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European Commission Accepts Proposal by Penguin to End Apple E-Book Pricing Deal

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Apr 12, 2001
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European regulators have accepted a promise by the British media group Penguin and German media conglomerate Bertelsmann to scrap deals on electronic books, also known as "e-books", with Apple which were found to be in breach of European competition policy.

Penguin was not the only company in the firing line. Back in December 2012, the Commission criticized the practices of four large publishers, Simon & Schuster, Hachette, Holtzbrinck and Harper Collins, of working with Apple via an "agency model" whereby the publishers set the retail price and the distributor takes a fee (30% in Apple's case).

Under the "wholesale model" in place before Apple entered the market, publishers sell their goods to distributors for fixed prices and allow the distributors decide the final retail prices. The agency model came under fire for causing a rise in retail prices of e-books compared to the wholesale model championed by Amazon and Google. Under Apple's "most favored nation" contract clauses, it was allowed to match lower pricing by other retailers, and with the support of the major publishers effectively forced the entire industry to switch to the agency model, raising antitrust issues in a number of regions.

ipad-2-reading-ebook.jpg
Joaquín Almunia, the European Commissioner for Competition, said in a press release from this morning:
After our decision of December 2012, the commitments are now legally binding on Apple and all five publishers including Penguin, restoring a competitive environment in the market for e-books.
Click to expand...
The development comes after a district judge in the United States, Denise Cote, said that Apple played a "central role" in helping to fix the price of e-books. Court documents show that Apple, along with five other publishers, "conspired to raise, fix, and stabilize the retail price for newly released and bestselling trade e-books in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1 ("Sherman Act") and various state laws". Apple has steadfastly claimed that it has done nothing wrong and will appeal the decision.

The European Commission is well-known for imposing large fines on companies who fail to follow practices designed to protect consumers against anti-competitive behavior. In 2009, Intel was handed a record-breaking EUR1.06 billion ($1.45 billion) fine for the abuse of its dominance in the computer chip market and in 2004, Microsoft was fined EUR497 million (around $795 million) for offering Windows Media Player standard with its operating systems as well as providing no information about competing network software to interact with Windows desktops and servers.

Article Link: European Commission Accepts Proposal by Penguin to End Apple E-Book Pricing Deal
 
Article Link
https://www.macrumors.com/2013/07/25/european-commission-accepts-proposal-by-penguin-to-end-apple-e-book-pricing-deal/
itr81

itr81

macrumors regular
Jul 12, 2010
230
52
At some point I wonder if apple my just drop out or start suing all governments and companies because its unable to compete and keep their ebook store open. I really think its just matter time..maybe within 5 yrs or less.
 
charlituna

charlituna

macrumors G3
Jun 11, 2008
9,636
816
Los Angeles, CA
ee13lbp said:
This joke is so bad it's moderately funny.

Anyhow, nice to see more lawsuits ending.
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Don't be so sure it is ending. Apple could petition successfully to have this delayed pending their appeal in the US which appears to be guidance for the EU in their actions. Then if they win the appeal it could make a muck of things in regards to nixing contracts etc without their consent.

Or Apple could find a way to sue in the EU for contract violation or some such citing the lack of anyone actually finding them guilty of anything. Or if they have been there might still be appeals that haven't finished out. Until they have you can bet Apple will do what they can to block the dissolution of contracts or being forced to change terms.

Ultimately little to nothing could change. At least for a while. And frankly that sounds about right to me. If the publishers want to settle fine, if the EU wants to set limits on what they can price their books, fine. Apple doesn't control pricing so they can't really fight that. But these moves of forcing contracts to cancel in total when no one has proven agency is anti consumer etc (even if amazon doesn't like it) is not okay. Not when it could come with the price of Apple simply cutting all sales in the EU. Putting Amazon back as THE Ebook reseller is not good, just as it wasn't good before. But neither the US or EU said boo until it was big bad Apple in the mix. And that is not good either.
 
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A

Aidyn's X

macrumors regular
Mar 25, 2010
191
50
I still don't see what the problem is with the agency model. This allows independent writers to put their books on the iBookStore, dictate their own prices, and take home 70% just like independent programmers do with their Apps. You can actually skip the publishers altogether by purchasing your own UPC code (can be done for around $100) and then voila, you have a published book for sale.
 
kmoreau48

kmoreau48

macrumors regular
Nov 3, 2012
130
65
Correct me if I'm wrong but from what I understand;

"agency model" : if the publisher wants to make 10$, he has to increase the price by 30%, knowing that apple would take 30% profit.

