U.S. Department of Justice Sues Apple and Publishers over E-Book Pricing

[Stephent]

How does having a 'loss leader' equate to giving something away for free or bundling browser software? Nothing.

Having a loss leader is normal (and legal) business practice from every store (virtual or B&M). Colluding to keep prices artificially high is illegal.

Free at, a loss, just degrees of the same thing. They inhibit competition in a market.

Ok see this "artificially high" thing is where I disagree. I would say that prices are going to a point where all parties can make money. Which is fair. When all the publishers were loosing their shirts of course when given a way out they are going to take it that isn't collusion it is smart business. Hey should we keep loosing money or take this deal that gives us a chance to survive. Really a no brainier. they didn't have to collude to come up with that. Consumers incorrectly assume that a lower price is always more fair. Apple just recognized that Amazon's purchase price from publishers was unsustainable and just gave then the other option they have been looking for for years.

 

[sha4000]

My money is on Apple winning this. They actually have the money and will to fight the DoJ. Most entities cave when the DoJ goes after them.

You don't actually believe that do you? Apple will settle but at a later date. I'm not saying that no one can beat the government in the long run but will it be worth it is the question? If there is even a chance that the chargers are true why would any company risk the wrath of the D.O.J?

Shame or guilt over companies making money? Really come on now. You act like Apple tucks you in at night and reads you a story.

Now that made me smile.

 

[Born Again]

It's amazing the hypocrisy Apple fanboys have.

If this were Amazon being investigated by the Dept of Justice, all the fanboys would be saying
GOOD, ebook prices too high, Amazon taking advantage of customers.

But because it's APPLE, the fanboys say
Terrible, Apple is the best with ebooks, this is WRONG!

Only an idiot would side with apple here.

Fan boy or not - logic says apple and the publishers were wrong

 

[KPOM]

Doesn't matter. Apple and the publishers pretty clearly colluded to set prices. It doesn't matter if this was done for some sort of "good cause" as they saw it, this is still illegal.

The point of the comparison is: Microsoft thought they were big enough and wealthy enough to sweat out the government. In a way, they succeeded -- by the time the settlement in their case was approved, the administration had changed to one that didn't care to enforce the antitrust laws. As a result, the final settlement was wimpy, but the damage had already been done. The Findings of Fact from the judge in the case cost Microsoft billions in settlements in private lawsuits, and the costs in distraction and reputation were immeasurable. Hubris can have a huge price tag.

Proving collusion is difficult, though. Arguably, airlines engage in a form of collusion. The Internet has just made this plainly obvious (flights on almost any airline to major destinations cost the same, and they tend to raise and lower fares at the same time). The difference is that the airlines don't meet in advance to decide whether to raise or lower prices (the way, for example, OPEC meets to decide oil output, or the Fed meets to decide target interest rates).

In this case, we have Apple wanting most-favored nation pricing and its 30% cut. An e-mail saying "we've solved the $9.99 thing" doesn't necessarily mean that Apple engaged in price fixing or collusion. Of course, the snippets released in the argument will be slanted in favor of whatever argument the DOJ wants to project. A problem with anti-trust law in general is that it is inherently political. Why the DOJ decided to target Apple and eBook publishing over something relatively benign is unclear. If anything, the biggest beneficiary of this move is Amazon, and the DOJ doesn't exist to protect competitors.

What's interesting is that 3 publishers so far have chosen not to settle. If this were such a slam dunk, likely all the publishers would have settled. Apple's motives may be less clear, though it could be hubris as you suggest. On the other hand, they may feel it's important to take a stand to show the DOJ they won't just roll over, as well.

 

[Vegasman]

Great breakdown of the case here

Great breakdown of the case here:

http://www.theverge.com/2012/4/11/2...k-price-fixing-case-against-apple-an-analysis

 

[KPOM]

You don't actually believe that do you? Apple will settle but at a later date. I'm not saying that no one can beat the government in the long run but will it be worth it is the question? If there is even a chance that the chargers are true why would any company risk the wrath of the D.O.J?

It's this "the government must be right" attitude that is dangerous in the long run. Remember, this is the same DOJ that ruled that drone attacks against US citizens is legal (not to mention waterboarding).

If Apple, with $100 billion in cash, is just going to cave when the DOJ makes an allegation, then why would anyone ever fight back.

 

[guzhogi]

You have obviously NEVER used Calibre. It will take a book in any digital format and convert it so you can read it on the Kindle for FREE

Haven't heard of it before. Thanks. Downloading now. Only thing is it's an extra step to use the books, which some of the less computer-savvy people might not know/want to use.

