Apple's Antitrust E-Book Case Enters Appeals, Outlook Good for Apple

[Lazy]

They may not have complained, but they were making less money selling through the iBook store. At $14.99 retail, the publisher makes $10.49 with Apple. My understanding is that they were getting full retail price ($14.99) with Amazon. Perhaps the publishers weren't complaining because the $9.99 price had gone away, thus making physical books more competitive with ebooks.

From the Fortune article linked earlier:

"Though publishers raised wholesale prices, Amazon held fast. By 2009 it was absorbing $2, $5, and even $7 losses on the sale of nearly every copy of those key titles."

As for why they would care what Amazon resold them for, they were worried that too low of a price would cheapen the public's perception of the value of a an eBook (for sure) and perhaps books in general. I.e. you're correct that they were concerned about physical books not being competitive with eBooks. So even though they'd be selling more copies and making more money (just looking at eBook sales) with Amazon selling for $9.99 instead of $14.99 they judged that to be worse for them overall and/or in the long run.

 

[charlituna]

But, but, but, a Judge prejudging a case before the trial has started is very bad, isn't?

Prejudging, cherry picking evidence to back her judgement, ignoring that nothing in the contracts was illegal (even Amazon uses favored nation clauses) and so on.

And then there is this issue, (ignored by Cote) that apparently collusion isn't illegal in and of itself. It can be legal if it is done to snack down someone doing something nasty. Like Amazon, who had been using its loss leader pricing to kill all other ebook options

 

[Oletros]

Prejudging, cherry picking evidence to back her judgement, ignoring that nothing in the contracts was illegal (even Amazon uses favored nation clauses) and so on.

No, she didn't prejudged, she didn't cherry picked and she didn't ignored that the clauses, per se, were not illegal.

And then there is this issue, (ignored by Cote) that apparently collusion isn't illegal in and of itself. It can be legal if it is done to snack down someone doing something nasty. Like Amazon, who had been using its loss leader pricing to kill all other ebook options

This is a joke, isn't?

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Amazon used predatory pricing to drive companies like Borders out of business and create a monopoly.

Can you link to that ruling? Thanks

 

[charlituna]

to agree that the price would have to be set at $14.99

Nope. Not even close. apple never said the price would be anything. They said the maximum a general market title could be was $14.99. Many, even perhaps most, titles launched at the same $9.99 that Amazon was charging or even went lower

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The trial is over.

Cote made comments about the DOJ would have no trouble proving their case days, even a couple of weeks, before the trial begin. Her comments were rather clearly siding with the DOJ. And when she made her judgment she disregarded several pieces of testimony that watered down her original comments

 

[itr81]

I'm glad judge Cote finally got called out. I sometimes felt this is the only judge that seems to go negative against Apple just so she can be in the spotlight again. Apple been judged by a lot of judges in the past but Cote takes the cake.

I hope Apple wins this. If Apple can not compete and bows out eventually, I seriously doubt Amazon will keep its prices low without competition.

 

[Rajani Isa]

The trial is over.

They're referring to comments made by Judge Cote before the trial officially started, indicating that she was on the DoJ's (the plantiff's) side.

In other words, she went into the case with a publicly spoken bias against the defendant.

I'm glad judge Cote finally got called out. I sometimes felt this is the only judge that seems to go negative against Apple just so she can be in the spotlight again. Apple been judged by a lot of judges in the past but Cote takes the cake.

Was she ever chastised/reprimanded for selecting someone who had no significant experience in his role? And that she's apparently known him well enough that she wrote him an endorsement for a government job in the 90's?

 

[bpcookson]

Perhaps he is not getting the original point, so here it is: The MR article stated Apple's contention not as their argument to the court, but in a way that made it sound like it is already a fact.

Thank you for clarifying. I was equally confused as to how the quoted segment was "editorialized" and the other guy was just being mean about it instead of answering honest questions.

