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

[Parasprite]

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 !

"Terrorism".

 

[litmag01]

Thanks! What a mess!

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).

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.

 

[Parasprite]

Underpowered?! It's an e-reader. How powerful of a CPU were you expecting in order to run something akin to Adobe Acrobat Reader... and not even in color?

Funny, just a few years ago it seemed that I was saying "how powerful of a computer must I actually need to run Adobe Acrobat Reader without significant slowdowns..."

 

[TheDauterive]

So publishers looked at Amazon's predatory monopoly and grew some spines?

What? Exactly how is Amazon's monopoly predatory? They weren't pricing their books below cost, only too cheap for Apple's taste. Not to say that Apple couldn't match their prices, only that they seem unwilling to accept markups below 30 percent.

Well, if Apple only wants to play for high profits they should stick to high-margin markets instead of forcing every competitor in markets they want to join to raise their prices.

Apple's "premium pricing" kept it on the margins of the PC business for decades. Through sheer force of innovation they changed the game with the iPhone and iPad, but now that competitors are catching up, it looks like Apple's premium prices are negatively affecting their market share in those markets as well.

Don't get me wrong. I love Apple products (even if I don't always love their corporate culture), and I'm willing to pay the price. But don't tell me Amazon is the bad guy when Apple colludes with book publishers to increase the price of e*books by 30%.

If Apple wants to charge a premium price for a copy of Ender's Game, let them do it, and let me decide whether I pay their premium surcharge or not.

The fact that people are crying "monopoly!" in defense of corporate price fixing is truly surreal. Perhaps if Apple had enough power, you would support them colluding with Intel to compel PC manufacturers to charge more for their Wintel boxes so Apple wouldn't have to face price competition in the computer market as well.

 

[BaldiMac]

What? Exactly how is Amazon's monopoly predatory? They weren't pricing their books below cost, only too cheap for Apple's taste.

Nope. Amazon was selling most best sellers below cost.

Not to say that Apple couldn't match their prices, only that they seem unwilling to accept markups below 30 percent.

Apple could match Amazon's prices. Apple just thought they would have to operate at a loss to do it.

Well, if Apple only wants to play for high profits they should stick to high-margin markets instead of forcing every competitor in markets they want to join to raise their prices.

Apple doesn't make high profits in content delivery.

But don't tell me Amazon is the bad guy when Apple colludes with book publishers to increase the price of e*books by 30%.

Why can't they both be bad?

The fact that people are crying "monopoly!" in defense of corporate price fixing is truly surreal.

Considering the point of antitrust law is to ensure healthy competition, crying monopoly would seem to be a legitimate defense. At least if you consider the monopoly to be abusing its position.

Perhaps if Apple had enough power, you would support them colluding with Intel to compel PC manufacturers to charge more for their Wintel boxes so Apple wouldn't have to face price competition in the computer market as well.

Perhaps if pigs could fly, you would support shoes made of bacon.

 

[TMay]

What? Exactly how is Amazon's monopoly predatory? They weren't pricing their books below cost, only too cheap for Apple's taste. Not to say that Apple couldn't match their prices, only that they seem unwilling to accept markups below 30 percent.

Well, if Apple only wants to play for high profits they should stick to high-margin markets instead of forcing every competitor in markets they want to join to raise their prices.

Apple's "premium pricing" kept it on the margins of the PC business for decades. Through sheer force of innovation they changed the game with the iPhone and iPad, but now that competitors are catching up, it looks like Apple's premium prices are negatively affecting their market share in those markets as well.

Don't get me wrong. I love Apple products (even if I don't always love their corporate culture), and I'm willing to pay the price. But don't tell me Amazon is the bad guy when Apple colludes with book publishers to increase the price of e*books by 30%.

If Apple wants to charge a premium price for a copy of Ender's Game, let them do it, and let me decide whether I pay their premium surcharge or not.

The fact that people are crying "monopoly!" in defense of corporate price fixing is truly surreal. Perhaps if Apple had enough power, you would support them colluding with Intel to compel PC manufacturers to charge more for their Wintel boxes so Apple wouldn't have to face price competition in the computer market as well.

Amazon was pricing books under what was paid to the publishers (that is a fact), mostly on new releases.

 

[TheDauterive]

Nope. Amazon was selling most best sellers below cost.

