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Old Aug 31, 2012, 10:19 AM   #1
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Apple Offering Concessions in European E-Book Suit as Several Publishers Settle in U.S.






Reuters reports that Apple and several major publishers have agreed to offer concessions in an ongoing European Union antitrust investigation over alleged e-book price fixing. The concessions would significantly unravel the Apple-backed agency model of book pricing in which publishers set the retail prices for their content with distributors such as Apple and Amazon receiving a fixed percentage of the sales price.
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Apple and four major publishers have offered to allow retailers such as Amazon to sell e-books at a discount for two years in a bid to end an EU antitrust investigation and stave off possible fines, a person familiar with the matter said on Friday. [...]

The Commission was now sounding out opinions from the industry as to whether the concessions are sufficient, the person familiar with the matter said, before a formal market test which could lead to the investigation being dropped.
News of Apple's willingness to make concessions in Europe comes just two days after a group of publishers agreed to a $69 million settlement in the United States over the same issue. The U.S. Department of Justice sued Apple and five publishers back in April, and while three of the publishers elected to settle the case, Apple and the other two publishers have been fighting the charges.

Regulators have claimed that the shift to the agency model amounted to price collusion facilitated by Apple and the publishers, sparking the antitrust concerns. For its part, Apple has cited that the implementation of the agency model has had the opposite effect, weakening Amazon's previously overwhelming position at the top of the market gained by selling books at deep discounts to entice customers to visit the online store and purchase other products and content.

Article Link: Apple Offering Concessions in European E-Book Suit as Several Publishers Settle in U.S.
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Old Aug 31, 2012, 10:23 AM   #2
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Yes ... the agency model must be stopped ... because if I am a content owner, I shouldn't be able to set my price for my content.

This hardly qualifies as worthy of anti-trust ... just some pissed off folks who whine because the latest blockbuster isn't going for $10. Cheap bastards.
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Old Aug 31, 2012, 10:29 AM   #3
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Old Aug 31, 2012, 10:30 AM   #4
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Originally Posted by EyeTack View Post
Yes ... the agency model must be stopped ... because if I am a content owner, I shouldn't be able to set my price for my content.

This hardly qualifies as worthy of anti-trust ... just some pissed off folks who whine because the latest blockbuster isn't going for $10. Cheap bastards.
Don't you set the price to the distributer?
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Old Aug 31, 2012, 10:31 AM   #5
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Originally Posted by EyeTack View Post
Yes ... the agency model must be stopped ... because if I am a content owner, I shouldn't be able to set my price for my content.

This hardly qualifies as worthy of anti-trust ... just some pissed off folks who whine because the latest blockbuster isn't going for $10. Cheap bastards.
Explain how it affects the content owner if they charge X but then a retailer charges less? They aren't getting paid on what the retailer charges, are they? They're getting paid on their sales price. The difference being - they stand to make more if the retailer needs to buy more books, no?
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Old Aug 31, 2012, 10:35 AM   #6
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I was under the impression that the iBook publishing terms banned publishers from selling their ebooks at a lower price anywhere else, giving Apple a contractually-obligated price advantage over everyone. Given that the agreement was made with pretty much every major publisher, that's rather more harmful than shifting to the agency model would have been on its own.

Amazon's price scraping is ruining the market. That doesn't mean that the other extreme is acceptable.

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Originally Posted by samcraig View Post
Explain how it affects the content owner if they charge X but then a retailer charges less? They aren't getting paid on what the retailer charges, are they? They're getting paid on their sales price. The difference being - they stand to make more if the retailer needs to buy more books, no?
It changes people's price expectations. It becomes very hard to sell a book for 10 if people are used to getting it for 2, even if you can in principle put it out on the shelf with the higher price tag. That's the problem with loss leaders, they erode the value of a product. And your ability to thin your margins improves as your company grows, giving larger players a competitive advantage, which tends towards reduced competition.
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Old Aug 31, 2012, 10:35 AM   #7
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Originally Posted by sockatume View Post
I was under the impression that the iBook publishing terms banned publishers from selling their ebooks at a lower price anywhere else, giving Apple a contractually-obligated price advantage over everyone. Given that the agreement was made with pretty much every major publisher, that's rather more harmful than shifting to the agency model would have been on its own.

