DoJ vs. e-Books/Apple: Anyone else pissed?

[TuxDave]

Cable/TelCo: No collusion. Simply matching the prices of other companies without any actual agreements or contracts between companies is not illegal. Also, this was attempted in Bell Atlantic Corp. v. Twombly and the court found that there was not even enough evidence to survive a summary judgment.

Wireless Providers: See above. Twombly is pretty much going to be in play here too.

Airlines: Again, there is no evidence of collusion.

The DOJ is going after Apple because Apple pressured horizontal competitors into contractual agreements which fixed the prices of e-books. Only in this case is there the requisite collusion to invoke antitrust laws. Right now, this looks like a slam dunk case for the DOJ and is hardly a "waste" of resources.

ZV

I don't know how much pressuring Apple needed since the publishers were dying to find a way to raise prices.

 

[dainthomas]

It was quite a disappointment that Apple didn't raise the price to $100.

Obviously you would have paid it.

Not sure if OP is an apple fan, but a defining characteristic of being one is deriding people for not paying as much and/or deriding other companies for not charging as much, so he matches that description.

 

[Zenmervolt]

I don't know how much pressuring Apple needed since the publishers were dying to find a way to raise prices.

However much pressure was needed, it wasn't there before Apple (otherwise prices would have gone up before Apple set up the contractual scheme amongst horizontal competitors).

ZV

 

[TuxDave]

However much pressure was needed, it wasn't there before Apple (otherwise prices would have gone up before Apple set up the contractual scheme amongst horizontal competitors).

ZV

That's because Apple is the only player with enough influence to disrupt the near monopoly that Amazon has. The publishers knew that and wanted to take that chance to get what they wanted, higher prices.

(not a lawyer)

I feel that the case against Apple isn't as you described. Apple doesn't have a commanding share over the book industry to say "hey, if you don't go with my system you're going to burn and die". The case is whether or not Apple played a part to aid the publishers conspire to fix prices.

Publishers can't contact each other and say "I'll raise the price of my books for $15 if you do the same". But the argument is closer to whether or not it went along the lines of.

Publisher A: "Hey Apple, I'll sell my books at $15... but only if the other guys do it too"
Apple: "Ok everyone, this guy wants to sell his books at $15 if you guys to do it too"
Publisher B: "Ok DEAL!"

/everyone signs a deal

I think that's the meat of the case. At least that's how I read it.

 

[Zenmervolt]

I feel that the case against Apple isn't as you described. Apple doesn't have a commanding share over the book industry to say "hey, if you don't go with my system you're going to burn and die". The case is whether or not Apple played a part to aid the publishers conspire to fix prices.

Publishers can't contact each other and say "I'll raise the price of my books for $15 if you do the same". But the argument is closer to whether or not it went along the lines of.

Publisher A: "Hey Apple, I'll sell my books at $15... but only if the other guys do it too"
Apple: "Ok everyone, this guy wants to sell his books at $15 if you guys to do it too"
Publisher B: "Ok DEAL!"

/everyone signs a deal

I think that's the meat of the case. At least that's how I read it.

I read the case a little differently, but not much.

More importantly though, antitrust isn't just about "do this or you'll burn and die," it's also about, "I want all of you to set your price at X, but it will only be stable if you all do it." Apple was able to say that (the agency pricing system was Apple's idea, they pushed it, not the publishers) and be credible only because of their existing marketshare.

Basically, Apple came in and said, "if everyone prices according to our [Apple's] model, we'll all make more money." Then the publishers jumped on board because everyone else did. So both the publishers and Apple have antitrust liability.

Even if the idea came from a publisher (as in your model), Apple still has a responsibility under antitrust law not to forward the idea on to other publishers; even just by encouraging the idea they would incur some liability. You don't need a "commanding lead", all you need is to conspire in restraint of trade. Even if you only have 1% of the market you can violate antitrust law if you actively attempt to restrain trade and the publishers' actions here easily fall within the very broad definition of "restraint of trade." Apple's encouragement of the plan would be enough under the vast majority of circumstances.