Most "books" or most "best sellers"? Aggressively pricing best sellers as loss leaders has been common practice among book sellers for as long as I can remember. Did you think getting a best seller at a discount was bad before Apple said they didn't want to do it so no one else should be allowed to either?

Even if Amazon was selling all e-books below cost (and I strongly suspect they were not), this point of fact does little to help your point. Is your argument that Amazon shouldn't be allowed to use e-books as loss leaders because...Apple wants to sell books too, but not that cheaply? Or publishers aren't getting the "right" amount of profit with cheaper e-books? Or Amazon's dominant market position is somehow harmful to consumers even though their prices are better than those proposed by Apple?

Apple could match Amazon's prices. Apple just thought they would have to operate at a loss to do it...Apple doesn't make high profits in content delivery.

My apologies. So, Apple doesn't make high profits in content delivery...therefore price fixing? If they don't make high profits in content delivery, they are free to not make high profits in e-books as well or use e-books as a loss leader just like Amazon. Or they can do what they did which was collude with publishers to raise prices to a level where they were willing to enter the market, which is illegal.

Why can't they both be bad?

There is no logical reason whatsoever why they cannot both be bad. In point of fact, however, Apple's attempt to raise prices through collusion is bad and Amazon's fighting that collusion is good. If you are looking for instances where Amazon is the bad guy, there are myriad examples. This, however, is not one of them.

Considering the point of antitrust law is to ensure healthy competition, crying monopoly would seem to be a legitimate defense. At least if you consider the monopoly to be abusing its position.

And price collusion is healthy competition? The point of anti-trust law is consumer protection. Going back to Adam Smith, the reason (most) economists have always disliked monopolies is because of their tendency to produce higher prices than competitive markets. Economists soon recognized that low barriers to entry combined with the threat of competitors entering the market can produce competitive prices even when one firm dominates the market. Amazon serves well to illustrate that point.

Anyone (and by anyone, of course, I mean any major, multi-billion dollar media corporation) who wants to compete with Amazon's low prices is free to do so, and if they don't want to, that's no reason to artificially jack up the price through price fixing. If, however, Amazon seeks to exploit their dominant position by raising prices above market equilibrium, they are sure to invite other competitors (like Apple) who would force prices right back down.

Perhaps if pigs could fly, you would support shoes made of bacon.

Is this an argument, or just a general sneer towards counter-factuals? The point of my question was, of course, should Apple get a free pass to collude whenever it is to their advantage, or just in this one case? Does this privilege extend to other companies as well or only Apple? Are anti-collusion laws a good idea period? These seem like important questions to ask, and not at all worthy of your dismissal.

 

[Zimmy68]

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.



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?

No, don't pretend, tell a huge financial paper that you engineered the collusion with book publishers. That won't come back and haunt you, will it?

It would be like the WSJ asking CBS if they want the customers to pay for the extra fees they want or TWC and them saying, "We don't care either way".
It's the truth but they would never say it.

You probably get an answer every time, it just doesn't jive with your Apple did nothing wrong theory.

 

[BaldiMac]

Most "books" or most "best sellers"? Aggressively pricing best sellers as loss leaders has been common practice among book sellers for as long as I can remember.

I was just correcting your statement that Amazon "weren't pricing their books below cost."

Did you think getting a best seller at a discount was bad before Apple said they didn't want to do it so no one else should be allowed to either?

1) Apple didn't say that.
2) Yes, I had a problem with Amazon's pricing policies irrespective of Apple. Primarily, their policy to prevent eBook pricing between $10 - $20 for self publishers. This issue with Apple simply brought more of these type of policies to light.

Even if Amazon was selling all e-books below cost (and I strongly suspect they were not), this point of fact does little to help your point. Is your argument that Amazon shouldn't be allowed to use e-books as loss leaders because...Apple wants to sell books too, but not that cheaply? Or publishers aren't getting the "right" amount of profit with cheaper e-books? Or Amazon's dominant market position is somehow harmful to consumers even though their prices are better than those proposed by Apple?

The fact that I consider Amazon's loss leader strategy to be predatory pricing has nothing to do with Apple. It has to do with the fact that they had 90% of the market and were selling most best sellers below cost which resulted in significant barriers to competition.

My apologies. So, Apple doesn't make high profits in content delivery...therefore price fixing?

Nope. Never accused Amazon of price fixing. And, of course, there is a difference between not making high profits and operating at a loss.

