Authors Believe Apple's Entry Into E-Book Market Wasn't Anti-Competitive

[MacRumors]

A coalition of authors and well-known booksellers have come forth to back Apple in a petition to overturn a recent ruling that stated the company was liable in conspiring to fix the prices of electronic books when its iBooks store launched on the iPad in 2010 (via Cult of Mac).

Together, the Authors Guild, Authors United, the American Booksellers Association, and Barnes & Noble have filed a 37-page amicus brief that states Apple was in fact enhancing competition and benefiting its customers.

"We are pleased to lend our support in this matter, critical to anyone interested in a competitive and diverse literary marketplace," said Mary Rasenberger, executive director of the Authors Guild, in a statement. "We fundamentally question the wisdom of the Second Circuit's use of antitrust law to punish a business arrangement that demonstrably increased competition in the e-book marketplace."

The brief falls in line with Apple's petition of the Supreme Court to review the case this past October, after first being found guilty of conspiring to artificially inflate the prices of e-books back in 2013, when the case started. The amicus brief filed by the authors and booksellers backs up Apple's attempts at overturning the ruling, stating that a positive outcome for the case is "critical to maintaining a healthy marketplace for the ideas and First Amendment-protected expression that authors and bookstores facilitate."

The groups even mention Amazon as more of a "disruptive" force in the e-books market, with a "loss leader" strategy that led to domination over the digital bookselling marketplace. The groups use Amazon's recent public battles with publishers like Hachette, where it essentially ceased selling any of their novels due to a price point disagreement, as a primary example. They also look at the market monopoly Amazon held before Apple entered with iBooks in 2010.

"With a 90% market share, nearly every customer who wanted to purchase an e-book had to do so through Amazon," the brief states. "Amazon could exercise this power to suppress specific publishers, authors, or messages with which it disagreed, with impunity. It also could steer the culture toward the ideas it valued. Amazon controlled what e-books were promoted on its home page, what e-books were recommended to consumers, and what books appeared at the top of a consumer's search results when she searched for e-books on the Amazon.com website."

With no response yet from the Department of Justice regarding Apple's filing for a review, the company still has an uncertain future in the two year-long case. All respondents have until January 4 to file a response in opposition to Apple's petitioning of the Supreme Court, so the next leg of the case is just over a month away.

Article Link: Authors Believe Apple's Entry Into E-Book Market Wasn't Anti-Competitive

 

[tobefirst ⚽️]

Well, this is shocking. The suppliers of the content don't think that the raising of prices unilaterally was anti-competitive.

 

[supercoolmanchu]

It can't be! The 'Department of Justice' is about protecting people. It's right there in the name!

 

[dumastudetto]

It's common sense that Apple's entry into the E-Book market was great news for consumers, authors and the industry at large. It was bad news for those who wanted to control the market with bullyboy tactics that would only harm authors and publishers.

 

[wovel]

Well, this is shocking. The suppliers of the content don't think that the raising of prices unilaterally was anti-competitive.

Suppliers always raise prices unilaterally. I would help you out if I could figure out at all what it was you were actually trying to say. The seller of something always controls the price. Apple let the owners of the content set the price they wanted to sell their content for. That was it.

 

[2457282]

Although I am neither a lawyer or an expert in these sorts of litigation, I did take the time to read some of the evidence. My take is that Apple, when negotiating with the publishers was directly aiming to bring down Amazon and some of the early contract language was very much anti-competitive in that it would force the publishers to change the agreement with Amazon. The final contracts did not have any of this language, but the intent could be interpreted based on the early language.

Apple was smart to not include the language because it did seem wrong. THe question is whether the final contract was still anti-competitive. My personal opinion is that it is not, but the early language certainly give the appearance of problems. Can Apple be held liable about language that was ultimately removed from the final contract? I think this is the bigger question and why they are fighting. Frankly, Apple put themselves in this spot and the question is did they do enough to back out before the ink was dry. If I read the final contract, on its own it looks fine. It's the backstory that looks shady.

Based on all this, I understand why they went after Apple, but I also think they went to far, since Apple ultimately came to their senses and back off the bad language.

Again, my take, based on non-expert reading of the details.

 

[tobefirst ⚽️]

Suppliers always raise prices unilaterally. I would help you out if I could figure out at all what it was you were actually trying to say. The seller of something always controls the price. Apple let the owners of the content set the price they wanted to sell their content for. That was it.

I don't need any help. (; Thanks.