"wholesale model" : the publisher sells its books to apple for 10$ and apple wants to make 30% profit so they just increase the price 30%.

at the end of the day, wouldn't the price still be the same? The only difference I see is who makes the calculation.

PS: I know there are a lot more maths involved -> 30% of $10 = $3 is less than 30% of $13 = $3.9.. so for the "agency model" the publisher needs to know 30% of what price will make him 10$ of profit. So if x is the price that the book is going to be sold the publisher wants to use x-0.3x = $10 of profit
solving for x, he will need to sell its book at $14.29.
30% of 14.29 = 4.29 profit to apple and 14.29-4.29 = 10 profit to publisher
(and I didn't include the taxes...)

I must have missed something (or misunderstood) because I don't see what's wrong with e-book prices.
 
NATO

NATO

macrumors 68000
Feb 14, 2005
1,702
35
Northern Ireland
itr81 said:
At some point I wonder if apple my just drop out or start suing all governments and companies because its unable to compete and keep their ebook store open. I really think its just matter time..maybe within 5 yrs or less.
Click to expand...

I doubt it, that's fundamentally how markets work - if you can't compete, you go out of business (or exit that particular area of business)
 
J

jonAppleSeed

macrumors regular
Mar 21, 2013
200
0
kmoreau48 said:
Correct me if I'm wrong but from what I understand;

"agency model" : if the publisher wants to make 10$, he has to increase the price by 30%, knowing that apple would take 30% profit.

"wholesale model" : the publisher sells its books to apple for 10$ and apple wants to make 30% profit so they just increase the price 30%.

at the end of the day, wouldn't the price still be the same? The only difference I see is who makes the calculation.

PS: I know there are a lot more maths involved -> 30% of $10 = $3 is less than 30% of $13 = $3.9.. so for the "agency model" the publisher needs to know 30% of what price will make him 10$ of profit. So if x is the price that the book is going to be sold the publisher wants to use x-0.3x = $10 of profit
solving for x, he will need to sell its book at $14.29.
30% of 14.29 = 4.29 profit to apple and 14.29-4.29 = 10 profit to publisher
(and I didn't include the taxes...)

I must have missed something (or misunderstood) because I don't see what's wrong with e-book prices.
Click to expand...

It kills competition. With agency, every reseller has to follow your prices so you'll never find it cheaper anywhere other then the iBook store.
 
Oletros

Oletros

macrumors 603
Jul 27, 2009
6,002
60
Premià de Mar
charlituna said:
Don't be so sure it is ending. Apple could petition successfully to have this delayed pending their appeal in the US which appears to be guidance for the EU in their actions. Then if they win the appeal it could make a muck of things in regards to nixing contracts etc without their consent.

Or Apple could find a way to sue in the EU for contract violation or some such citing the lack of anyone actually finding them guilty of anything. Or if they have been there might still be appeals that haven't finished out. Until they have you can bet Apple will do what they can to block the dissolution of contracts or being forced to change terms.

Ultimately little to nothing could change. At least for a while. And frankly that sounds about right to me. If the publishers want to settle fine, if the EU wants to set limits on what they can price their books, fine. Apple doesn't control pricing so they can't really fight that. But these moves of forcing contracts to cancel in total when no one has proven agency is anti consumer etc (even if amazon doesn't like it) is not okay. Not when it could come with the price of Apple simply cutting all sales in the EU. Putting Amazon back as THE Ebook reseller is not good, just as it wasn't good before. But neither the US or EU said boo until it was big bad Apple in the mix. And that is not good either.
Click to expand...

What are you talking about? Apple has already settle with the EU.

Apple can't petition, the US is not a guidance for the EU case, Apple can't sue nobody for breach of contract. Really, where have you read any of what you have claimed?

----------
Aidyn's X said:
I still don't see what the problem is with the agency model. This allows independent writers to put their books on the iBookStore, dictate their own prices, and take home 70% just like independent programmers do with their Apps. You can actually skip the publishers altogether by purchasing your own UPC code (can be done for around $100) and then voila, you have a published book for sale.
Click to expand...