If they don't make high profits in content delivery, they are free to not make high profits in e-books as well or use e-books as a loss leader just like Amazon.

Sure, but in the real world, when below cost pricing prevents competitors from successfully entering the market, it can be considered predatory pricing. "You can subsidize it with profits from other markets" isn't really a valid argument.

Or they can do what they did which was collude with publishers to raise prices to a level where they were willing to enter the market, which is illegal.

Yep. No argument there.

There is no logical reason whatsoever why they cannot both be bad. In point of fact, however, Apple's attempt to raise prices through collusion is bad and Amazon's fighting that collusion is good. If you are looking for instances where Amazon is the bad guy, there are myriad examples. This, however, is not one of them.

I disagree.

And price collusion is healthy competition?

Nope. Never said anything of the sort. Been saying that collusion occurred since my first post on the topic.

The point of anti-trust law is consumer protection. Going back to Adam Smith, the reason (most) economists have always disliked monopolies is because of their tendency to produce higher prices than competitive markets. Economists soon recognized that low barriers to entry combined with the threat of competitors entering the market can produce competitive prices even when one firm dominates the market. Amazon serves well to illustrate that point.

Anyone (and by anyone, of course, I mean any major, multi-billion dollar media corporation) who wants to compete with Amazon's low prices is free to do so, and if they don't want to, that's no reason to artificially jack up the price through price fixing. If, however, Amazon seeks to exploit their dominant position by raising prices above market equilibrium, they are sure to invite other competitors (like Apple) who would force prices right back down.

Which is all exactly right. Except I don't think that Amazon's long term strategy is to raise prices. I think they are seeking to dominate markets in order to build their customer base and create monopsony markets where they are able to control wholesale pricing. I don't think this is good. I think that it is a predatory pricing strategy that was not anticipated by antitrust law.

Is this an argument, or just a general sneer towards counter-factuals? The point of my question was, of course, should Apple get a free pass to collude whenever it is to their advantage, or just in this one case? Does this privilege extend to other companies as well or only Apple? Are anti-collusion laws a good idea period? These seem like important questions to ask, and not at all worthy of your dismissal.

No, the point of your question was to imply that people that disagree with you are irrational fanboys who simply take Apple's side without any critical thinking.

----------

No, don't pretend, tell a huge financial paper that you engineered the collusion with book publishers. That won't come back and haunt you, will it?

It would be like the WSJ asking CBS if they want the customers to pay for the extra fees they want or TWC and them saying, "We don't care either way".
It's the truth but they would never say it.

That statement isn't an indication of collusion at all. It's an indication that Apple negotiated an MFN clause with the publishers. Which the judge confirmed is perfectly legal.

You probably get an answer every time, it just doesn't jive with your Apple did nothing wrong theory.

Well, except for the fact that I think Apple did something wrong.

And you are the first person to respond at all to my question. Thanks!

 

[69650]

Interesting debate but let's be clear on this issue.

The DoJ have accused Apple of colluding with the publishers to raise consumer prices. It's suggested that they did this by conspiring with the publishers to force the agency model on other eBook retailers such as Amazon.

This is how it works. Apple and the publishers get together, they agree that the agency model makes them all the most profit so they agree a deal. The publishers then all trot along to Amazon and say we've gone a deal with Apple to use the agency model and we're going to make you adopt the same deal or we won't sell you any eBooks anymore.

So now the publishers have control over end prices and guess what - they put the prices up across the board. That's what annoyed the DoJ. The fact that almost overnight eBook prices shot up. And what's more because the publishers are setting the end price there is no longer any price competition. It's a bit like trying to buy a MBP on the high street - everyone has the same price. That means there is no competition driving eBook prices down anymore.

 

[TheDauterive]

you are the first person to respond at all to my question. Thanks!

You're welcome!

 

[BaldiMac]

Interesting debate but let's be clear on this issue.

The DoJ have accused Apple of colluding with the publishers to raise consumer prices. It's suggested that they did this by conspiring with the publishers to force the agency model on other eBook retailers such as Amazon.

This is how it works. Apple and the publishers get together, they agree that the agency model makes them all the most profit so they agree a deal. The publishers then all trot along to Amazon and say we've gone a deal with Apple to use the agency model and we're going to make you adopt the same deal or we won't sell you any eBooks anymore.

So now the publishers have control over end prices and guess what - they put the prices up across the board. That's what annoyed the DoJ. The fact that almost overnight eBook prices shot up.

