Publishers in E-Book Antitrust Case File Objection to DOJ's Proposed Punishment for Apple

[Sir Real]

An industry tries to regulate itself to protect itself from a monopoly abuses and then apple gets f'd over. Waaaait... Obviously Steve did not bribe the right politicians. Because the banks seem to be able to regulate themselves to the tune of WORLD ECONOMY MELTDOWN! I really hope you Americans reform your tax code and financial system. Lock down the banks.

Speaking as an American I can honestly say I've pretty much given up all hope. Get ready for the next big meltdown. There were plenty off warnings prior to the Sub Prime Mortgage Meltdown. They were all ignored. Here's a link to 3 women regulators who were ignored. http://www.mcclatchydc.com/2012/01/30/137029/commentary-three-female-regulators.html#.UgOC7RbA4qY

 

[the8thark]

I believe this whole thing came about because it is not seen as a "free market" ... hardware choice is not what is being discussed.

Is not seen as and is not are two totally different things. And I believe that is what Apple and the publishers are appealing about. The DOJ does not see it as a free market, when Apple and the publishers feel it is a free market. Hence the appeal.

 

[snowmoon]

In the end the DoJ recommendations do not pass the sniff test. They are not in line with the law or prevailing precedence in these cases. Both the magnitude and intrusiveness are well out of line for the facts.

We should all be rooting for the agency model, it till help hasten the demise of big publishers and their monopolies sooner, Apple and Amazon have their own long term interest in mind, not those of the publishing houses. Why the DoJ continues to be blind to the anti-competitive actions of Amazon astound me, specifically their use of the dominant position to strong arm exclusive deals and lock out others.

 

[Nungster]

Don't understand why this case is so hard to solve. All the DoJ have to do is get Apple to remove the clause from their agency agreements that prevents the publishers from selling their eBooks through Amazon at a lower price. If Apple wants to make 30% margin on eBook sales that's fine. If Amazon want to make 5% margin and sell the eBooks much cheaper that's up to them. It's a free market. Ultimately customers will decide who gets their money.

I totally agree! Who says online prices have to all be the same? If Apple wants higher margins then let them set their price. If Amazon wants to use ebooks to generate traffic and sell them at small margins, then so be it. Let the consumer decide where they want to buy an eBook.

 

[Kid Vorpal]

Can we find anymore ways to use the word "draconian" ?

Because it needs to be used at every opportunity, usually incorrectly ,especially when 90% of the public agrees with people using words they don't understand.

Has there ever been a more effective ************** buzzword ? Ever ?

This word is thrown around more than football. And by people less intelligent...if you can believe that !

It's almost as bad as the word "innovation". You'll see that (and its many variants) used extensively on these forums, and in much the same fashion.

Welcome to MacRumors.

 

[bsolar]

I think that you misunderstand the Agency Model. What it sets is the retail price. The MFN clause was so that Apple would always get the lowest retail pricing from the publisher as any other seller. The publishers required that Amazon also sign new contracts based on the agency model, under threat of losing the publisher's catalog, otherwise as you state, Amazon would just continue low balling pricing.

I don't think I'm misunderstanding since that's exactly what I said myself:

With the agency model the publishers sets the price the consumer pays, and gets 70% of that, the retailer gets the remaining 30% (assuming Apple's fees).

"Price the consumer pays" == retail price.

The key part, again, is that with the agency model if the retail price gets lower, the publisher's cut gets lower accordingly. So if you have separate competitors one which the agency model and the other with wholesale, the one with wholesale can decide the retail prices freely without affecting the per-sale publisher's cut (which is a fixed amount), but with the MFN clause it means the other retailer using agency would be able to lower its retail prices too, this time reducing the publisher's cut (since with agency it's a percentage of the retail price itself).

What the publisher gets is the ability to set retail pricing to maximize profit at any time during the sales cycle; highest at release, and lowering over time.

The publishers' goal was not to maximize profits, it was clear to them that with the new model they were going to make less profits overall with ebooks. They still went with it because they wanted to increase prices overall, most likey to protect their physical books' business.

The agency model levels the playing field for all sellers, and assures that the Amazon's of the world can't use predatory pricing, i.e., selling below cost, to gain market share. This same agency model is how video and music sales have worked out so successfully.

Amazon does not use predatory pricing, it sells below cost some key items as loss-leaders (which is a different thing) but it's overall profitable in the ebooks business. I don't see why operating on low margins should be removed from the equation when talking about competition, as long as the business unit is overall profitable. It surely is not in the best interest of consumers, which is the ultimate goal of the antitrust laws. It's not like you have to "level the playing field", Apple can and should compete also on price investing money to enter the market like all companies do.

 

[ThunderSkunk]

The free market is working just fine.

Ideology becomes dogma.

 

[BaldiMac]

Actually, it's the agency model of setting the same price for everyone which forced smaller ebook sellers out of business.

Do you have any evidence to support this statement? It makes no sense on its face, and everything I've ever read says the exact opposite. Competition increased after agency pricing.