That being said, it seems like a really small bone to pick, no? It's no secret that the site is pro-Apple and the lead in just kind of supports the actual quote. Like how else should that quote be used? Or then not at all?

 

[AdonisSMU]

But, but, but, a Judge prejudging a case before the trial has started is very bad, isn't?

Turnaround is fair play. If you can't beat em, join em.

 

[BaldiMac]

Turnaround is fair play. If you can't beat em, join em.

I'd say his point was just a false equivalence. Judge Cote making comments that Apple colluded a year before the trial in another proceeding (settlements with the publishers) and repeating that judgment right before the trial starts is far different from an appellate judge asking questions after reviewing evidence in an appeals hearing.

 

[gnasher729]

Can you link to that ruling? Thanks

Not a ruling. Facts. No if you want to know how Amazon can get away with having a monopoly and using its monopoly power to hurt competitors, while Apple gets convicted for trying to break into the market where Amazon holds the monopoly, there are probably people who know, but they won't tell.

 

[Oletros]

Facts.

What facts? You don't have provided any fact

 

[BaldiMac]

What facts? You don't have provided any fact

The fact that we've had this discussion so many times with sources, definitions, legal precedents and clear explanations of why Amazon's actions could be considered predatory pricing should be enough.

But if it's not, the fact that an appellate judge in the OP refers to Amazon's actions as “predatory pricing” should indicate that it's a reasonable claim.

 

[PinkyMacGodess]

Are you daft? The case against Apple is weak. Did you not read the appellate judges comments? Even they are finding it hard to believe.

Come back when you actually have read the article and put your anti-Apple, anti-business bias to rest.

It's not at all weak. Apple colluded with publishers to raise the prices of 'digital' books.

Let me restate that: 'DIGITAL books'.

There is *nothing* inherently more expensive about producing and selling 'digital books' that makes the price have to be on par with the physical printed book, except that Apple takes a rather large cut off the top for every one that is sold.

Apple getting with publishers and saying 'Me love you guys and think you need to get more money for your content' was self serving to a large degree. Apple 'gives the publishers more money', and they also 'get' more money.

I'm not a fan of Amazon and their predatory pricing. They are like the Walmart of the internet, but I also think it's silly to pay $14.95 and up for a 'digital book'.

There is no paper involved, no trucks, no warehouses, no middlemen, no 'book signing tours', basically not anywhere near the overhead of the traditional publishing business, yet we are apparently supposed to pay the same price?

When Apple started this 'colluding', the prices of all books jumped at Amazon. That seems illegal to me. It's price fixing. It's charging an artificially high price after consultation with your competitors.

Apple was self-serving in their benevolence to the publishing industry.

Oil companies were busted for doing it. Many corporations have been busted for price fixing and collusion.

I can't think of *any reason* why Apple should get away with this.

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The fact that we've had this discussion so many times with sources, definitions, legal precedents and clear explanations of why Amazon's actions could be considered predatory pricing should be enough.

But if it's not, the fact that an appellate judge in the OP refers to Amazon's actions as “predatory pricing” should indicate that it's a reasonable claim.

There is nothing in the law that requires anyone to sell anything for a profit. There is nothing in the law that prohibits someone 'charging lower prices and making it up on volume'.

Pricing *should* have some basis in reality. Amazon was, perhaps, charging less for their 'books', but they were priced in such a way where they thought they could 'make it up on volume'. Since their 'books' require their reader app, I never actual bought any of them, but I was aware of the price difference.

Collusion on prices is illegal. 'Fixing' prices to an artificial level is illegal. What Apple did, as I said earlier, is self-serving, and yes, illegal. What Amazon did was 'force' people to take less for their work. There is nothing, like I said above in this post, there is nothing in the law that requires anyone selling anything for a profit, and if the publishers didn't like Amazon's attitude, the should have stopped dealing with Amazon. I wonder how they feel about dealing with Walmart. I'll bet Walmart wags them like a dogs tail...