Good summary!

And what's more because the publishers are setting the end price there is no longer any price competition. It's a bit like trying to buy a MBP on the high street - everyone has the same price. That means there is no competition driving eBook prices down anymore.

But here you lose it a bit. There is nothing wrong with agency pricing from a competitive standpoint. An individual book may be the same price everywhere, but it is still competing with thousands of other books at various price points.

And your example proves my point perfectly. Apple set retail prices on all their Macs for years. They were the same price everywhere.

 

[LordVic]

Good summary!



But here you lose it a bit. There is nothing wrong with agency pricing from a competitive standpoint. An individual book may be the same price everywhere, but it is still competing with thousands of other books at various price points.

And your example proves my point perfectly. Apple set retail prices on all their Macs for years. They were the same price everywhere.

I think a better example and statement would be that, if book A was the exact same price at 3 different e-tailers, what is it to differentiate purchase from each?

in this particular case, the playing field gets severely limited based on the storefront. For many web based e-book sellers, it meant complete failure of business, since they were unable to provide a distribution system like the i-devices and kindles.

Apple takes the immediate competitive edge because of their large user base of i devices. ibooks giving the immediate and almost instant in app purchasing of books. it's easy, fast and "idiot proof".

By Apple then also saying "sorry amazon, you can't use your app to sell ebooks anymore on our device", then also limits amazon's ability to sell their books on the most prevelant device in the market. (yes, i'm aware you can go to safari and just buy via the web), but it's not the same ease of use, especially from a technologically "dumb" crowd who just wants to click a button and have content.

So the overall affect of everything put together, from the collusion of the publishers, to apples own ecosystem, effectively crushed competition seemingly overnight.

 

[BaldiMac]

I think a better example and statement would be that, if book A was the exact same price at 3 different e-tailers, what is it to differentiate purchase from each?

Quality, selection, ecosystem, reviews, recommendations, experience, etc.

in this particular case, the playing field gets severely limited based on the storefront. For many web based e-book sellers, it meant complete failure of business, since they were unable to provide a distribution system like the i-devices and kindles.

Unable? Web, Android, and iOS apps are all viable eBook distribution systems.

Apple takes the immediate competitive edge because of their large user base of i devices. ibooks giving the immediate and almost instant in app purchasing of books. it's easy, fast and "idiot proof".

By Apple then also saying "sorry amazon, you can't use your app to sell ebooks anymore on our device", then also limits amazon's ability to sell their books on the most prevelant device in the market. (yes, i'm aware you can go to safari and just buy via the web), but it's not the same ease of use, especially from a technologically "dumb" crowd who just wants to click a button and have content.

So the overall affect of everything put together, from the collusion of the publishers, to apples own ecosystem, effectively crushed competition seemingly overnight.

Well, except for the fact that didn't actually happen. Competition increased under agency pricing. Evidently, more companies are willing to sell eBooks when you can make a profit.

It went from

90% Amazon
10% Other

to

60% Amazon
20% Apple
20% Other

 

[Bistromathic1]

But here you lose it a bit. There is nothing wrong with agency pricing from a competitive standpoint. An individual book may be the same price everywhere, but it is still competing with thousands of other books at various price points.[emphasis added]

And your example proves my point perfectly. Apple set retail prices on all their Macs for years. They were the same price everywhere.

If I'm looking for a particular book, e.g. the next book in a series I'm reading, a different book doesn't compete with the book that I want. Since all vendors are the same price, I can't shop around if the price is more than I want to pay. I don't have thousands of choices, I can either 1) suck it up and pay the higher price, 2) forget it, or 3) wait several months (usually over a year) until the price goes down (a bit). That's not competition. Judge Cote seems to agree. On pages 56 & 57 of her opinion:

[Hachette CEO David]Young also understood that the MFN required Hachette to move all of its e-book retailers to an agency relationship, and “ensure,” in his words, “a competitive, level playing field for e-book sellers.”

The footnote:The word “competitive” in this and many other contexts at the trial means the opposite of competition. It means the eradication of retail price competition.

 

[BaldiMac]

If I'm looking for a particular book, e.g. the next book in a series I'm reading, a different book doesn't compete with the book that I want. Since all vendors are the same price, I can't shop around if the price is more than I want to pay. I don't have thousands of choices, I can either 1) suck it up and pay the higher price, 2) forget it, or 3) wait several months (usually over a year) until the price goes down (a bit).

