Apple Rebuts Antitrust Charges Over E-Book Pricing

"anti-trust" law was developed to break up the Standard Oil "Trust". Keep in mind that breaking up the regional and vertical conglomeration had several negative effects too. We lost the power internationally to own many of the oil fields we now spend a considerable sum defending for other owners, for example.

Because the discovery guy, drilling guy, refining guy, pipeline guy, distributor guy and retailer guy are now mostly all different firms, there are more frequent disruptions, breakdowns, and business failures, this week the refineries.

In addition, each layer now has finance costs, separate profits and taxation (the government's actual motivation for the law), and several times the administrative overhead. All that raises the overall cost at the pump. Standard paid cash for everything.

Anti-trust enforcement is designed to break down "pricing power" but despite that intention has the undesirable long term effect of increasing consumer cost, or lowering delivered value.

It also has the undesirable effect of more government in our lives and more lawyers in our lives.

Rocketman

Rocketman said:

So Amazon should also be punished for their business model which crushed essentially all book stores and record stores in the entire country? That's a whole bunch of lost jobs, and the loss of outlets caused an overall large loss of industry sales. Offset by a large increase in Amazon sales to almost all the industry electronic sales and a very large fraction of physical sales.

Again causing a reduction in overall industry sales and loss of "most" outlets.

Every claim of this nature is a double edged sword.

The recent natural gas price drop form $11 to $2 was caused by "fracing" adding only 11% to normal supply flow. It's still $11-$15 (per MBTU or whatever) everywhere else in the world.

Rocketman

http://en.wikipedia.org/wiki/File:Henry_hub_NG_prices.svg

BTW I read the lawsuit cover to cover. It is a monologue of claims. The response will be interesting.

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My objection is to language between supplier a and retailer b that forces supplier a to treat all other retailers differently than it used to. Suppliers and retailers should be free to enter into individual contracts that do not interfere with other supplier and retailer contracts. Doing so is bad for the consumer.

Amazon was and still is the largest ebook retailer. Other retailers like b&n still offer significant competition and are still much bigger than Apple. The only difference is now that Apple is in the market everyone is forced to pay significantly more for the same content (not all content but any Aple made agreements with). Explain to me how that is good?

None of the things you mentioned change one iota regardless of Apple being in this market or not or the ultimate outcome of this case so I'm not sure why you mention them.

Publishers

The party is over for publishers.

Much like the publishers/middle men for the music industry.

The party is over.

Adapt to the digital frontier or you will be erased.

Rocketman said:

"anti-trust" law was developed to break up the Standard Oil "Trust". Keep in mind that breaking up the regional and vertical conglomeration had several negative effects too. We lost the power internationally to own many of the oil fields we now spend a considerable sum defending for other owners, for example.

Because the discovery guy, drilling guy, refining guy, pipeline guy, distributor guy and retailer guy are now mostly all different firms, there are more frequent disruptions, breakdowns, and business failures, this week the refineries.

In addition, each layer now has finance costs, separate profits and taxation (the government's actual motivation for the law), and several times the administrative overhead. All that raises the overall cost at the pump. Standard paid cash for everything.

Anti-trust enforcement is designed to break down "pricing power" but despite that intention has the undesirable long term effect of increasing consumer cost, or lowering delivered value.

It also has the undesirable effect of more government in our lives and more lawyers in our lives.

Rocketman

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Not really. Standard Oil was not the only target of antitrust laws, not hardly. In fact it was used to curb anticompetitive practices in many industries before it was applied to Standard. You also fail to recognize the realities of what Standard did in its heyday, but I am not surprised. It's a cinch to romanticize 19th century predatory business practices when you didn't have to actually live with them. But the biggest error you make in your analysis is the implication that vertical integration is automatically a violation of antitrust laws. It is not, and even to this day many oil companies and businesses in other industries are vertically integrated. What is illegal is to use market power to create barriers to competition, and for a practice to be illegal it has to be found to be illegal in a court of law -- and that is no trivial task.

Finally, antitrust law enforcement is not designed to break down pricing power. What it is designed to do is prevent companies with pricing power from creating artificial barriers to competition. This is a very different concept from the one you suggest.

Good Deal!?