 

[AdonisSMU]

Apple should not be punished for you not thinking ahead. If you don't like the iBooks store price go elsewhere. Every tablet book store has it's door fee to get in. (That fee being the cost of the tablet itself). It was your choice use iBooks, you made that choice when you bought the iPad. If you didn't like it, should have bought a kindle or something.

The free market is working just fine. No one forced you to buy an iPad. Kindles and others exist.

I have Kindle on my iPad. A hardware choice hasn't stopped me from purchasing on a Kindle when it's cheaper to do so.

 

[terrymr]

Don't understand why this case is so hard to solve. All the DoJ have to do is get Apple to remove the clause from their agency agreements that prevents the publishers from selling their eBooks through Amazon at a lower price. If Apple wants to make 30% margin on eBook sales that's fine. If Amazon want to make 5% margin and sell the eBooks much cheaper that's up to them. It's a free market. Ultimately customers will decide who gets their money.

Because the publishers want to set the sale price.

 

[Rogifan]

I totally agree! Who says online prices have to all be the same? If Apple wants higher margins then let them set their price. If Amazon wants to use ebooks to generate traffic and sell them at small margins, then so be it. Let the consumer decide where they want to buy an eBook.

I thought the publishers set the price not Apple?

 

[etrinh]

If your statement is indeed factual, the DOJ should look into this issue also instead of "picking" on Apple.

Meanwhile, Amazon prohibits independent publishing companies from selling through the iBookstore for a lower price.

In fact, Amazon price-matches ebooks, and then pays the publishers on those reduced prices even though those are not the prices the publishers agreed to.

In other words, Amazon is doing the exact same thing that Apple has been found guilty of doing.

But the DOJ doesn't seem to give a whit about that.

 

[Zimmy68]

I thought the publishers set the price not Apple?

Sure, they set the price, but Apple stipulates, that no one can sell lower (Jobs famous foot in the mouth "the price will be the same" statement), and they get 30%.

Sell for $100 a book for all Apple cares.

 

[BaldiMac]

Sure, they set the price, but Apple stipulates, that no one can sell lower

Not quite. The MFN clause stipulates that the price the publishers offer in the iBookstore will be lowered if it is sold anywhere else for a lower price.

(Jobs famous foot in the mouth "the price will be the same" statement),

Foot in the mouth? I ask this every time someone brings this up, and I never get an answer. Was Jobs supposed to pretend that he was unaware of the MFN clause in the contract?

 

[cmichaelb]

I had to scroll too far down to find the article. I'll just make a blanket statement based on no facts at all:

Apple is both greedy and has the American government in their pockets while at the same time they fight the American government on the eBook pricing scandal in which they try to give publishers (including private authors) the freedom to sell works they own at prices they find fair while Apple asks for 30% like they do for anything else they sell... the big jerks.

Wow no kidding, what a horribly outdated website design.

 

[bsolar]

Sure, they set the price, but Apple stipulates, that no one can sell lower.

That's not how the MFN clause works. Other retailers can sell lower, if the publisher negotiates a deal with another retailer which leads to a lower retail price. What Apple can then do is lower the price on its own store to match the lower price from the other retailer.

Basically Apple will always have the lowest retail price, and the publisher's cut from Apple varies accordingly, so publishers either accept the reduced revenue from Apple or avoid allowing lower retail prices anywhere else.

It's true that the end result is the same (no one can sell lower than Apple) but technically the MFN clause doesn't mandate that.

 

[FirstNTenderbit]

From your quoted article:

So I don't understand a comparison of this case/lawsuit/situation to a cartel.

On an semi-unrelated note... Why do people get so worked up about this kind of thing in regards to very small, inexpensive purchases, but completely ignore and not care when the same behavior occurs in regards to large expensive stuff. Think auto industry. The car manufacturers (akin to book publishers) supply cars to dealers who have obtained a license to sell them (akin to iBooks or Amazon). They conspire to come up with the highest possible price that the consumer will possibly pay. And to stifle competition, all of the various dealerships (who really are competition) generally avoid publishing set prices or going rates. They like to maintain a cloud of vagueness about what the retail price should be. We are talking about much higher dollar amounts here... and the DOJ or noone else cares. Why?

You are right. Not a cartel. On your semi-unrelated note you are wrong. The auto industry does not set the price. The auto industry, just like the majority of all industries, sets an MSRP -Manufacturers Suggested Retail Price. Retailers use the MSRP as a baseline for their actual sale price. That's why people shop for cars. There is no one price for a specific brand, model, or level of any car. Unless a manufacturer sells directly to the consumer, rarely do they have any say on sale price. Again, that's not just the auto industry, it's overwhelmingly most industries. Retailers set the price, and because they do, no price for a particular item is the same everywhere. That's also why most of them will price match.

 

[litmag01]

Confused??

Does this mean that the publishers who settled are saying that to punish Apple would mean that the DOJ is violating the terms of those publisher's settlements? Am I understanding that correctly?

If so, does that mean settlement terms of cases with the DOJ can dictate how the DOJ prosecutes?

I really would like some more insight on this.

Thanks in advance.

 

[Rocketman]

Follow the money. The government has been fining deep pocket entities in particular after Obama became President. I have yet to see a top 50 of fines, but it is in the hundreds of billions of dollars. That goes to treasury and translates into regulatory segment (DOJ, SEC, etc) additional spending OFF BUDGET. Not one penny goes to alleged victims.