 

[BaldiMac]

It's not at all weak. Apple colluded with publishers to raise the prices of 'digital' books.

Let me restate that: 'DIGITAL books'.

There is *nothing* inherently more expensive about producing and selling 'digital books' that makes the price have to be on par with the physical printed book, except that Apple takes a rather large cut off the top for every one that is sold.

Apple getting with publishers and saying 'Me love you guys and think you need to get more money for your content' was self serving to a large degree. Apple 'gives the publishers more money', and they also 'get' more money.

I'm not a fan of Amazon and their predatory pricing. They are like the Walmart of the internet, but I also think it's silly to pay $14.95 and up for a 'digital book'.

There is no paper involved, no trucks, no warehouses, no middlemen, no 'book signing tours', basically not anywhere near the overhead of the traditional publishing business, yet we are apparently supposed to pay the same price?

When Apple started this 'colluding', the prices of all books jumped at Amazon. That seems illegal to me. It's price fixing. It's charging an artificially high price after consultation with your competitors.

Apple was self-serving in their benevolence to the publishing industry.

Oil companies were busted for doing it. Many corporations have been busted for price fixing and collusion.

I can't think of *any reason* why Apple should get away with this.

Because none of what you described is illegal outside of the collusion. Your idea that eBook prices should be lower that physical book prices is irrelevant. And there is no actual evidence that Apple knew about any collusion by the publishers, let alone was a knowing participant.

There is nothing in the law that requires anyone to sell anything for a profit. There is nothing in the law that prohibits someone 'charging lower prices and making it up on volume'.

But there is something in the law that prohibits predatory pricing.

Pricing *should* have some basis in reality. Amazon was, perhaps, charging less for their 'books', but they were priced in such a way where they thought they could 'make it up on volume'. Since their 'books' require their reader app, I never actual bought any of them, but I was aware of the price difference.

How do you "make it up on volume" when the books are priced below cost?

The only argument here is that Amazon made it up through other books that were not below cost. But that's one of my fundamental disagreements with the DOJ's case. The are treating the ebook market as if it is a commodity market, where every eBook is the same. Obviously, that's not true.

Best sellers and new releases have a much greater market impact than the long tail. When a monopolist prices them below cost, it is a barrier to entry for new competitors. A situation that is a primary concern of antitrust law.

 

[linuxcooldude]

When Apple started this 'colluding', the prices of all books jumped at Amazon. That seems illegal to me. It's price fixing. It's charging an artificially high price after consultation with your competitors.

Apple telling all the publishers it wants to constitute the agency model, in of itself, is not illegal. Apple saying "This is what we are offering, take it, or leave it" Of course, most publishers are very receptive to that idea as it will get them more money.

Now if Apple and all the publishers got together in a meeting to discuss on how they were to implement this new agency model would be collusion of the illegal sort.

Now if all the publishers got together on their own, without Apple, to discuss the agency model Apple would not be responsible of anything illegal either.

 

[IJ Reilly]

Thank you for clarifying. I was equally confused as to how the quoted segment was "editorialized" and the other guy was just being mean about it instead of answering honest questions.

That being said, it seems like a really small bone to pick, no? It's no secret that the site is pro-Apple and the lead in just kind of supports the actual quote. Like how else should that quote be used? Or then not at all?

I find lots of bones to pick with the writing on MR, some of them bigger than others. I realize most people find these complaints to be fussy and ridiculous, but I know at least a few of us are equally annoyed by the frequent errors of grammar and usage, and the general lack of clarity. These problems are easily corrected.

I suggested a simple rewrite of that sentence in another post. This suggestion doesn't necessarily reflect the way I would chose to report this story, but it's how a copy editor might approach making the minimum changes required to clarify who is saying what. The apparent problem is the lack of a copy editor at MR. Nobody seems to be in charge of flagging and fixing these mistakes.