If you want in on a good deal, you might want to start buying up Apple stock, now that it is getting near the $600 price point again. Shareholders, in my opinion, are panicking for nothing as they sell sell sell. Just more beneficial to the ones out there that are smart.

jimboutilier said:

Amazon was and still is the largest ebook retailer. Other retailers like b&n still offer significant competition and are still much bigger than Apple. The only difference is now that Apple is in the market everyone is forced to pay significantly more for the same content (not all content but any Aple made agreements with). Explain to me how that is good?

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Ahhhh! Now we get to the nub. Some private property owners CHOOSE the Amazon outlet, some choose the Barnes outlet, some choose the Apple outlet, some choose more than one.

Just because one of those three different COMPETITIVE outlets choose to have a walled garden and a different pricing model, does not hurt consumers. Consumers can buy "books" at a variety of prices and outlets. Some "brands" are exclusive to an outlet, that's all. Wally World has house brands you cannot get elsewhere. So does Nordstrom, and they charge up the kazoo for it.

You can't get every product at every outlet, but that is not a monopoly as defined, it is a business model as shown by tradition and commercial practice for centuries.

Hat tip to IJ.

Rocketman

EbookReader said:

I would recommend everyone who haven't read it, to take 10-15 minutes of your time to read the DOJ complaint:

http://assets.sbnation.com/assets/1053857/e-books_complaint.pdf

You will LEARN a lot.


If you don't have time, then read the short version.
Analysis from The Verge
http://www.theverge.com/2012/4/11/2...k-price-fixing-case-against-apple-an-analysis

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Thanks for posting the link. After reading the darn thing, I'm now more convinced that not only have they not done anything illegal, they haven't done anything immoral or even distasteful. In fact, they solved a huge problem, which was Amazon's monopolistic stranglehold on the market. Actually I don't believe in monopolistic strangleholds. Amazon sells lots of books that Apple doesn't, and provides a free reader app to my iPad. I buy more books from Amazon not because they have lower prices, but because they sell the books at all! The Apple ebooks are generally nicer anyways.

Remember that anyone is free to publish any ebook they want for any price they want on their website without contracts with Apple or Amazon. Scott Meyers does this for his new Overview of the new C++. And I buy a lot of ebooks from oreilly.com. Any contracts they sign with the A teams are not forced or compelled on anyone.

Attacking Apple and the publishers in this way demonstrates how anti-American the President's administration is.

Rocketman said:

Ahhhh! Now we get to the nub. Some private property owners CHOOSE the Amazon outlet, some choose the Barnes outlet, some choose the Apple outlet, some choose more than one.

Just because one of those three different COMPETITIVE outlets choose to have a walled garden and a different pricing model, does not hurt consumers. Consumers can buy "books" at a variety of prices and outlets. Some "brands" are exclusive to an outlet, that's all. Wally World has house brands you cannot get elsewhere. So does Nordstrom, and they charge up the kazoo for it.

You can't get every product at every outlet, but that is not a monopoly as defined, it is a business model as shown by tradition and commercial practice for centuries.

Hat tip to IJ.

Rocketman

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I agree. Some dummy in Washington behind all this has his head up his butt. He should just go live in some communist country.

Why should you guys care, eh? You just want the lowest price, right? Sure. But if you or your friend ever wanted to become an author, and you needed to sell your book at —a very reasonable— $8.99 to break even… what happens when everyone complains that you overpriced your book and it should only be $5.99 because "that's what price Amazon sells popular books at" —Who screwed you over here?

Amazon selling books below cost price is a damaging model in the long run for the book industry, whether it means you get books cheaper or not, it might someday result that you get much less books.

Whereas Apple's model (agency model) is: "sell the book at whatever price you think is fair and give us 30%". Which is what they do for the app store too.

The reason Apple additionally wants a fixed price across all eBook stores is because they don't want Amazon coming in again and saying, "Psst… publisher… we wanna drive people to our website, so how about we give you this check and you set the price a little… 'cheaper' on our site? " — Which, I'm sure you've gathered by now, would result in exactly the same problem as from before.

IMO I think the anger directed at the DOJ stems mostly from the fact that Apple, while reaping the benefits of their usual 20-30% profit, is really instituting a more competitive business model for a dying industry, while having the interests, and demonstrating the potential, to help overhaul the traditional distribution of educational material as well like text books. Meanwhile, the DOJ does their "job", and is now seen as attacking these positive changes. It's casting the wrong light on the DOJ, and Apple as usual, is again seen as the victim of litigation here.