What I'm saying is that it is unsurprising to me that the authors would think that what Apple is doing is great when it ultimately raises prices for consumers.

Apparently, the seller of something apparently doesn't always control the price, as Amazon was forced to change what they were charging for ebooks.

 

[Gasu E.]

Although I am neither a lawyer or an expert in these sorts of litigation, I did take the time to read some of the evidence. My take is that Apple, when negotiating with the publishers was directly aiming to bring down Amazon and some of the early contract language was very much anti-competitive in that it would force the publishers to change the agreement with Amazon. The final contracts did not have any of this language, but the intent could be interpreted based on the early language.

Apple was smart to not include the language because it did seem wrong. THe question is whether the final contract was still anti-competitive. My personal opinion is that it is not, but the early language certainly give the appearance of problems. Can Apple be held liable about language that was ultimately removed from the final contract? I think this is the bigger question and why they are fighting. Frankly, Apple put themselves in this spot and the question is did they do enough to back out before the ink was dry. If I read the final contract, on its own it looks fine. It's the backstory that looks shady.

Based on all this, I understand why they went after Apple, but I also think they went to far, since Apple ultimately came to their senses and back off the bad language.

Again, my take, based on non-expert reading of the details.

Pretty good comment. I think, though, the basis of the anti-competitive action was that the publishers were colluding, and Apple was the go-between. That, in itself, is illegal. So the early language may indeed be evidence of that collusion. The final contract is actually less relevant; as it would have been ok for Apple to have individual agreements with each publisher like the ones in the contract. The anti-competitive part was the publishers agreeing with each other, via Apple.

 

[Gasu E.]

I don't need any help. (; Thanks.

What I'm saying is that it is unsurprising to me that the authors would think that what Apple is doing is great when it ultimately raises prices for consumers.

Apparently, the seller of something apparently doesn't always control the price, as Amazon was forced to change what they were charging for ebooks.

Producers actually don't care about the end-user price; they care about what Amazon pays them. Prior to Amazon, with thousands of booksellers and hundreds of publishers, the price received by authors was somewhat market-based. With a monopoly seller, it is not. Markets are supposed to result in a price that is a fair balance between consumers and producers; with an Amazon monopoly, not so.

In the short run, according to microeconomics theory, producers will sell at a loss, because they have sunk costs. However, that discourages entry of new producers and investment by existing producers in the longer run. So, fewer writers entering, or writers choosing alternative professions. Alternatively, it can force producers to figure out how to lower costs. One thing we are seeing as a result of Amazon is more self-publishing, for example; self-publishing is typically done by part-time authors and requires no publisher advances, so it is an example of bringing reduced costs to authorship.

 

[Guidonculous]

Frankly, Apple put themselves in this spot and the question is did they do enough to back out before the ink was dry. If I read the final contract, on its own it looks fine. It's the backstory that looks shady

This sounds nice as a comment, but it doesn't make a whole lot of sense as a justification of what's occurred. There is no reason we should know the conversations behind these deals, as this never should've gone to court. The publishers and authors felt amazing was being abusive, so they made deals which increased their relative strength.

Let's be honest, of course there is an element from within Apple which is "anti-competitive", it's how you stay competitive yourself. Do you think all of apples competitors never have anti-competitive thoughts about Apple in the phone space where Apple has 90% of the profits? Of course they do, because they inherently wish to take some of those profits from Apple.

Let's also be honest, if you're in an abusive relationship, you probably will say some things to your therapist which would be frowned upon in divorce court. It's really not relevant to the court case what you said behind closed doors. What matters are they actions and behaviors you take public ally and with the partner in question.

The fact that Apple was brought to court at all is extremely concerning for our democracy/economy. We should be attacking monopolies, not defending them. The fact that Amazon has faced no questions after the hachette debacle is terrifying.

Apple is sued constantly, more than any organization in history. They have never taken the verdicts to the Supreme Court. It's clear Apple thinks this is a question about the fairness of our country, not a few million dollars.

Most favored nation clauses are in no way defined as anti-competitive. The judge in the case deemed that in a scenario where a loss leader was causing everyone in the industry to lose money, including themselves, how on earth would a most favored nation clause be anti-competitive? It's simply attacking the issue at its root.

Play out amazon's strategy and you end up with absolutely a less healthy ecosystem for authors and publishers. Inevitably, this will decrease the quality of books our nation writes. That is the definition of anti-competitive.