 

[charlituna]

It's not at all weak. Apple colluded with publishers to raise the prices of 'digital' books.

That is not entirely correct. It wasn't about raising prices. Many prices stayed the same. It was about being by the publishers choice.

And that is really how it should be. In a free market system, the publishers set the price and if the market feels the price is too high they don't buy and the publishers lower the price. Until a 'right' price is discovered.

 

[Zimmy68]

That is not entirely correct. It wasn't about raising prices. Many prices stayed the same. It was about being by the publishers choice.

And that is really how it should be. In a free market system, the publishers set the price and if the market feels the price is too high they don't buy and the publishers lower the price. Until a 'right' price is discovered.

So if Levi's want their jean's priced at $50, not a single store should be allowed to sell them at a lower price?
No matter what store I walk into it will be $50??

That is how it should be?

That is a great system you got there.

 

[BaldiMac]

So if Levi's want their jean's priced at $50, not a single store should be allowed to sell them at a lower price?
No matter what store I walk into it will be $50??

That is how it should be?

That is a great system you got there.

So you think selling direct to consumer should be illegal?

 

[FakeWozniak]

So if Levi's want their jean's priced at $50, not a single store should be allowed to sell them at a lower price?
No matter what store I walk into it will be $50??

I thought this was referred to as the agency model. And it's legal. For a while, you couldn't buy an Apple product from a reseller at a price different than Apple sold it themselves. I suppose it is all part of negotiations and contracts.

 

[PinkyMacGodess]

So if Levi's want their jean's priced at $50, not a single store should be allowed to sell them at a lower price?
No matter what store I walk into it will be $50??

That is how it should be?

That is a great system you got there.

Actually, and admittedly on a tangent, I found out that Levi's DOES sell jeans 'Made In America', for something like $150.00 a pop. I think they were called 'Classic' jeans or some such... Looking right now.

Interesting, I think they killed them off...

Bummer. But I still look for Made In Mexico, because at least they are made (hopefully) in the Northern Hemisphere... It's sad going shopping for Levi's/ I had a friend that went to Bangladesh and the kids were swarming him to see if he had 'jeans' and offering him damn near anything for them. He went back a few times and always packed extra pairs 'for the kids'. Now a lot of Levi products are made there, and I'll be they still can't afford to buy them, even thought they make them there now.

Whatever.

The race to the bottom...

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So if Levi's want their jean's priced at $50, not a single store should be allowed to sell them at a lower price?
No matter what store I walk into it will be $50??

That is how it should be?

That is a great system you got there.

The problem is that if Levi, Wrangler, Calvin Klein, Nautica, etc, all got together and decided that their jeans should all be sold at $50.00, no matter the style/color/fabric, that would be collusion. That would be illegal.

I fail to see how even if Apple didn't force the issue, which would be a HUGE stretch given their comments, how them agreeing with the fixed prices doesn't make them guilty.

And to be honest, I don't think I bought many 'books' at that time, so anything I would receive wouldn't be much, and would be just plowed back into buying more 'books'.

The real crimes in 'book' pricing are the textbooks! HOLY BOVINE! They were expensive as hell when I went to college and university. They have gotten even more ridiculous from what I've heard. And some 'schools' are forbidding students to use 'used' books too. And yet student financial aid is being gutted to pay for the wishlists of Corporate America... Damn...

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That is not entirely correct. It wasn't about raising prices. Many prices stayed the same. It was about being by the publishers choice.

But that's a problem too. So a 'book' that costs very little for a 'publisher' to release, should be priced somewhere north of $12.00 because the publisher says so?

These publishers are beginning to sound a lot like the music industry, where the 'fat cats' demand that they get paid FIRST (DAMMIT) and the artists get a thin shave off the top.

Then I guess you are fine with the drug companies making a deal with the Bush administration so that they can charge American consumers sometimes 400% more than they charge in Canada, or Mexico. There was an expose on the 'EpiPen' recently. That device hasn't changed in years, and the price keeps going up, in America, yet in Canada, the price isn't even half what it is here, it's more like 80% off the price here.