The thing is, Apple is a business, everything they do, must be in the company's best interest. They are not a traditional company, and they have been on the cutting edge, and often pushes for change, and that tends to cause controversy. It is my belief that their goals, business models, and I guess "roadmap" of changes, have generally been a positive move, and benefited themselves and the industries it impacts.

On the other hand, the DOJ has to pick their battles. There's no right answer, and we, the average citizen will probably never discover the true motives or reasons behind these lawsuits. It may very well be a justified action for the DOJ, or it may be lobbyists from competitors who don't want Apple to get a piece of the pie. Or perhaps the DOJ sees this as a chance to earn a settlement. Who knows.

Again, in my opinion, whether this litigation is justified or not, I hope it does not affect the agency model, or the ability for the publishing industry to expand their reach, flexibility, and ability to foster growth and innovation, which is what I believe the agency model will bring, and the publishing industry desperately needs.

thewitt said:

They will likely admit no wrong doing, settle out of court, drop the agency model, then lower prices to force Amazon to lose money to compete. They can spend $1,000,000,000 punishing Amazon this way.

Wanna play hardball Amazon? Let's play.

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Just who do you think apple is that their shareholders would sit back and watch while they blow $1b on a vendetta that was really what we call business. They can't get upset bcuz they were caught trying to stack the deck.

Mr. Gates said:

Scott Free
From Wikipedia, the free encyclopedia
Scott Free is an alternate spelling of the phrase "scot-free", meaning "without consequences or penalties".

Scott Free may also refer to:

Scott Free (album), a 1984 album by jazz drummer Max Roach
Mister Miracle, the DC Comics character also known as Scott Free
Ridley Scott's and Tony Scott's film production company


Changed my slang spelling for ya all the same

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Favourite, Theatre, Colour, blah blah blah.....

EssentialParado said:

Why should you guys care, eh? You just want the lowest price, right? Sure. But if you or your friend ever wanted to become an author, and you needed to sell your book at —a very reasonable— $8.99 to break even… what happens when everyone complains that you overpriced your book and it should only be $5.99 because "that's what price Amazon sells popular books at" —Who screwed you over here?

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The agency model does not solve any of this.

People are still selling books through the old model.

... and the market is speaking clearly:

Agency model books are more expensive than non-agency books
Agency model books sell fewer copies than non-agency books
Agency model ebooks are often priced higher than the paper book equivalent.

Consumers want to pay less for books. People are making money from selling cheap books - the rest of the market needs to adapt or die. Companies shouldn't rely on illegal business practices to ensure their antiquated business model survives.

Boston007 said:

The party is over for publishers.

Much like the publishers/middle men for the music industry.

The party is over.

Adapt to the digital frontier or you will be erased.

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That's exactly what they are doing. Adapting their businesses. With the help of Apple, for example. And they don't need no stinking incompetent DoJ to tell them how to do that.

I don't think that what Apple did was in violation of anti-trust laws. However, what the PUBLISHERS did is another story. I think there's a strong case to be made there.

If you find that the publishers did violate anti-trust laws regarding price fixing, then it's hard to avoid adding conspiracy charges on top of that. And that's where Apple comes in.

Did Apple conspire with the publishers to create the situation? They may not be guilty of anti-trust violations, but criminal conspiracy, or accessory before the fact, could be a strong possibility.

jimboutilier said:

Perhaps I should have been more specific about what I meant by impacts. It's the part where a publisher can not sell a product for less to any other retailer I was getting at. To me that's tortious interference and collusion.

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jimboutilier said:

My objection is to language between supplier a and retailer b that forces supplier a to treat all other retailers differently than it used to. Suppliers and retailers should be free to enter into individual contracts that do not interfere with other supplier and retailer contracts. Doing so is bad for the consumer.

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So you are talking about what should be illegal. Not what actually is illegal. MFN clauses are not illegal by themselves. It happens all the time. If I agree to sell something for a long time period at a certain price, I can't have my supplier immediately go out and and undercut me with all my competitors, using their deal with me as leverage.

Amazon was and still is the largest ebook retailer. Other retailers like b&n still offer significant competition and are still much bigger than Apple. The only difference is now that Apple is in the market everyone is forced to pay significantly more for the same content (not all content but any Aple made agreements with). Explain to me how that is good?

