Judge Approves $450M Settlement For Apple's Ebook Price Fixing

An anonymous reader writes: On Friday a U.S. federal judge approved a settlement in the Apple ebook price-fixing case that could see the technology giant paying $450 million. $400 million of that would go to the roughly 23 million consumers thought to be affected by the price fixing, and the rest would go to lawyers. Though the case is now settled, the dollar amount is not necessarily final — an appeals court still has to rule on a previous verdict. If the appeals court finds in Apple's favor, then the total settlement drops to only $70 million. If they find against Apple, then it's the full amount. "The settlement appeared to reflect fatigue by Apple, the Justice Department, state attorneys general and class-action lawyers eager to conclude a case that has dragged on, largely because of delays by Apple."

Comments

So good that the proxy battle is over

[phayes]

All hail Amazon, the winner by proxy of this fight

Re:So good that the proxy battle is over

[I'm New Around Here]

Sounds like it. Apple and 5 publishers tried to raise the price of new "e-books from the $9.99 price that Amazon had made standard".

So why does Amazon get to set the price, and not Apple or the publishers?

Re:So good that the proxy battle is over

[whoever57]

So why does Amazon get to set the price, and not Apple or the publishers?

There would not have been a problem if Apple had tried to lower the price of ebooks.

Re:So good that the proxy battle is over

[__aaltlg1547]

Because setting your own price is legal and colluding with other companies to raise the price isn't.

Re:So good that the proxy battle is over

[Pembers]

So why does Amazon get to set the price, and not Apple or the publishers?

Because that's how the sale of every other product to the consumer works - the manufacturer or publisher tells the retailer "we'll sell you a crate of widgets for X dollars apiece" and the retailer is free to sell them to the consumer for whatever they think the consumer is willing to pay. Usually it's some function of X, but it doesn't have to be.

Agency pricing (so-called because the publisher sets the retail price and the retailer acts as an agent of the publisher, taking a fixed percentage of that as his profit) removes the ability of retailers to compete on price. Apple liked it because they don't want to compete on price anyway. It doesn't matter so much when you're talking about their hardware - plenty of people are willing to pay a premium for an Apple computer or phone or tablet because they perceive them as better or cooler than cheaper products with similar specs from other manufacturers. But if you're talking about ebooks, it's hard to see why you should pay $12.99 or $14.99 for the latest Stephen King or James Patterson from Apple when you could get exactly the same thing for $9.99 or less from Amazon. But if it's the same price at Amazon, you might as well get it from Apple.

The publishers liked agency pricing because it meant Amazon couldn't price ebooks at a point where it would cut into the publishers' print business. The publishers know that print is going away anyway - they're just trying to prolong it as much as they can because they know that when Barnes & Noble goes bust, there won't be anyone else they can play off against Amazon. They also know that print distribution is the last advantage they have over self-publishing. Self-published ebooks now compete on a level playing field with ebooks from the big publishers, but it's still very difficult for a self-published book to sell a lot of copies in print. (The ones that have managed it were usually picked up by a publisher after doing well as ebooks.) Everything else a publisher can offer an author can be bought from freelancers for a one-off fee, instead of most of the revenue for the life of the copyright.

Having said all that, the lawsuit was never about agency pricing as such. US competition law cares very little about protecting retailers. What was illegal was that Apple and the publishers colluded to raise prices, thus harming consumers. The fact that they used an unusual method of pricing to do it is neither here nor there, really.

Re:So good that the proxy battle is over

[Plumpaquatsch]

So why does Amazon get to set the price, and not Apple or the publishers?

There would not have been a problem if Apple had tried to lower the price of ebooks.

Actually they did. Ebook prices dropped everywhere but Amazon.

Re:So good that the proxy battle is over

[Solandri]

Sounds like it. Apple and 5 publishers tried to raise the price of new "e-books from the $9.99 price that Amazon had made standard".

So why does Amazon get to set the price, and not Apple or the publishers?

This is so simple I'm amazed you got voted up. Fundamental market mechanics is that sellers try to raise the price, buyers try to lower the price. Everything from someone haggling over an item at a flea market to a multi-billion dollar corporate buyout operates this way. Both buyer and seller are acting in their own interests. However, the counterbalance to sellers having the power to raise the price is that if they raise it too much, buyers can go to a different seller to get the same or similar item. That natural balance between sellers trying to get as high a price as they can without driving buyers to competitors is what sets the market price.

Apple and the publishers were sellers who tried to raise the price. If they'd arrived at that price individually, then there's no problem. But they colluded to set it at that price, which is absolutely illegal since it breaks this fundamental market mechanic.