Amazon's price scraping is ruining the market. That doesn't mean that the other extreme is acceptable.
Yes, the Apple agreement has a 'most favored nation' clause. That doesn't give them a pricing *advantage*, though. It simply prevents them from having a pricing *disadvantage*.

Allowed:
Apple: $5
Amazon: $5
Joe's Book Shop: $5

Disallowed:
Apple: $6
Amazon: $6
Joe's Book Shop: $5

And, technically, a 'most favored nation' clause doesn't say "You can't sell it anywhere else for less". It says, "If you sell it anywhere else for less, you have to give us that lower price as well."
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Old Aug 31, 2012, 10:36 AM   #8
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Quote:
Originally Posted by EyeTack View Post
Yes ... the agency model must be stopped ... because if I am a content owner, I shouldn't be able to set my price for my content.

This hardly qualifies as worthy of anti-trust ... just some pissed off folks who whine because the latest blockbuster isn't going for $10. Cheap bastards.
You've missed the point entirely of this investigation by the EU.

With physical books (and eBooks until the Agency model was introduced), Amazon etc would buy books/eBooks in bulk at the wholesale price agreed by the publisher. Amazon could then in turn sell the books for as much or as little as it liked, but the publisher still got paid their wholesale price.

What the agency model did was stop Amazon etc selling books for whatever price they wanted and instead imposed a price on the end-customer, with Amazon/Apple receiving a fee in return for each sale.

It's blatant price-fixing, it has artificially inflated eBook prices and it should be stopped. I hope the EU hits them with everything they've got, because price fixing in every other industry is illegal because it's anti-consumer.
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Old Aug 31, 2012, 10:45 AM   #9
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Quote:
Originally Posted by tbrinkma View Post
Yes, the Apple agreement has a 'most favored nation' clause. That doesn't give them a pricing *advantage*, though. It simply prevents them from having a pricing *disadvantage*.

Allowed:
Apple: $5
Amazon: $5
Joe's Book Shop: $5

Disallowed:
Apple: $6
Amazon: $6
Joe's Book Shop: $5

And, technically, a 'most favored nation' clause doesn't say "You can't sell it anywhere else for less". It says, "If you sell it anywhere else for less, you have to give us that lower price as well."
Yes, an important distinction. The key issue is that the "most favoured nation" clause sets a single price for every ebook seller, not just Apple. Your options are to sell it for the same price as Apple, or to sell it at a higher price. The latter is hardly an option at all. That's powerfully anticompetitive.

----------

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Originally Posted by samcraig View Post
Explain how it affects the content owner if they charge X but then a retailer charges less? They aren't getting paid on what the retailer charges, are they? They're getting paid on their sales price. The difference being - they stand to make more if the retailer needs to buy more books, no?
In the short term, yes. In the long term, Amazon was (and I say this as a two-year Kindle owner who's never had an iBook that wasn't free) killing off every other retail and online channel for ebooks. Fewer competitors means there's less pressure for them to keep their prices low.
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Old Aug 31, 2012, 10:48 AM   #10
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Originally Posted by NATO View Post
You've missed the point entirely of this investigation by the EU.

With physical books (and eBooks until the Agency model was introduced), Amazon etc would buy books/eBooks in bulk at the wholesale price agreed by the publisher. Amazon could then in turn sell the books for as much or as little as it liked, but the publisher still got paid their wholesale price.

What the agency model did was stop Amazon etc selling books for whatever price they wanted and instead imposed a price on the end-customer, with Amazon/Apple receiving a fee in return for each sale.