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Because price is not the only important thing about a book for me.

BaldiMac said:

Because price is not the only important thing about a book for me.

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What else are you looking for?

I can't think of anything that iBooks provides that you can't get from Amazon, Barnes and Noble or Kobo (to name just three) - unless you like vendor lock in or limited device support.

Just to make something clear:

As a consumer I don't care about who gets into trouble or gets blamed, all I want is for the Agency model to die.

Rocketman said:

Ahhhh! Now we get to the nub. Some private property owners CHOOSE the Amazon outlet, some choose the Barnes outlet, some choose the Apple outlet, some choose more than one.

Just because one of those three different COMPETITIVE outlets choose to have a walled garden and a different pricing model, does not hurt consumers. Consumers can buy "books" at a variety of prices and outlets. Some "brands" are exclusive to an outlet, that's all. Wally World has house brands you cannot get elsewhere. So does Nordstrom, and they charge up the kazoo for it.

You can't get every product at every outlet, but that is not a monopoly as defined, it is a business model as shown by tradition and commercial practice for centuries.

Hat tip to IJ.

Rocketman

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The problem isn't that Apple chose to have a "walled garden and different pricing model". The problem is that they (allegedly) conspired with the publishers to force that same setup on all the other retailers.

The main allegation against Apple is that they worked with the publishers to bring about a situation that would ensure that no other retailer would have lower prices on the same products.

That's price fixing. It's illegal. There's no question about that. It's also criminal conspiracy.

There is no question as to the legality of these actions. The only question is, did Apple do them or not?

It's Apple's model, publishers only reluctantly looked at it and as memories seem very short here, they were resistant to it for a very long time. It was not until the other model started hurting their revenues, they were obliged by their fiduciary duty to look more closely at Apple's plan. They went in because they were all rational actors. That's not collusion, it is response to market forces. It explains all nearly coincident timing. Apple making it available and the alternate model seeing reduced performance.

Rocketman

Obumage.

Leave it to the US Gov. to hault a growing economy in its tracks. Way to go Obumage! Who knows what kind of tail spin they might put the US economy in by stunting the growth of one of our major corporate entities.

Why can't they focus all this nervous energy on somebody that would greatly benefit us all, like OPEC!!

Rocketman said:

It's Apple's model, publishers only reluctantly looked at it and as memories seem very short here, they were resistant to it for a very long time. It was not until the other model started hurting their revenues, they were obliged by their fiduciary duty to look more closely at Apple's plan. They went in because they were all rational actors. That's not collusion, it is response to market forces. It explains all nearly coincident timing. Apple making it available and the alternate model seeing reduced performance.

Rocketman

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That's true to some extent, but it doesn't stop the model being illegal or immoral in the first place.

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TrentS said:

Leave it to the US Gov. to hault a growing economy in its tracks. Way to go Obumage! Who knows what kind of tail spin they might put the US economy in by stunting the growth of one of our major corporate entities.

Why can't they focus all this nervous energy on somebody that would greatly benefit us all, like OPEC!!

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Governments shouldn't pick and choose which laws they enforce based on a popularity contest.

As has been noted above, it's not just the US that thinks the Agency Model is illegal.

Rocketman said:

It was not until the other model started hurting their revenues, they were obliged by their fiduciary duty to look more closely at Apple's plan.

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How were the revenues hurt if they were paid full price?

Bye Bye Obumage!!!

Daveoc64 said:

That's true to some extent, but it doesn't stop the model being illegal or immoral.

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Governments shouldn't pick and choose which laws they enforce based on a popularity contest.

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But if that focus is "What the people want", then that sure better be what they focus on! The US Gov. is there to serve us, it's constituents, not vice versa. When it IS the other way around, then we do have a serious problem. And these days, it sure does seem like it IS the other way around. So a popularity thing it should be! What the people want, the Gov. better deliver, or else come election time, we will find someone who will!!

TrentS said:

But if that focus is "What the people want", then that sure better be what they focus on! The US Gov. is there to serve us, it's constituents, not vice versa.

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That's exactly what they're doing though!

They're working to bring ebook costs down for consumers.

Oletros said:

How were the revenues hurt if they were paid full price?

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Because the profit margins sucked?