Amazon was a seller who tried to lower the price. That's not a problem since it benefits the buyer. It's just like a store deciding to hold a sale. (There's an anti-trust argument that Amazon shouldn't be selling ebooks at a loss, using profits from other markets to undercut competitors in the ebook market. But that wasn't the focus of this particular case, and its disingenuous to try to argue Apple and the publishers aren't guilty because of this. Both can be illegal. If Amazon's ebook pricing is driving competitors to bankruptcy, then that's a separate issue that needs to be decided in a separate case.)

Re:So good that the proxy battle is over

[whoever57]

Actually they did. Ebook prices dropped everywhere but Amazon.

Wow. Are you so enamoured with Apple that you have to deny inconvenient facts? From the first paragraph of TFA:

A federal judge on Friday approved a settlement in which Apple could begin paying $400 million to as many as 23 million consumers related to charges that it violated antitrust law by conspiring with publishers to raise e-book prices and thwart efforts by Amazon.

See that? It says "raise ebook prices".

I am constantly amazed by the number of people on /. who appear to support Apple in their quest to make ebooks more expensive for consumers.

Re:So good that the proxy battle is over

[ihtoit]

nothing illegal about running a loss leader - after all, that's what Microsoft did with the XBox. Every console they sold was at a loss. Break even point was about the sixth game purchase at retail, which is why the games were upwards of £60 a pop.

Re:So good that the proxy battle is over

[Anonymous Coward]

Except that's not what happened in this case. Apple said, "You set the price You want; We just take a percentage," as is done in the App Store, is done by traditional publishing companies, and is done anywhere else the agency model is used.

Re:So good that the proxy battle is over

[matfud]

And as it turns out in this case Apple were wrong. Oddly it turns out that they can not just do that. Is that moral or correct in some way? Who knows. But your law sais the did something wrong and owe compensation.

Re:So good that the proxy battle is over

[gnupun]

Agency pricing (so-called because the publisher sets the retail price and the retailer acts as an agent of the publisher, taking a fixed percentage of that as his profit) removes the ability of retailers to compete on price.

Does it? The retailer can still compete by lowering his profit percentage (30% is ridiculously high anyway and 50% for books over $10 is daylight robbery) of the final sales price. He can also negotiate a lower publisher price based on volume sold (just like traditional retailers). Amazon's $10 and lower price only for digital books is stupid, fascist and evil.

it's hard to see why you should pay $12.99 or $14.99 for the latest Stephen King or James Patterson from Apple when you could get exactly the same thing for $9.99 or less from Amazon.

That $9.99 is due to amazon's de facto monopoly, bullying publishers and authors. Amazon takes a whopping 65% cut for ebooks priced over $10 and only around 30% for books below $10. Distributors and retailers are mere channels between producer/manufacturer and users. They should have no right to set the base selling price of any item they sell, instead they should just add a markup percentage to whatever is their purchase price. We don't want another Apple appstore type pricing where everything is priced $1 to $2, because the quality of end product will really suffer.

Re:So good that the proxy battle is over

[radarskiy]

"The retailer can still compete by lowering his profit percentage"
No, the agency model implicitly fixed the *retail* price, because the publisher decided both the wholesale price and the retail markup.

Re:So good that the proxy battle is over

[radarskiy]

"why does Amazon get to set the price, and not Apple or the publishers?"

Amazon does not get to set prices through coercive pressure due to its monopsony, the same as how the publishers do not get to set prices through coercive pressure due to collusion. However, this cases was not about Amazon so it cannot be used as a statement on whether or not Amazon can or should uses a monopsony to set market prices.

Re:So good that the proxy battle is over

[poetmatt]

This is the exact opposite of the truth. Amazon allowed ebooks as low as 99 cents, the itunes price fixing explicitly prevented that from being a possibility.

Re:So good that the proxy battle is over

[Plumpaquatsch]

Actually they did. Ebook prices dropped everywhere but Amazon.

See that? It says "raise ebook prices".

And Snowden is a traitor. Fuck you, and the company that pays you to post here.

Re:So good that the proxy battle is over

[Plumpaquatsch]

This is the exact opposite of the truth. Amazon allowed ebooks as low as 99 cents, the itunes price fixing explicitly prevented that from being a possibility.

So there were no more ebooks at Amazon for 99 cents? Prove it or we know you are lying.

BTW, there are Books on the iBook Store for 99 cents. Obviously Apple only keeps Amazon from selling ebooks cheap. It's fucking magic.

Re:So good that the proxy battle is over

[Plumpaquatsch]

Except that's not what happened in this case. Apple said, "You set the price You want; We just take a percentage," as is done in the App Store, is done by traditional publishing companies, and is done anywhere else the agency model is used.

And coincidently it's the way Amazon's own Kindle Direct Publishing works - just that they took 60% initially before Apple ruined their business model.