It's blatant price-fixing, it has artificially inflated eBook prices and it should be stopped. I hope the EU hits them with everything they've got, because price fixing in every other industry is illegal because it's anti-consumer.
Sums it up beautifully.
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Old Aug 31, 2012, 10:52 AM   #11
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Originally Posted by sockatume View Post
Yes, an important distinction. The key issue is that the "most favoured nation" clause sets a single price for every ebook seller, not just Apple. Your options are to sell it for the same price as Apple, or to sell it at a higher price. The latter is hardly an option at all. That's powerfully anticompetitive.

----------



In the short term, yes. In the long term, Amazon was (and I say this as a two-year Kindle owner who's never had an iBook that wasn't free) killing off every other retail and online channel for ebooks. Fewer competitors means there's less pressure for them to keep their prices low.
Long term I think we'll see more and more people self-publishing which negates a lot of this model anyway. I'm not quick at all to dismiss the publishing industry - because I worked in in for many years. I also pre-mourn the day when printed books are a rarity. But it will no doubt (eventually) get to that.
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Old Aug 31, 2012, 10:53 AM   #12
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Quote:
Originally Posted by NATO View Post
You've missed the point entirely of this investigation by the EU.

With physical books (and eBooks until the Agency model was introduced), Amazon etc would buy books/eBooks in bulk at the wholesale price agreed by the publisher. Amazon could then in turn sell the books for as much or as little as it liked, but the publisher still got paid their wholesale price.

What the agency model did was stop Amazon etc selling books for whatever price they wanted and instead imposed a price on the end-customer, with Amazon/Apple receiving a fee in return for each sale.

It's blatant price-fixing, it has artificially inflated eBook prices and it should be stopped. I hope the EU hits them with everything they've got, because price fixing in every other industry is illegal because it's anti-consumer.
That's not the point at all. The agency model is legal. The problem is alleged collusion between the publishers to enact the model as part of a joint decision.

If you look at the proposed US settlement, agency pricing is only outlawed for two years to counteract the alleged affects of the alleged collusion.
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Old Aug 31, 2012, 10:54 AM   #13
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Originally Posted by NATO View Post
You've missed the point entirely of this investigation by the EU.

With physical books (and eBooks until the Agency model was introduced), Amazon etc would buy books/eBooks in bulk at the wholesale price agreed by the publisher. Amazon could then in turn sell the books for as much or as little as it liked, but the publisher still got paid their wholesale price.

What the agency model did was stop Amazon etc selling books for whatever price they wanted and instead imposed a price on the end-customer, with Amazon/Apple receiving a fee in return for each sale.

It's blatant price-fixing, it has artificially inflated eBook prices and it should be stopped. I hope the EU hits them with everything they've got, because price fixing in every other industry is illegal because it's anti-consumer.
Except Amazon was consistently selling for such a deep discount that it was nearly impossible for any competitor that wasn't selling in such volume across such a wide range of products (i.e., any competitor) was unable to compete and thus Amazon had the market to themselves. Which gave Amazon the ability to dictate terms to the publishers and eventually set whatever price they wanted.

The Most Favored Nation clause was needed at the time because without it, Amazon both had the market strength and willingness to use it to regain control of the market ("You want agency pricing? OK, you sell to us for 20% less or your books are no longer for sale by us. Any books. e-Books, hardbacks, paperbacks") Things have changed and it probably should be dumped by now.

I can't imagine the concessions being accepted, particularly the two year limit on discounting. No time limit but "can discount up to 20%" might fly.
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Old Aug 31, 2012, 10:58 AM   #14
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Originally Posted by NATO View Post
You've missed the point entirely of this investigation by the EU.

With physical books (and eBooks until the Agency model was introduced), Amazon etc would buy books/eBooks in bulk at the wholesale price agreed by the publisher. Amazon could then in turn sell the books for as much or as little as it liked, but the publisher still got paid their wholesale price.