 

[KPOM]

Great breakdown of the case here:

http://www.theverge.com/2012/4/11/2...k-price-fixing-case-against-apple-an-analysis

This op-ed is a good attempt at a counterpoint.

http://www.forbes.com/sites/waynecr...getting-cored-in-washington/?partner=yahootix

 

[section31]

Free at, a loss, just degrees of the same thing. They inhibit competition in a market.

Ok see this "artificially high" thing is where I disagree. I would say that prices are going to a point where all parties can make money. Which is fair. When all the publishers were loosing their shirts of course when given a way out they are going to take it that isn't collusion it is smart business. Hey should we keep loosing money or take this deal that gives us a chance to survive. Really a no brainier. they didn't have to collude to come up with that. Consumers incorrectly assume that a lower price is always more fair. Apple just recognized that Amazon's purchase price from publishers was unsustainable and just gave then the other option they have been looking for for years.

By your own definition it IS collusion. Just because it may be smart business doesn't make it legal.

I am certainly not one to equate low prices with "more fair" and realize that it isn't always in the best interest of the consumer. What I am certain is that when I group of publishers who control an overwhelming portion of an industry get together to establish a price in the interest of controlling the price of a competitor absolutely is collusion and thus illegal.

I'm pretty sure we all know what is going on here whether one is an Apple fan or not. Apple is attempting to make sure that Amazon doesn't become the 'iTunes' of the e-book market.

And for those who think that Apple would be so arrogant to fight the DOJ to the end? Seriously think about that for a second and see how MS, Google and every other company in history has ever fared in doing so.

 

[IJ Reilly]

Proving collusion is difficult, though. Arguably, airlines engage in a form of collusion. The Internet has just made this plainly obvious (flights on almost any airline to major destinations cost the same, and they tend to raise and lower fares at the same time). The difference is that the airlines don't meet in advance to decide whether to raise or lower prices (the way, for example, OPEC meets to decide oil output, or the Fed meets to decide target interest rates).

In this case, we have Apple wanting most-favored nation pricing and its 30% cut. An e-mail saying "we've solved the $9.99 thing" doesn't necessarily mean that Apple engaged in price fixing or collusion. Of course, the snippets released in the argument will be slanted in favor of whatever argument the DOJ wants to project. A problem with anti-trust law in general is that it is inherently political. Why the DOJ decided to target Apple and eBook publishing over something relatively benign is unclear. If anything, the biggest beneficiary of this move is Amazon, and the DOJ doesn't exist to protect competitors.

What's interesting is that 3 publishers so far have chosen not to settle. If this were such a slam dunk, likely all the publishers would have settled. Apple's motives may be less clear, though it could be hubris as you suggest. On the other hand, they may feel it's important to take a stand to show the DOJ they won't just roll over, as well.

It seems the publishers sat down together and decided on a joint strategy to create a more favorable pricing system for themselves. This is virtually dictionary definition collusion. Apple's role in all of this isn't totally apparent, but it seems that they encouraged the publishers to collude, at the very least.

The antitrust laws are enforced mainly on a complaint basis. Little doubt Amazon made the complaint to the DoJ. Yes, the government could have dragged its feet and/or spiked the complaint, but that in itself would have been a political act. One thing you have gotten wrong is that the antitrust laws do exist to protect competitors. That is their only explicit role, in fact.

A settlement seemed imminent just a week or so ago. The vast majority of antitrust complaints are settled long before they go to a lawsuit. The very fact that the DoJ has filed a formal suit in this case tells us that they believe they have a strong hand to play.

I don't want to see Apple get stuck in the same muck that Microsoft did. That self-inflicted wound has never healed. Danger, danger, Will Robinson!

 

[MagnusVonMagnum]

I honestly never really understood the government's argument on this one. Publishers already have a monopoly on book pricing anyways since one book is (usually) only available from one publisher. How can they collude with one another to keep the price of a book only one party has a monopoly on artificially high?

I think it has more to do with Apple not allowing discounts on products they sell even if a 3rd party (i.e. brick and mortar store) wants to discount it. When was the last time you saw Best Buy have a sale on a Macbook? Other than closeouts for new models, Apple won't allow it. And THAT is what they should really be going after, not just books.

I've seen similar pricing things with music on iTunes. Look into "sleep" albums on iTunes. Many are $10 for 1 track (album only purchases) whereas they are 99 cents on Amazon (regular track rate). It's hard for me to believe the artist would agree to such a HUGE pricing disparity between the two services unless of course they also despise iTunes and figure it will drive sales away AND net them a few 10x sales in the process.