Re:So good that the proxy battle is over

[Plumpaquatsch]

Sounds like it. Apple and 5 publishers tried to raise the price of new "e-books from the $9.99 price that Amazon had made standard". So why does Amazon get to set the price, and not Apple or the publishers?

Apple and the publishers were sellers who tried to raise the price. If they'd arrived at that price individually, then there's no problem. But they colluded to set it at that price, which is absolutely illegal since it breaks this fundamental market mechanic.

Which price did they arrive at? Oh, yeah, right. You are blowing smoke. There was no fixed price. Let alone that prices fell everywhere but at Amazon which was selling at a loss before.

Huge victory

[Psicopatico]

Either way, lawyers won :(

Re:Huge victory

[Richard_at_work]

They did the work...

Re:Huge victory

[I'm New Around Here]

Probably $1.

Socialism / fascism at its finest

[roman_mir]

Total unadulterated nonsense. Apple comes to an agreement with some publishers to prevent Amazon from lowering prices, (or so the case says and I do not have a tendency to trust anything I hear, but lets assume that is thecase here). People still were buying through Apple but there is no monopoly on books, books can be bought in many formats. Apparently the market gave Apple enough profits as a reward for what they do to allow Apple to play hard, you know what? Amazon could easily raise enough money to fight this in the same market. They can find a publisher to work with them, nobody repealed the natural laws of competition yet. And maybe Apple has it right - people that buy their phones can buy books from them at Apple prices and also without having all the facts I am not at all convinced that Amazon was 'in the right' and Apple 'in the wrong', but what I do know is that the governments and the courts usurped this illegal authority with socialist / fascist nonsense like the Sherman act.

Re: Socialism / fascism at its finest

[Chris453]

"without having all the facts" So basically you are talking out of your ass and have no clue what your talking about. Apple committed a serious crime to hurt consumers. In a just world all the Apple executives that signed off on this would be in jail.

Re: Socialism / fascism at its finest

[roman_mir]

I don't own a single Apple product could not care less. There is no such thing as being 'guilty' of something that is an illegal and an immoral power grab by the government.

AFAIC this is no different than government throwing people to jail for drug use or sale, prohibition, concentration and labour camps and any other violence governments perpetrate upon people.

Re: Socialism / fascism at its finest

[Anonymous Coward]

Please read up some history on these watered down laws. It isn't about anti-economics, it's just capitalism controls. Not that different from regulating lead out of paint and fuel... just not as obvious and clear.

Re: Socialism / fascism at its finest

[I'm New Around Here]

A government is 'for' two things.

Set a duty roster of nighttime guards, so that people can sleep peacefully at night. The guards are there to wake everyone up if there is an attack.

Set a roster of people to build common-use structures such as roads or bridges.

Everything else is not 'what a government it for'.

And one of those two isn't essential to have the government involved.

Re: Socialism / fascism at its finest

[rtb61]

A government is there as a social function of the people that form that government. The governments function is and should be what ever the people want it to be. People uniformly hate being lied to, cheated and having their possessions stole. So a function people pretty much uniformly ascribe to government is to prevent lying, cheating and stealing and of course catch and punish those that lie, cheat and steal. Governments implement regulations in order to attempt to achieve this, liars, cheaters and stealers then attempt to work around those regulations which means government ends up creating more regulations etc.

Don't get rid of government, get rid of the psychopaths and narcissists the necessitate huge mechanisms of state to control their out of control behaviour. Let's just guess who hates regulations more the liars, cheats and thieves or their victims.

Pittance

[PopeRatzo]

$450 million is nothing to Apple. They find that much under the cushions on the sofas in the Apple lounge. They spend more than that every week on KY and poppers.

Re:Pittance

[rknop]

Indeed, in these kinds of class action lawsuits, there is only one big winner, and that is the lawyers who are litigating it.

I'm all for class action lawsuits in principle; companies that do things that are bad for soceity should face some sort of consequences for their actions, and people who were inconvenienced or harmed by the actions of companies should have some sort of recompence. In practice, however, usually what happens is that the people nominally benefitting get just a few dollars (probably not worth the paperwork of making it happen), the charge to the company is perhaps not trivial, but an easily absorbed cost of doing business, and it's a bonanza for the lawyers involved. The rewards system encourages litigous behavior for the sake of litigation, not good behavior on the part of companies nor does it provide any real recompense for people harmed.

How about paying taxes first.

[Bar666Bar]

Most Americans pay their fair share.
Couple weasels who hate America think they are so smart, creating and using tax loopholes for their own benefit.

Not surprise here, seeing Saudis, Russian and American oligarchs vacationing together and sending kids to the same Swiss schools.
For them USA is just a place to suck money from.

Re:How about paying taxes first.

[I'm New Around Here]

If they actually paid their taxes they would have to raise the price of ebooks. Look where that got them.