What the agency model did was stop Amazon etc selling books for whatever price they wanted and instead imposed a price on the end-customer, with Amazon/Apple receiving a fee in return for each sale.

It's blatant price-fixing, it has artificially inflated eBook prices and it should be stopped. I hope the EU hits them with everything they've got, because price fixing in every other industry is illegal because it's anti-consumer.
I don't think the agency model's bad in itself. The trouble is that the "favoured nation" clause means that Amazon etc. can't argue for lower prices. Given the success of the Kindle store I'm sure that Amazon could fight for a significantly better agency fee (or even their preferred wholesale model) if Apple's agreement didn't forbid it. That'd be my preferred outcome, really: Apple gets to keep the agency model (their store, their rules) and everyone else gets to fight it out with the publishers.

I think the Powers That Be are too cheesed off for that, though.

----------

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Originally Posted by GadgetDon View Post
The Most Favored Nation clause was needed at the time because without it, Amazon both had the market strength and willingness to use it to regain control of the market ("You want agency pricing? OK, you sell to us for 20% less or your books are no longer for sale by us. Any books. e-Books, hardbacks, paperbacks") Things have changed and it probably should be dumped by now.
You think iBooks needed price fixing to be successful?

Edit- Genuine question, BTW. Personally, always thought that the iPad and iPhone's success obviated that.
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Old Aug 31, 2012, 10:58 AM   #15
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Originally Posted by BaldiMac View Post
That's not the point at all. The agency model is legal. The problem is alleged collusion between the publishers to enact the model as part of a joint decision.

If you look at the proposed US settlement, agency pricing is only outlawed for two years to counteract the alleged affects of the alleged collusion.
The collusion was necessary. Amazon had a nasty habit of punishing individual publishers who wouldn't play ball in e-books by yanking their paperback and hardback books as well - and their market strength in physical books is so strong, that's a huge club. All the publishers saying "we are switching to the agency model" had strength.

For an analogy, if one person goes on strike for better working conditions, the person just gets fired. If everyone goes on strike, management has to deal. Oddly, that form of collusion is considered a good thing.
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Old Aug 31, 2012, 11:00 AM   #16
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Except Amazon was consistently selling for such a deep discount that it was nearly impossible for any competitor that wasn't selling in such volume across such a wide range of products (i.e., any competitor) was unable to compete and thus Amazon had the market to themselves. Which gave Amazon the ability to dictate terms to the publishers and eventually set whatever price they wanted.

The Most Favored Nation clause was needed at the time because without it, Amazon both had the market strength and willingness to use it to regain control of the market ("You want agency pricing? OK, you sell to us for 20% less or your books are no longer for sale by us. Any books. e-Books, hardbacks, paperbacks") Things have changed and it probably should be dumped by now.

I can't imagine the concessions being accepted, particularly the two year limit on discounting. No time limit but "can discount up to 20%" might fly.

Seems some people are OK with Apple having all the cake at the party but other companies are wrong from trying to do the same.
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Old Aug 31, 2012, 11:03 AM   #17
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The collusion was necessary. Amazon had a nasty habit of punishing individual publishers who wouldn't play ball in e-books by yanking their paperback and hardback books as well
Amazon did that in response to the Apple deal, to avoid adopting the agency model. You've got the arrow of time (and causality) backwards.
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Old Aug 31, 2012, 11:04 AM   #18
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Amazon did that in response to the Apple deal, to avoid adopting the agency model. You've got the arrow of time (and causality) backwards.
It's the second time he's done that this week....
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Old Aug 31, 2012, 11:11 AM   #19
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It's the second time he's done that this week....
From his perspective, it'd be the first.

----------

The wording of the Reuters article, about allowing Amazon etc. to sell books at a discount, leaves open the possibility that they really are going to break the favoured nation clause.
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Old Aug 31, 2012, 11:19 AM   #20
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Originally Posted by EyeTack View Post
Yes ... the agency model must be stopped ... because if I am a content owner, I shouldn't be able to set my price for my content.