In any case, Amazon seems able to take losses with sales to generate interest in their site while Apple wants tiered pricing at set rates for both their convenience and profit. The problem with fixed pricing is the consumer always loses. Some things aren't worth as much as others and pricing should reflect that. Is a crappy movie and a 1st rate movie both worth $5 to rent in HD? What about 5 years later? Are they both worth $4? Probably not. But that's the kind of pricing you usually see (other than some really awful 99 cents stuff) on iTunes. Where is the market forces at that adjust price by demand??? That sounds like price fixing to me and not Capitalism which is supposed to be driven by market forces.

What I don't understand is why they're only going after books. They do the same price fixing for music and movies and oil companies and gas stations often do it as well (agree to keep the same basic price or within a penny or so 99% of the time so the consumer can't get a good deal).

 

[Boston007]

Haven't heard of it before. Thanks. Downloading now. Only thing is it's an extra step to use the books, which some of the less computer-savvy people might not know/want to use.

Yes the GUI is a bit clumsy, but you can put ANY digital document on to your Kindle for free. It's really nice.

 

[MagnusVonMagnum]

Their profit margin on taxes on GAS is MUCH higher then they are getting on the books

Actually, profits at the stations themselves are very low (couple of cents per gallon at best). The refineries and supplying countries make the lion's share of the profit. This is why so many service stations use gas to get customers in the door, but then try to sell them everything from lottery tickets to a meatball sandwich. The profits on the other store items are MUCH higher.

 

[section31]

Difference being that what Miscrosoft did was closer to Amazon's practices than Apples. Not charging for IE to drive other browser companies out of business. so like Amazon selling at a lose. I wonder how much this case will bring Amazon's practices to light and result in them being sued as well. I think they stand a much worse chance of winning than apple.

Actually it's quite different. Microsoft forced the browser on users by bundling it with their OS. If they simply kept it for free to download (but how to dl it without an included browser? j/k) then this probably wouldn't have been a problem since the users freely chose IE.

This really isn't comparable. It's really more Wal-Mart than Microsoft. I'm not necessarily a fan of either but that doesn't mean I'll assume their practices are illegal. (Unethical maybe..haha)

 

[Intarweb]

If I want something from amazon I need a kindle.

If I want something from barnes & noble I need a nook.

Incorrect.

 

[apriori]

I'm not sure where there's more economic illiteracy: the DoJ or this forum.

Being a market leader does not a monopoly make.

A monopoly is defined as a barrier to entry in a certain market; that is, a single entity must possess the sole license to offer services in a certain market to be a true monopoly (e.g., the U.S. Postal Service, U.S. patent holders). The fact that Barnes and Nobles are at a competitive disadvantage to Amazon does not constitute a barrier to entry in the eBook market -- B+N are free to sell books and Nooks to whomever is willing to buy. If they can't compete, they have no right to demand that the government prolong their existence on their competitor's (and, typically the taxpayer's) dime.

As a matter of principle, the state have *no* business regulating who sells what to whom. Moreover, state intervention in the market also bears disastrous implications on a practical level. For all of their noble intentions, unintended consequences *always* follow from such state interference. This is a fact borne out by the immeasurable damage that anti-trust laws have done to many U.S. industries (including, sadly, the film industry -- in the old studio system, there were 2000 movies made each year and 200 producers; in the post-anti-trust studio system, 200 movies are made each year by 2000 producers).

Laying aside the ethical concerns of anti-trust laws, they are also fundamentally unnecessary. Imagined "monopolies", like Microsoft in the 90's, Wal-mart in the ought years, and Apple now, are inevitably eroded by a combination of time, technological advances and shifts in consumer preference. And yet the same economic illiterates who screech for anti-trust regulations time-and-time again conveniently fail to notice this phenomenon: when one dragon drops off the radar (Microsoft), they just seek out anther for Uncle Sam to slay (Apple). And the funny thing? The same anti-trust laws enacted to break-up a monopoly are eventually twisted to subsidize the prolonged existence of the market it was meant to break-up long after the above mentioned market forces have made it redundant (the railroad industry is a classic example).

Permitting a hive of bureaucrats to subvert consumer market forces as a means of fighting imagined monopolies invites nothing but disaster. It's hard to believe that most of you really want the same idiots who supply tax-payer funded military-grade weapons and money laundering services for Mexican drug cartels (See, "Operation Fast and Furious") in charge of micro-managing consumer markets.

If affordable eBooks are what you want, I'd advise taking advantage of this incredible library of free economics classics, available in many formats including ePub: http://mises.org/Literature

 

[AmpSkillz]

I know i'm probably in the minority here, but seriously, why can't I pay an extra $5 over printed price to get a printed & epub bundle?! And YES EPUB. I don't want kindle's crap or apple's crap. Give me EPUB.

Edit: Dear Down ranker, please explain yourself on why using an open format that DOES NOT require the proprietary software is a bad thing? Do you like being locked into a single companies format? Do you like being only able to view that book on that companies app? I know I don't. What happens if said companies fails? You're one screwed pooch with a library of ebooks you can't read.