Re:How about paying taxes first.

[Plumpaquatsch]

Most Americans pay their fair share. Couple weasels who hate America think they are so smart, creating and using tax loopholes for their own benefit.

Not surprise here, seeing Saudis, Russian and American oligarchs vacationing together and sending kids to the same Swiss schools. For them USA is just a place to suck money from.

Errm, apart from the fact that Apple does pay billion in US taxes - you also want rich people around the world to pay US taxes?

Re:How about paying taxes first.

[ihtoit]

Apple avoided paying up to $2.4billion in taxes in 2011 through a complex strategy that funnels money to low tax states and foreign countries such as Ireland and the Netherlands. Through using havens in Asia, Apple have also avoided 1.1Bn Euro tax bill in 2013, and between 2010-2014 they managed to shave an estimated total of $44Bn worth of tax billing worldwide by incorporating offshore.

Apple Inc are incorporated in Ireland and operate and trade in the USA: they pay NO TAX in either country.
iTunes funnels two thirds of their revenue outside the US through a holding company in Luxembourg. They pay NO TAX on this.

Source: three minutes on Google, five minutes on the Wall Street Journal and five on Pinsent Mason LLP.

Re:How about paying taxes first.

[ihtoit]

or make a simple rule: if you have ANY commercial presence in a country, YOU PAY TAXES. PERIOD. If you sell an mp3 player with a warranty card and ship it direct from Sweatshop China to an address in Hackensack NJ, you pay US corporation tax on your gross profit, asshole.

Re:How about paying taxes first.

[Plumpaquatsch]

Apple Inc are incorporated in Ireland and operate and trade in the USA: they pay NO TAX in either country.

Liar, liar crotch on fire. Apple paid over 6 billion $ US-taxes in 2012, and 1.5 billion from 2009 to 2012 in Ireland.

Re:How about paying taxes first.

[Plumpaquatsch]

or make a simple rule: if you have ANY commercial presence in a country, YOU PAY TAXES. PERIOD. If you sell an mp3 player with a warranty card and ship it direct from Sweatshop China to an address in Hackensack NJ, you pay US corporation tax on your gross profit, asshole.

But you are actually complaining that if you ship directly from China to Uruguay, you should still pay US corporation tax on it.

Re:How about paying taxes first.

[ihtoit]

not unless you're claiming that Uruguay is a Member of the Federated States of America.

Re:How about paying taxes first.

[Plumpaquatsch]

So you admit you have no idea what we (let alone you yourself) are talking about.

Re:How about paying taxes first.

[ihtoit]

I know exactly what I'm talking about, you seem to have some wires crossed.

Re:How about paying taxes first.

[Plumpaquatsch]

I know exactly what I'm talking about, you seem to have some wires crossed.

Yeah, I have asome wires crossed because you have no fucking clue about what you are talking about on several levels. What the hell do you think we are talking about here? Why don't you tell is, if you please?

Re:How about paying taxes first.

[ihtoit]

oh for...

if you sell an mp3 player in the UNITED STATES to a customer in the UNITED STATES and have to ship it from CHINA, it makes no difference if the financial transaction funnels through Ireland, the sale was made in the UNITED STATES ergo the tax burden is THERE.

THAT is how it is SUPPOSED to work.

Get some fucking reading comprehension skills.

Re:How about paying taxes first.

[Plumpaquatsch]

oh for...

if you sell an mp3 player in the UNITED STATES to a customer in the UNITED STATES and have to ship it from CHINA, it makes no difference if the financial transaction funnels through Ireland, the sale was made in the UNITED STATES ergo the tax burden is THERE.

THAT is how it is SUPPOSED to work.

Get some fucking reading comprehension skills.

So why do you complain that Apple pays all taxes due for the business they do in TFUSA?

Re:How about paying taxes first.

[ihtoit]

what!?

I wasn't complaining that they do, I was complaining that they DON'T.

Re:How about paying taxes first.

[Plumpaquatsch]

So you finally admit that you don't know what you are talking about. Because they do.

Re:How about paying taxes first.

[ihtoit]

evidence was provided earlier in the thread that indicates the contrary to what you claim. Accept it or stick it up your arse.

Re:How about paying taxes first.

[Plumpaquatsch]

Liar liar. Stop pulling "evidence" out of your ass.

Re:So...

[Dunbal]

Of which the lawyers will still get $50 million...

talk about kick in the teeth for consumers

[ihtoit]

this equates to a $17 Dollar mail-in rebate, which most people won't bother with (it's only $17), but given previous performances from Microsoft who have been handed down similar class compensation orders, the court will accept this form of payment offered.

They committed fraud. SOMEONE SHOULD GO TO FUCKING JAIL OVER IT.