ZV

 

[TuxDave]

I read the case a little differently, but not much.

More importantly though, antitrust isn't just about "do this or you'll burn and die," it's also about, "I want all of you to set your price at X, but it will only be stable if you all do it." Apple was able to say that (the agency pricing system was Apple's idea, they pushed it, not the publishers) and be credible only because of their existing marketshare.

Basically, Apple came in and said, "if everyone prices according to our [Apple's] model, we'll all make more money." Then the publishers jumped on board because everyone else did. So both the publishers and Apple have antitrust liability.

Even if the idea came from a publisher (as in your model), Apple still has a responsibility under antitrust law not to forward the idea on to other publishers; even just by encouraging the idea they would incur some liability. You don't need a "commanding lead", all you need is to conspire in restraint of trade. Even if you only have 1% of the market you can violate antitrust law if you actively attempt to restrain trade and the publishers' actions here easily fall within the very broad definition of "restraint of trade." Apple's encouragement of the plan would be enough under the vast majority of circumstances.

ZV

I agree and so the case stands on whether or not Apple did as you suggested or as I suggested. I think the common misconception from what I'm reading is that people treat this anti-competitive lawsuit the same as something like the Intel case. In that case, Intel was charged with using its commanding influence to force customers to act in a way they commanded. I don't think this case is similar to that.

 

[Wreckem]

But the publishers aren't making more money. Only the booksellers are making more money.

Publishers are making $8.40 to $11.50 per e-book under the agency model. They avg'd $13 per e-book under the wholesale model.

They did what they did to stop Amazon from lowering and lowering the prices of e-books. They more or less set a price floor. Which as the content providers they have every right to price their books the way they want. The issue is they colluded in doing so.

Unfortunately for Amazon, 3 of the publishers have already settled. The settlement does NOT do away with the agency model. It prevents the publishers for setting/restricting e-book prices for 2 years. After that they are free to restrict pricing so long as they do not conspire/collude.

In the end though, I don't believe the collusion was a bad thing. It busted Amazon's monopoly and allowed more competitors to enter the marketplace than would have been able to with Amazon's monopoly selling e-books for a loss.

Honestly though I see publishers eventually cutting out Amazon and other middlemen and selling e-books directly to customers. It will happen as soon as the publishers aren't dependent on physical book sales(and thus Amazon).

 

[nageov3t]

I see the assertion made many times that Amazon is selling ebooks at a loss, but is there any proof to that?

I'd be surprised if ebook profit margins were so low that they were a loss at $9.99 but a profit at $12.99

 

[Wreckem]

I see the assertion made many times that Amazon is selling ebooks at a loss, but is there any proof to that?

I'd be surprised if ebook profit margins were so low that they were a loss at $9.99 but a profit at $12.99

It is known that before the agency model was put in place new releases were being sold to Amazon at a wholesale price at an avg price of $13. Amazon in turn sold those for $9.99. So yes they were selling at a loss. To profit, they would have had have sold the new releases for more than the $13 they paid for them.

Now, under the agency model, the publishers set the prices at $12-15, and the sellers get 30% of that. So now Amazon is forced to make a profit per book, and the publishers are getting less than the $13 they previously received.

The govts whole case is based on the fact Amazon was selling e-books for a loss. That Apple + the Publishers colluded to raise pricing. If Amazon was selling e-books for a profit instead of a loss, like other book sellers, there wouldn't have been a price increase to consumers. Instead Amazon was selling for a loss and the book publishers saw a bleak future(their eventual demise) if they allowed Amazon to dictate pricing.

 

[UglyCasanova]

I like to read books printed on paper. That said they day will be here sooner than you think where our only 2 options to buy things will be Amazon and WalMart.

 

[Wreckem]

I like to read books printed on paper. That said they day will be here sooner than you think where our only 2 options to buy things will be Amazon and WalMart.

Its going to be sooner than most think.

 

[Ns1]

iono, Apple's argument seems to make sense?

