US government files antitrust suit against Apple over e-book pricing [u]

Posted:
in General Discussion edited January 2014


An antitrust suit accusing Apple and a number of book publishers of price fixing and collusion was filed by the U.S. Department of Justice on Wednesday [updated].



The complaint was filed in a New York district court against Apple, Hachette, HarperCollins, Macmillan, and Penguin, according to Bloomberg. Indications first surfaced on Tuesday that the Department of Justice was readying an antitrust suit.



The justice department is expected to settle with "several publishers" this week, as Reuters reported earlier that Simon & Schuster, Hachette, Penguin, Macmillan and HarperCollins are involved in negotiations. Apple and Macmillan have reportedly refused to engage in settlement talks, and have argued that Apple's pricing agreements have enhanced competition in an industry that was previously dominated by Amazon.



Update: Court filings have revealed that Simon & Schuster, Hachette and HarperCollins did, in fact, settle their cases.



Word of the government's interest in e-book price fixing first came to light in March, when it was revealed that the Department of Justice had warned Apple and five major publishers of its plans to sue them. The government has taken issue with Apple's alleged role in convincing e-book publishers to switch to an "agency model" for sales, rather than the "wholesale model" that Amazon had implemented with its own Kindle store.



Under Amazon's method, publishers would sell their books at wholesale and let the bookseller set its own prices. Amazon repeatedly upset publishers by selling titles at a loss.











Apple co-founder Steve Jobs said himself to biographer Walter Isaacson that publishers "hated" Amazon's method, and the online retailer had "screwed it up." Because of that, Jobs said, publishers were willing to switch to the agency model and partner with Apple.



"We told the publishers, 'We'll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that's what you want anyway,'" Jobs said. "But we also asked for a guarantee that if anybody else is selling the books cheaper than we are, then we can sell them at the lower price too. So they went to Amazon and said, 'You're going to sign an agency contract or we're not going to give you the books.'"



[ View article on AppleInsider ]

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Comments

  • irnchrizirnchriz Posts: 1,420member
    Apple should fight the US Justice department in court on this, they have more money than the USA anyways, just stretch it out for years and years and the US govt will just go bankrupt. lol
  • emig647emig647 Posts: 2,345member
    Definitely not surprised. Apple seems to have this market locked down tight.
  • emig647emig647 Posts: 2,345member
    Quote:
    Originally Posted by irnchriz View Post


    Apple should fight the US Justice department in court on this, they have more money than the USA anyways, just stretch it out for years and years and the US govt will just go bankrupt. lol



    Aren't they already bankrupt
  • tallest skiltallest skil Posts: 40,379member
    Quote:
    Originally Posted by irnchriz View Post


    ?just stretch it out for years and years and the US govt will just go bankrupt. lol



    Stretch it out for seconds, you mean. We're already bankrupt.
  • hill60hill60 Posts: 6,960member
    This should be interesting.



    Apple will be given the green light to drive Amazon out of business by undercutting prices of books bought under a Government sanctioned wholesale model.
  • island hermitisland hermit Posts: 6,217member
    Looks like Apple is going to fight this and, imho, I think they should. It is at the core of Apple's business model for selling E-books.



    It's not like Apple doesn't have enough money to fight this for a long time.



    After all... Apple's lawyers were probably looking for something to do...
  • gatorguygatorguy Posts: 14,798member
    Quote:
    Originally Posted by hill60 View Post


    This should be interesting.



    Apple will be given the green light to drive Amazon out of business by undercutting prices of books bought under a Government sanctioned wholesale model.



    I'd be surprised if Apple thought books were so important to their business model that they'd take a loss on them. That doesn't sound very Apple-like.
  • mrstepmrstep Posts: 446member
    Quote:
    Originally Posted by Tallest Skil View Post


    Stretch it out for seconds, you mean. We're already bankrupt.