This hardly qualifies as worthy of anti-trust ... just some pissed off folks who whine because the latest blockbuster isn't going for $10. Cheap bastards.
I agree that there is nothing wrong with the agency model but I can see where places like Amazon don't like feeling forced to use someone else's terms. Of course they and the publishers wouldn't just part ways

The publishers could still demand some level of pricing control no matter the model, with perhaps allowances for the first couple of weeks of sales just like they do with paper books. Even perhaps allowing a system where Amazon etc has to sell at MRP outside of the opening couple of weeks and X number of days during the rest of the year (of their choosing) so long as the price is no more than say 30% off the MRP. Anything less than that has to be approved by the publisher first. They could even set the MFN clause based on those special sales. So say like last week when Starbucks was giving out a card for the first Artemis Fowl kids book. The MFN would then say that all publishers get to offer that book for free during the active distribution period for those codes. On the flip, Amazon wants to offer say the 4 Twilight books in a bundle for $15, Apple gets to price match that deal during the same period IF the final price is more than 30% off the price of the books regularly. If it is only say 25% off, then Amazon gets to keep that exclusive offer.

Yes this is a little messier but it is more reasonable to both sides and not just the publishers which is why the DOJ got involved.

I am pleased to see that the settlements aren't affecting the terms Apple can use and unlike how it was reported they only reverted the agency pricing at Amazon. Still distasteful but not as bad as the original reports sounded
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Old Aug 31, 2012, 11:22 AM   #21
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You think iBooks needed price fixing to be successful?

Edit- Genuine question, BTW. Personally, always thought that the iPad and iPhone's success obviated that.
First, an MFN clause is not price fixing (in the illegal sense). Second, despite everything Apple (legally or illegally) did to level the playing field with Amazon, Apple still only had around 7% of the ebook market compared to Amazon's 60+%.
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Old Aug 31, 2012, 11:27 AM   #22
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The collusion was necessary.
It was not. Apple could have competed on price too. Amazon could have tried to sell at loss to strangle the competition, but that would have been most likely abuse of dominant position and now it would be Amazon at the wrong end of an antitrust lawsuit.

Not to mention that even assuming the collusion necessary (it was not), that doesn't make it legal.
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Old Aug 31, 2012, 11:38 AM   #23
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First, an MFN clause is not price fixing (in the illegal sense). Second, despite everything Apple (legally or illegally) did to level the playing field with Amazon, Apple still only had around 7% of the ebook market compared to Amazon's 60+%.
That's because of the market penetration Amazon has with their kindle. That and the fact that if people own a kindle and an iPhone - they can buy books to read on both. Not so true in reverse. Yes, Amazon's format is proprietary - but you can read them on a wide variety of devices. Apple hasn't done the same.

So when someone (like myself) wants to ensure I can read whenever/wherever - I'm going to buy through Amazon. Even with the price being the same. And most of the time - even if Apple was a bit cheaper.
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Old Aug 31, 2012, 12:24 PM   #24
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Concession or payoff? Funny how fanboys cry when someone is ripping off apple, but defend apple when they rip off consumers. Hope apple and the rest involved get fined back to the stone age.
Hey apple, folks who live in a glass house shouldn't throw stones!
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Old Aug 31, 2012, 01:01 PM   #25
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Originally Posted by BaldiMac View Post
That's not the point at all. The agency model is legal. The problem is alleged collusion between the publishers to enact the model as part of a joint decision.

If you look at the proposed US settlement, agency pricing is only outlawed for two years to counteract the alleged affects of the alleged collusion.
I'm not sure about US law, but there seems to be a lot of discontent among consumer organisations and governments in the EU over the Agency model as a model for selling eBooks. The UK's Office of Fair Trading had started an investigation into this business practice, but closed it once the European Union started its own investigation. I suspect that the EU would be more critical of the Agency model, but obviously time will tell based on any settlement or verdict reached once fully investigated.
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