'Free trade' and the 'free market' are ruses to make people believe that they are getting a 'good deal', when the only people winning are the crooked corporations...

 

[AdonisSMU]

I'd say his point was just a false equivalence. Judge Cote making comments that Apple colluded a year before the trial in another proceeding (settlements with the publishers) and repeating that judgment right before the trial starts is far different from an appellate judge asking questions after reviewing evidence in an appeals hearing.

Good point.

 

[gnasher729]

What facts? You don't have provided any fact

Are you going through life with closed eyes? You really haven't heard any reporting about Amazon putting pressure on Hachette, Hachette books suddenly not being available for pre-order anymore, and other shenanigans?

Look, we are not in a court here where I have to give evidence when you are willfully closing your eyes that doesn't meet your preconceived ideas that Apple has to be guilty, at any price.

 

[EbookReader]

Steve Jobs admitted to colluding to raise ebook prices here:

http://business.time.com/2013/07/10/apple-found-guilty-in-e-book-price-fixing-conspiracy-trial/

And she pointed to an exchange that Apple’s late CEO Steve Jobs had with a reporter on the day the iPad was launched. Asked by the reporter why consumers would pay $14.99 to Apple to purchase an e-book that was selling at Amazon for $9.99, Jobs replied, “Well, that won’t be the case.” The reporter then asked, “You mean you won’t be 14.99 or they won’t be 9.99?” Jobs paused, and “with a knowing nod” responded, “The price will be the same.”

With that statement, Judge Cote wrote in her decision, “Jobs acknowledged his understanding that the Publisher Defendants would now wrest control of pricing from Amazon and raise e-book prices, and that Apple would not have to face any competition from Amazon on price.” Shortly thereafter, faced with a unified front from the major publishers, Amazon realized it had no choice but to accept agency agreements, and prices for e-books soon went up. “The increases at Amazon within roughly two weeks of moving to agency amounted to an average per unit e-book retail price increase of 14.2% for their New Releases, 42.7% for their NYT Bestsellers, and 18.6% across all of the Publisher Defendants’ e-books,” Judge Cote found.



----------------------------

If Apple wanted to compete with Amazon on ebook without breaking the law, all Apple has to do is use the same strategy. Buy ebook wholesale. Put some popular ebooks on sales / Loss Leaders. Make profits on the rest of the ebooks catelog.

Apple wanted more profits and elimination of price competition.

The result is that 30% to the "agent" with PRICES THE SAME AT EVERY STORES (Kindle, Nook, Kobo, GooglePlay, Ibookstore).

 

[BaldiMac]

Steve Jobs admitted to colluding to raise ebook prices here:

No, he didn't. He admitted to knowing the terms of the contracts that Apple negotiated.

Again:

Cote: "If Apple is suggesting that an adverse ruling necessarily implies that agency agreements, pricing tiers with caps, MFN clauses, or simultaneous negotiations with suppliers are improper, it is wrong. As explained above, the Plaintiffs have not argued and this Court has not found that any of these or other such components of Apple’s entry into the market were wrongful, either alone or in combination."

Cote: "It is also not illegal for a company to adopt a form “click-through” contract, negotiate with all suppliers at the same time, or share certain information with them."

If Apple wanted to compete with Amazon on ebook without breaking the law, all Apple has to do is use the same strategy. Buy ebook wholesale. Put some popular ebooks on sales / Loss Leaders. Make profits on the rest of the ebooks catelog.

Because it's so easy to break into a new market when 25% of your sales are at a loss!

Apple wanted more profits and elimination of price competition.

The result is that 30% to the "agent" with PRICES THE SAME AT EVERY STORES (Kindle, Nook, Kobo, GooglePlay, Ibookstore).

As confirmed by Judge Cote, none of that is illegal