Tax
Spend
Borrow
Fine

Fascinating. Just make sure the Senate passes nothing!

Yes this thread should be in PRSI, but until it is, the on-topic replies should be allowed. I try to comply. Really.

 

[bsolar]

Does this mean that the publishers who settled are saying that to punish Apple would mean that the DOJ is violating the terms of those publisher's settlements? Am I understanding that correctly?

The settlements the publishers signed still allow them to sign agency model deals (albeit with some restrictions in the clauses). If the DoJ prohibits Apple from signing such deals it effectively means the publishers lose their most important "agency" partner, which I guess they were expecting to be able to keep when they signed the settlements (only with a modified deal to address the restrictions).

They claim the DoJ's request would impose additional punishment on the publishers on top of the settlements already signed, with no significant impact on Apple itself (which on a wholesale model would be able to set the retail price freely just like Amazon was doing before the whole mess).

 

[tbrinkma]

Does this mean that the publishers who settled are saying that to punish Apple would mean that the DOJ is violating the terms of those publisher's settlements? Am I understanding that correctly?

If so, does that mean settlement terms of cases with the DOJ can dictate how the DOJ prosecutes?

I really would like some more insight on this.

Thanks in advance.

Think about it for a moment. If the DOJ settles with Company A and requires certain behavioral changes from Company A in the process, and then settles with Company B (who Company A supplied) and requires behavioral changes which *prevent* Company A from fulfilling their obligations under their settlement, then Company A is at risk of further sanctions for failing to uphold their part of the settlement, through no fault of their own.

Since the terms of the publishers' settlements aren't public, we don't have the specifics, but that's the principle.

 

[3282868]

I am by no means a lawyer or pseudo-lawyer, nor an expert on economics.

That being stated, I'm trying to make sense of this matter.

Apple's deal with key publishers allowed Apple to maintain a set price which may undercut competitors while pushing eBook sales and exposure through built-in links to Apple's store? In essence, it is similar to how iTunes developed with the iPod and Music Store. Only Apple devices could use iTunes to sync media, whether ripped from a CD or purchased via the Music Store (DRM media at the time), using the Music Store as an easier alternative to brick and mortar stores. Was that considered collusion with Apple and record companies?

Assuming I'm understanding this matter, the point of contention was the lack of availability or presence for other eBook distributors in iOS and its accompanying store. Was the agreement that certain publishers could only work with Apple or that competition was hindered due to a lack of eBook availability outside of Apple's iBooks?

 

[BaldiMac]

I am by no means a lawyer or pseudo-lawyer, nor an expert on economics.

That being stated, I'm trying to make sense of this matter.

Apple's deal with key publishers allowed Apple to maintain a set price which may undercut competitors while pushing eBook sales and exposure through built-in links to Apple's store? In essence, it is similar to how iTunes developed with the iPod and Music Store. Only Apple devices could use iTunes to sync media, whether ripped from a CD or purchased via the Music Store (DRM media at the time), using the Music Store as an easier alternative to brick and mortar stores. Was that considered collusion with Apple and record companies?

Assuming I'm understanding this matter, the point of contention was the lack of availability or presence for other eBook distributors in iOS and its accompanying store. Was the agreement that certain publishers could only work with Apple or that competition was hindered due to a lack of eBook availability outside of Apple's iBooks?

None of that had anything to do with this case.

Basically Apple was found to have provided the five publishers involved with leverage that they used in collusion to force a new pricing model on Amazon and other retailers that resulted in increased prices.

 

[3282868]

None of that had anything to do with this case.

Basically Apple was found to have provided the five publishers involved with leverage that they used in collusion to force a new pricing model on Amazon and other retailers that resulted in increased prices.

Ok, thanks. Yes, I realize this matter is indirectly related. I haven't been following this much (if at all), so thanks for the recap.

Interesting, I wouldn't have thought of such a business strategy. Setting prices with five major publishing houses forced Amazon to raise their prices (against their business strategy), thus enticing would be Amazon customers to eBooks and the Apple devices necessary for reading as many owned Apple devices and was much easier for them to use their iTunes account in iOS rather than through Kindle and other third party apps. Did Apple also take a 30% cut from publishers? Thanks and sorry for the questions.

 

[Tknull]

You are right. Not a cartel. On your semi-unrelated note you are wrong. The auto industry does not set the price. The auto industry, just like the majority of all industries, sets an MSRP -Manufacturers Suggested Retail Price. Retailers use the MSRP as a baseline for their actual sale price. That's why people shop for cars. There is no one price for a specific brand, model, or level of any car. Unless a manufacturer sells directly to the consumer, rarely do they have any say on sale price. Again, that's not just the auto industry, it's overwhelmingly most industries. Retailers set the price, and because they do, no price for a particular item is the same everywhere. That's also why most of them will price match.

Yea.. I didnt really think my analogy all the way through. Seems that everything, while appearing one way on its face, is full of nuances.
That said, though... not sure I have much faith in the government (US in this case) coming up with great solutions. Beurocrats... Ugh.