Agency model was not a problem and is not illegal.

The problem was the alleged collusion between publishers and Apple to force the agency model to other ebook stores.

----------
jonAppleSeed said:
It kills competition. With agency, every reseller has to follow your prices so you'll never find it cheaper anywhere other then the iBook store.
Click to expand...

Wrong, agency model doesn't imply that the price is the same in all the stores
 
J

jonAppleSeed

macrumors regular
Mar 21, 2013
200
0
Oletros said:
Wrong, agency model doesn't imply that the price is the same in all the stores
Click to expand...

What it implies is you can't set the price lower than what the publishing house wants it to be sold at.
So resellers are forced to sell at this price if they want to compete. Because who is going to sell it for more when they know the competition is going to be competing on price.
 
kmoreau48

kmoreau48

macrumors regular
Nov 3, 2012
130
65
jonAppleSeed said:
It kills competition. With agency, every reseller has to follow your prices so you'll never find it cheaper anywhere other then the iBook store.
Click to expand...

So it still depends on the price that the publisher sells the books to the resellers. If the book is sold $10, then apple takes 30% from it so the publisher is making only $7 of profit...
but when it is sold to another reseller that follows the "wholesale model" for $10, the publisher is making $10 and then the reseller have a hard time making a profit because apple is selling it at $10...

1. So why would the publisher still sell its book for $10 to apple when he knows he will make less profit?

2. If other resellers want to be competitive with apple, why don't they just use the same business model and take 30% from the price?

I mean if the publisher is willing to make less profit from apple, I don't see how apple is to blame when the price is set by the publisher.

I still don't get it :confused:
 
dcorban

dcorban

macrumors 6502a
Oct 29, 2007
914
30
kmoreau48 said:
I mean if the publisher is willing to make less profit from apple, I don't see how apple is to blame when the price is set by the publisher.
Click to expand...

Apple wasn't the sole "defendant". They are just the only one to not agree to a settlement. The other publishers would be in the same boat. Apple and the other publishers allegedly colluded to ultimately raise prices.

What the regulatory bodies and courts fail to realize, is that ebooks might not even be in the apple store if this agreement was not made. The millions of iPad owners would likely prefer to have ebooks costing a few dollars more than have no ebooks.

I have no skin in this game. Ebooks in general are ridiculously priced for what you get. They would have to cost 50% or less than physical books for me to make the sort of compromises the publishers are currently asking.
 
F

foobarbaz

macrumors 6502a
Nov 29, 2007
876
1,969
Funny. While the rest of Europe and the US fight fixed book prices, they are mandated by law in Germany. In fact, the entire book industry works on the agency model, here. :(
 
E

EbookReader

macrumors 65816
Apr 3, 2012
1,190
1
foobarbaz said:
Funny. While the rest of Europe and the US fight fixed book prices, they are mandated by law in Germany. In fact, the entire book industry works on the agency model, here. :(
Click to expand...

that's because price-fixing (for books) is legal in Germany.

by law

Same with France and Spain.

Retail price competitions for books in those countries don't exist.

Pros: more places to buy books since a 1,000 store chain can't undercut a mom and pop bookstore on prices
Cons: higher prices for consumers since discount is not allowed
 
K

KALLT

macrumors 603
Sep 23, 2008
5,361
3,378
dcorban said:
Apple wasn't the sole "defendant". They are just the only one to not agree to a settlement. The other publishers would be in the same boat. Apple and the other publishers allegedly colluded to ultimately raise prices.

What the regulatory bodies and courts fail to realize, is that ebooks might not even be in the apple store if this agreement was not made. The millions of iPad owners would likely prefer to have ebooks costing a few dollars more than have no ebooks.
Click to expand...

But conversely all other eBook users would have to accept Apple's interference with the eBook market and the overall price increase. The Commission is not against the agency model, in fact it condones it because there are non-economic considerations at play too, e.g. diversity of books as cultural goods. What the Commission is concerned with is that Apple facilitated illegal price fixing within the entire eBook market. If Apple wants to stick with its pricing scheme then it has to accept that it may be driven off the market by cheaper offerings. That is how it should be: the market dictates the price, not Apple.
 
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