 'One buyer faces many sellers.' You can't lump all of the publishers together and call them 'multiple sellers', because they all sell different products.
The second major problem with your claim is that Amazon is not the buyer, consumers are.
Amazon does not have some magical power to force publishers to accept low prices for ebooks. The publisher has a monopoly on his books, and he can set whatever price he wants. If Amazon doesn't get some ridiculously low price for an ebook, what are they going to do, not sell it? As soon as they refuse to sell a book the door is thrown wide open for competitors to sell the book.
Amazon's power comes from their ability to not sell paper books. That puts the publishers in the position of having to choose between low ebook prices or low paper sales. Too bad. Every manufacturer has to make such decisions in their product line.
You can't lump all of the publishers together and call them 'multiple sellers', because they all sell different products.
They all sell books. Sure, books are more differentiated than, say, strawberries, but the vast majority of them are not strongly differentiated and are fairly expendable. They're simply books. If there was only one chain of theaters in your nation, would you be making the same argument about the movie studios?
If Amazon doesn't get some ridiculously low price for an ebook, what are they going to do, not sell it?
Uh, yes, that's exactly what Amazon has done and continues to do. They pulled all Macmillan books in response to a pricing dispute they had with the publisher back before the switch to the agency model, and they did it again just last year in response to another publisher who refused to lower their prices. The Macmillan issue was kinda a big deal at the time, and it was happening right in the middle of all of this stuff I'm talking about, hence why it was a valid concern that the publishers had.
As soon as they refuse to sell a book the door is thrown wide open for competitors to sell the book.
Sure...in theory. In practice, however, what alternative would the publishers have? At the time that this stuff was going on, Amazon had over 90% market share in the eBooks industry. B&N was the next closest, with less than 10%. Unless the publisher wanted to tank their own business, their only choice was to make a deal with Amazon, since they sure as hell couldn't hope that people would go out and buy a second $200 eBook reader from a competitor of Amazon's just so that they could read the books from that publisher.