For the judge to say that apples evidence that it was increasing the total amount of money spent one books isn't relevant is ridiculous. Of course it's relevant in a discussion about anti-competitive behavior. If the competition increased, then it wasn't anti-competitive. For the judge to assign a monitor with 0 experience in the field is absurd. For him to demand meetings with the head of industrial design is inappropriate. For the judge to stand by his requests is insane.

Apple just did this same thing in the music industry, and had the monitor the whole time, and nothing scandalous was observed.

There's no two ways about this, apple entering the ebook market was good for authors, publishers and consumers. The fact that this discussion is happening is a major sign our country is in trouble.

 

[bsolar]

Producers actually don't care about the end-user price; they care about what Amazon pays them.

This is actually not correct: Apple's ebook deal was acknowledged by both parties to be more expensive for end-user but actually less profitable for publisher. The reason publishers accepted it was exactly because they wanted to increase the end-user price so that the perceived value of books would remain artificially high.

 

[Judas1]

Producers actually don't care about the end-user price; they care about what Amazon pays them. Prior to Amazon, with thousands of booksellers and hundreds of publishers, the price received by authors was somewhat market-based. With a monopoly seller, it is not. Markets are supposed to result in a price that is a fair balance between consumers and producers; with an Amazon monopoly, not so.

In the short run, according to microeconomics theory, producers will sell at a loss, because they have sunk costs. However, that discourages entry of new producers and investment by existing producers in the longer run. So, fewer writers entering, or writers choosing alternative professions. Alternatively, it can force producers to figure out how to lower costs. One thing we are seeing as a result of Amazon is more self-publishing, for example; self-publishing is typically done by part-time authors and requires no publisher advances, so it is an example of bringing reduced costs to authorship.

What are you talking about? Ebooks were still a fledgeling market, and Amazon did not have the power to hamstring publishers. Publishers hated that Amazon was promoting ebooks and they knew that ebooks would cannibalize physical books and destroy their control and profit. There has never been a complaint that Amazon wasn't paying them fair market price. The issue that they had was that Amazon was selling ebooks on sale as part of their loss leader strategy and sellers using loss leaders is nothing new and isn't wrong.

 

[jcmeyer5]

At the end of the day, no, Apple shouldn't be liable for contract language that was not in the approved contract. Someone wrote something up, it was reviewed by legal, and discarded likely because it was illegal. To me, that illustrates responsible and appropriate legal review, not some nefarious plot to bring down Amazon.

At the end of the day, it gave price control back to the artists. I am not sure what exactly they are claiming as far as collusion, but the idea that Apple was a "go between" is probably a misinterpretation of the relationship.

 

[gnasher729]

Well, this is shocking. The suppliers of the content don't think that the raising of prices unilaterally was anti-competitive.

The "suppliers of the content" (in other words hard working authors who make a living writing the books that you want to read at the cheapest price possible) who actually know what's going on in the market have figured out that Amazon had a 90% monopoly in the market which makes any allegations of anti-competitiveness against any else ridiculous, and they have also first hand experience with Amazon brutally using their monopoly to force companies like Hachette to surrender to their conditions.

 

[bstpierre]

What are you talking about? Ebooks were still a fledgeling market, and Amazon did not have the power to hamstring publishers. Publishers hated that Amazon was promoting ebooks and they knew that ebooks would cannibalize physical books and destroy their control and profit. There has never been a complaint that Amazon wasn't paying them fair market price. The issue that they had was that Amazon was selling ebooks on sale as part of their loss leader strategy and sellers using loss leaders is nothing new and isn't wrong.

I may be wrong, or this might just apply to automobiles, but I believe in California it is illegal to sell something below cost.

edited to reply to the correct post.

 

[bsolar]

The "suppliers of the content" [...] have figured out that Amazon had a 90% monopoly in the market which makes any allegations of anti-competitiveness against any else ridiculous

Why? Amazon being a monopoly has nothing to do with others engaging in anti-competitive behavior or not. This is true even if you assume that the monopoly was illegal and it's exactly the reason why the question of Amazon abusing its dominant position was not investigated in the ruling against Apple & publishers: it's not relevant to that case.

If Apple & Publishers want that question answered they can sue Amazon for abuse of dominant position and then we'll see what happens, but it would in any case not excuse them for their own illegal anti-competitive practices.

 

[bsolar]

I may be wrong, or this might just apply to automobiles, but I believe in California it is illegal to sell something below cost.