Except when you discuss antitrust law, you look at markets, not individual products.

That's not competition. Judge Cote seems to agree. On pages 56 & 57 of her opinion:

Judge Cote also agrees that agency pricing is a legal pricing strategy.

"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. "

It's almost like she contradicted herself.

 

[Bistromathic1]

Judge Cote also agrees that agency pricing is a legal pricing strategy.

"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. "

It's almost like she contradicted herself.

On page 134:

The issue is not whether an entity executed an agency agreement or used an MFN, but whether it conspired to raise prices.

The conspiracy to raise prices changes everything. She didn't contradict herself.

 

[BaldiMac]

The conspiracy to raise prices changes everything.

Absolutely.

She didn't contradict herself.

I was referring to your quote where she claimed agency pricing was anti-competitive in comparison to the quote I posted where she claimed that agency pricing was not found to be wrongful. But I was just being frivolous. (Hence the use of "almost". )

 

[Bistromathic1]

Absolutely.



I was referring to your quote where she claimed agency pricing was anti-competitive in comparison to the quote I posted where she claimed that agency pricing was not found to be wrongful. But I was just being frivolous. (Hence the use of "almost". )

I understand. I imagine if Judge Cote were using quotes around the word, it's the snarky, eye-rolling form of "competitive" she means.

 

[TMay]

If I'm looking for a particular book, e.g. the next book in a series I'm reading, a different book doesn't compete with the book that I want. Since all vendors are the same price, I can't shop around if the price is more than I want to pay. I don't have thousands of choices, I can either 1) suck it up and pay the higher price, 2) forget it, or 3) wait several months (usually over a year) until the price goes down (a bit). That's not competition. Judge Cote seems to agree. On pages 56 & 57 of her opinion:

No, that's not what she says at all. There isn't anything wrong with the Agency model. Colluding to implement the Agency Model is wrong.

 

[Bistromathic1]

No, that's not what she says at all. There isn't anything wrong with the Agency model. Colluding to implement the Agency Model is wrong.

Yes, the principle of the Agency Model is fine. What Judge Cote snarkily refers to as "competitive," it's in conjunction with this particular agency agreement.

 

[69650]

And your example proves my point perfectly. Apple set retail prices on all their Macs for years. They were the same price everywhere.

Agreed and I'm sure that's good for Apple but it's not good for customers because there is little or no price competition on the high street for Mac products.

 

[hchung]

OK, obviously you never tried one of them. It took a long time to flip pages! It would slow down slower than that at times and appear to hang flipping pages! That kind of activity should be 'natural' for that type of device! YOU BUY IT TO READ BOOKS. READING BOOKS REQUIRES FLIPPING PAGES. It flipped pages like a rock. a BIG rock. Trying to roll uphill... It was a bad joke.

I have a Nook Simple Touch. And yes, it takes forever to flip pages.
In fact, I haven't turned it on in 6 months.

But that has nothing to do with the CPU, it's the screen. eInk screens typically require that full-screen reset in order to get a clear picture, hence the slowness. It could have a Core i7 in it, and it'd still flip pages slowly.

Underpowered? No.
Slow screen? Yes.

 

[PinkyMacGodess]

I have a Nook Simple Touch. And yes, it takes forever to flip pages.
In fact, I haven't turned it on in 6 months.

But that has nothing to do with the CPU, it's the screen. eInk screens typically require that full-screen reset in order to get a clear picture, hence the slowness. It could have a Core i7 in it, and it'd still flip pages slowly.

Underpowered? No.
Slow screen? Yes.

So your point is?

It was a dog. Due to screen, memory, processor: It was a dog. Rumors that B&N are shopping it around to get it off their books (the Nook) could be interesting for Nook users if they are unsuccessful... Will B&N kill the Nook then? What would it mean for current users.

Whatever... Better devices have died in the past.

 

[Oletros]

I have a Nook Simple Touch. And yes, it takes forever to flip pages.
In fact, I haven't turned it on in 6 months.

But that has nothing to do with the CPU, it's the screen. eInk screens typically require that full-screen reset in order to get a clear picture, hence the slowness. It could have a Core i7 in it, and it'd still flip pages slowly.

Underpowered? No.
Slow screen? Yes.

The first Nook, the one with the touch LCD below the eink screen was slow as hell, not just page flipping, but just all the operations