The DOJ’s accusation of collusion against Apple is simply not true. The launch of the iBookstore in 2010 fostered innovation and competition, breaking Amazon’s monopolistic grip on the publishing industry. Since then customers have benefited from eBooks that are more interactive and engaging. Just as we’ve allowed developers to set prices on the App Store, publishers set prices on the iBookstore.

 

[nageov3t]

iono, Apple's argument seems to make sense?

allowing publishers to set their own prices is one thing. likewise, couldn't they have raised the price they were selling to Amazon at and let Amazon make the call on their own if they wanted to raise prices or take a bigger loss rather than signing agreements where no other vendors are allowed to sell books at different prices than Apple is charging for them?

what kind of outrage would there be if the top 5 car companies forged a backroom agreement with dealerships that no new car would be sold for under $20,000 and they wouldn't compete with each other on prices?

 

[Wreckem]

iono, Apple's argument seems to make sense?

Apple is going down for collusion. Even if the collusion helped break Amazon's monopoly.

It doesn't help Apple that during the DOJ investigation the DOJ discovered Apple wanting to collude with Amazon(Apple would give up e-books if Amazon gave up mp3s).

 

[Ns1]

Apple is going down for collusion. Even if the collusion helped break Amazon's monopoly.

It doesn't help Apple that during the DOJ investigation the DOJ discovered Apple wanting to collude with Amazon(Apple would give up e-books if Amazon gave up mp3s).

"It's a harder case against Apple than the publishers," says Geoffrey Manne, who teaches antitrust law at the Lewis and Clark Law School in Oregon and runs the International Center for Law and Economics. (See CNET's list of related articles and an explanation of e-book economics.)

One reason lies in the Justice Department's 36-page complaint, which recounts how publishers met over breakfast in a London hotel and dinners at Manhattan's posh Picholine restaurant, which boasts a "Best of Award of Excellence" from Wine Spectator magazine. The key point is that Apple wasn't present.

guess we'll see?

 

[Wreckem]

allowing publishers to set their own prices is one thing... but signing agreements where no other vendors are allowed to sell them at different prices than Apple is charging for them?

what kind of outrage would there be if the top 5 car companies forged a backroom agreement with dealerships that no new car would be sold for under $20,000 and they wouldn't compete with each other on prices?

Content providers are allowed to set pricing of their goods. If they didn't collude in the switch to agency model, they all could have independently demanded a switch to the agency model.

And the car analogy doesn't work. Cars aren't all sold for losses. Amazon was selling new releases for losses. If all cars were sold for losses, you'd be better sure Ford, GM, etc would be stepping in and requiring minimum sale prices.

Amazon wasn't competing on prices. They were selling books for a loss to sell kindles. How could others actually compete with Amazon's monopoly selling for a loss? Now under the agency model they are selling kindles for a loss and books for a profit which is much more fair and allows more competitors to enter the market.

 

[Wreckem]

guess we'll see?

Personally, I dont have a problem with what went down. What went down allowed more competitors into the market place. People have hard on for wanting to take down Apple. People have wanted to take them down for their long term foresight to lock in very favorable prices on lcd screens. Which was in no means illegal. Buying up all the supply to use to make products isn't illegal. They've wanted to take them down on their monopoly on digital music which was gained through more legit ways than Amazons former monopoly on e-books. And people have hardon for all that cash Apple has. The DOJ will find a way to win.

 

[Zenmervolt]

I agree and so the case stands on whether or not Apple did as you suggested or as I suggested. I think the common misconception from what I'm reading is that people treat this anti-competitive lawsuit the same as something like the Intel case. In that case, Intel was charged with using its commanding influence to force customers to act in a way they commanded. I don't think this case is similar to that.

That's not quite what I said.

Even if apple acted as you suggested and merely passed on another party's suggestion, that's still collusion and there's still strong potential for antitrust liability.

You don't always need market dominance to violate antitrust laws. Even if Apple merely encouraged, but did not instigate, the arrangement they still have strong potential for antitrust liability.

ZV