The general rule is that it's illegal to sell below cost only with the intent of driving away the competition to be able to rise prices afterwards to recoup the "investment". This is why practices like loss-leader sales are allowed and some consider Amazon selling some bestsellers below cost to be a legal loss-leader practice, especially since they are overall profitable in their ebooks sales as far as I remember.

In general it's very difficult to win a predatory pricing lawsuit since lower prices are generally considered good for consumers and it's difficult to demonstrate that there is enough barrier-to-entry to keep competitors away if you increase the prices a lot after they left.

 

[Zimmy68]

Hmmm, the group that would benefit the most by Apple's anti-competitive shenanigans say Apple wasn't being anti-competitive?

Hmmm, what are the odds of that?????

 

[macduke]

I don't think anyone but the Department of Justice and Amazon has actually thought Apple was guilty of anything. Even the Android nuts I know thought this whole thing was dumb. Amazon is the real problem. They pressure authors all the time and have questionable ethics and business practices. I have no idea why they haven't been investigated.

 

[BaldiMac]

Why? Amazon being a monopoly has nothing to do with others engaging in anti-competitive behavior or not. This is true even if you assume that the monopoly was illegal and it's exactly the reason why the question of Amazon abusing its dominant position was not investigated in the ruling against Apple & publishers: it's not relevant to that case.

That's not true. Most antitrust cases include consideration of pro-competitive affects on the market. It's why the issue of Judge Cote's ruling that Apple's conduct was a per se violation is so important. It allows her to avoid considering the pro-competitive affects that she acknowledged.

 

[Zimmy68]

I don't think anyone but the Department of Justice and Amazon has actually thought Apple was guilty of anything.

Huh? Wasn't it the DOJ's job to determine if Apple colluded with publishers, which they did?
Are we really going back to "what did they do wrong?"
I thought we past that.

Mossberg - Steve, how are you going to compete when you charge $15 a book?
Jobs - Because we will make it so everyone has to charge $15 a book.


Yep, nothing shady going on there.

 

[jimboutilier]

Huh? Wasn't it the DOJ's job to determine if Apple colluded with publishers, which they did?
Are we really going back to "what did they do wrong?"
I thought we past that.

Mossberg - Steve, how are you going to compete when you charge $15 a book?
Jobs - Because we will make it so everyone has to charge $15 a book.


Yep, nothing shady going on there.

Exactly. The "most favored nation" clause in the contract and Apple's 30% profit margin forced wholesale and retail prices up across the board. So all consumers paid higher prices to line Apple's pockets - if they bought from Apple or not. I've never bought a book from Apple since and never will as long as there is any other choice.

 

[BaldiMac]

Huh? Wasn't it the DOJ's job to determine if Apple colluded with publishers, which they did?
Are we really going back to "what did they do wrong?"
I thought we past that.

Mossberg - Steve, how are you going to compete when you charge $15 a book?
Jobs - Because we will make it so everyone has to charge $15 a book.


Yep, nothing shady going on there.

Exactly. The "most favored nation" clause in the contract and Apple's 30% profit margin forced wholesale and retail prices up across the board. So all consumers paid higher prices to line Apple's pockets - if they bought from Apple or not. I've never bought a book from Apple since and never will as long as their is any other choice.

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."
​

There is certainly a reasonable argument that Apple colluded with publishers, but you're certainly not making it.

 

[samcraig]

Pretty sure it doesn't matter what authors think in regards to this legal issue. Also - of COURSE Barnes & Noble is on board with the disagreement. I love B&N - but they wished they had the adoption and sales from their Nook line that Amazon was able to achieve with their Kindle line.

At the end of the day - Apple, in my opinion, took the wrong route to compete. They chose their arbitrary 30% as the profit margin they wanted to make on books. They learned from this though and have negotiated other rates when it comes to other content now.

 

[BaldiMac]

They chose their arbitrary 30% as the profit margin they wanted to make on books. They learned from this though and have negotiated other rates when it comes to other content now.

30% is not their profit margin. And it isn't arbitrary. The 30% cut of each sale lead to single digit profit margins which is where they felt comfortable operating.

Also - of COURSE Barnes & Noble is on board with the disagreement. I love B&N - but they wished they had the adoption and sales from their Nook line that Amazon was able to achieve with their Kindle line.

I think you can look at B&N as a poster boy for the pro-competitive effects of agency pricing on the market. They went from nothing to around 15% under agency pricing and then slowing sliding back down in market share combined with significant losses after agency pricing was dissolved.