YEAH down ranker! you will feel quite foolish when Apple goes out of business next year and you cant use your iBooks anymore.

Seriously though, it was probably more about how you said you don't want Apple crap or Kindle crap instead of just saying you wish Amazon and Apple would adopt an open format like ePub

Totally agree with the paying an extra 5$ for the eBook though

 

[PracticalMac]

Thank you big brother.

I'm glad they don't waste time with time wasting issues such as collusion of gas prices at the pumps, and they deal with important things like book prices.

I see what you did!


I wonder what kind of impact this will have on authors (that is publishers being more picky on who they publish).
Well, there is iBooks Author to fall back on!

 

[schmidm77]

Honestly, I don't see the collusion simple by letting publishers set the price. Apple is basically just providing a storefront and doesn't seem to care what the prices are as long as it get its 30% cut. This is exactly the same thing as how the pricing model in the app store works.

Now, the only problem I do see is the additional agreement to not sell to other resellers for less than the iBooks price, but publishers could do that on their own anyway without any Apple involvement.

 

[AmpSkillz]

They should be taking care of the lock ins on the ebook market as well.

If I want something from amazon I need a device with kindle software installed.

If I want something from apple I need a iOS device.

If I want something from barnes & noble I need a device with nook software installed.

I don't need special glasses from different companies to read the print versions why should the ebooks be any different?

Now Im not totally against special formats for certain devices to take advantage of some special feature a certain ebook device provides but I think there should be a generic universal format. . . Like txt files are to microsoft word files.

I pretty much agree with everything you said after making the needed corrections.

Currently, you can just use an iOS device to read all 3 of the above and more

 

[Stephent]

By your own definition it IS collusion. Just because it may be smart business doesn't make it legal.

I am certainly not one to equate low prices with "more fair" and realize that it isn't always in the best interest of the consumer. What I am certain is that when I group of publishers who control an overwhelming portion of an industry get together to establish a price in the interest of controlling the price of a competitor absolutely is collusion and thus illegal.

I'm pretty sure we all know what is going on here whether one is an Apple fan or not. Apple is attempting to make sure that Amazon doesn't become the 'iTunes' of the e-book market.

And for those who think that Apple would be so arrogant to fight the DOJ to the end? Seriously think about that for a second and see how MS, Google and every other company in history has ever fared in doing so.

I guess I just see shades of grey here. I see Amazon as the one at fault and that the only solution was what many would define as collusion to fix the problem. Several business in a sector all wanting the same thing is nothing new. When it is to create unfairly high profit margins it is a problem. When it is to have any margin at all it should be fair. Based off of your definition of collusion I would argue then all Unions should be illegal since they are a group of otherwise separate individuals colluding in order to exact higher prices for their goods/services. On a side note it just occurred to me that this would be an interesting defense since it was ruled (incorrectly I believe) that corporations are people too. Like I said way back I actually know a good bit about how the publishing industry works and while I am usually a staunch defender of the consumer this is one of the few cases where I will side with the company. Mostly because this is a response to unfair practices by another company and if the DOJ went after Amazon too we would end up in the same exact price range so it wouldn't really have much effect on consumers.

 

[gopnick]

Only an idiot would side with apple here.

Fan boy or not - logic says apple and the publishers were wrong

You obviously aren't a lawyer.

 

[Tarzanman]

This op-ed is a good attempt at a counterpoint.

http://www.forbes.com/sites/waynecr...getting-cored-in-washington/?partner=yahootix

Actually, that's a pretty horrible counterpoint. The gist of the article is that "No one should care about the price increase or arrangements between publishers because ebooks are so much better than physical books".

It also completely ignores the hard facts of the DoJ's case against the publishers.

I think this case will get settled. Apple could fight it, but it makes no sense to because the DoJ has the publishers dead to rights.

 

[gopnick]

DoJ is punishing innovation, which comes at a premium price. Period.

It isn't DoJ's job to look out for the consumer; it is to stop anti-capitalistic trade practices. Apple is merely trying to grow market share. There's nothing wrong with that.

WHO IS JOHN GALT?

----------

It's this "the government must be right" attitude that is dangerous in the long run. Remember, this is the same DOJ that ruled that drone attacks against US citizens is legal (not to mention waterboarding).

If Apple, with $100 billion in cash, is just going to cave when the DOJ makes an allegation, then why would anyone ever fight back.

Amen. Now bend over, while we search your butthole for drugs (after having arrested you for jaywalking).

Yes, our government thinks that is constitutional as well.

 

[firewood]

The Department of Justice is jealous that Apple took on Amazon's misuse of market power before they did, thus cutting the DOJ out of getting any credit for that into an election year.