    Not in terms of having a private institution in charge of our currency that will simply buy government bonds itself using freshly printed money, so... Nope, doesn't sound like bankruptcy to me. How can you be broke when you have a friend who will print fresh money to buy your bad debt no matter what you do?



    My favorite line to hear is people saying "The U.S. needs to help with X or Y - it's the richest nation on earth!". Try the most in-debt at this point. Not sure how that qualifies as richest unless debt is a resource. \
  • asherianasherian Posts: 144member
    I know many people here are Apple fans...but look at this objectively.



    Since Apple's price fixing with publishers (and make no mistake, that's what the "minimum book price" is exactly), the cost of new novels for eBooks has gone up from $9.99 to nearly $20. It is literally cheaper for me to go to the local brick & mortar store and buy a brand new hardcover than to download an eBook.



    There's nothing wrong with Apple's agency model. The problem is with them mandating a minimum (high) book price that no one can undercut. That, quite literally, eliminates competition.



    If Google or Amazon did this, the lot of you would be screaming bloody murder. Time for some objectivity, no?
  • kent909kent909 Posts: 642member
    Lets see. I bought two books this past week. I went to iBooks and saw that they were more expensive there, than Amazon. So I bought them in Kindle format from Amazon. What is the problem here?
  • island hermitisland hermit Posts: 6,217member
    Quote:
    Originally Posted by Asherian View Post


    I know many people here are Apple fans...but look at this objectively.



    Since Apple's price fixing with publishers (and make no mistake, that's what the "minimum book price" is exactly), the cost of new novels for eBooks has gone up from $9.99 to nearly $20. It is literally cheaper for me to go to the local brick & mortar store and buy a brand new hardcover than to download an eBook.



    There's nothing wrong with Apple's agency model. The problem is with them mandating a minimum (high) book price that no one can undercut. That, quite literally, eliminates competition.



    If Google or Amazon did this, the lot of you would be screaming bloody murder. Time for some objectivity, no?



    OK, let's look at this with some objectivity.



    The court case has just started. Let's see what they have to say.



    Let's try not letting our "feelings" about Google or Amazon get in the way.
  • tallest skiltallest skil Posts: 40,379member
    Quote:
    Originally Posted by mrstep View Post


    Not sure how that qualifies as richest unless debt is a resource. \



    Debt is a resource because if we default on ours, the world economy collapses.



    You can say the same for oil. Hence, debt is a resource.



    A LITTLE debt isn't. Like we can grow rice in the US. But it's not prevalent enough to really be considered a staple. But elsewhere in the world?
  • freerangefreerange Posts: 1,476member
    How can this possibly be an anti-trust issue. Apple let the seller of the product set their own selling price!!!!! There is absolutely nothing illegal about that. Meanwhile Amazon sells products at a loss and put major book sellers out of business - they took out competitors. Seems like that is the very definition of anti-competitive. Fight them tooth and nail Apple! Since when is buying products below cost a consumer right?
  • fake_william_shatnerfake_william_shatner Posts: 660member
    Quote:
    Originally Posted by emig647 View Post


    Definitely not surprised. Apple seems to have this market locked down tight.



    I don't think it's the fact that they OWN the market -- it's that the Justice Department is going after them for "fixing prices LOWER." The complaints are obviously from other e-book sellers like Amazon, who don't want the "iTunes factor" taking hold. Amazon sells music cheaper than Apple -- but they aren't a music producer and that's just business.



    Signing authors and giving them little in compensation, while charging outrageously for eBooks is the business model as it stands.



    I haven't looked at the details, but I'm going to go with my "spider sense" and assume that Apple is doing a simple, across the board contract that allows authors to gain more money, cut out the middle man, and consumers to have a consistent price -- just like they did with the music industry.



    The musician who makes a hit with iTunes could ACTUALLY make a good living from just selling music, rather than as a loss leader to promote concert tours (which is the business model for all but the few top musical acts who got a good deal).







    Our Justice Department is only a club that is wielded on those companies who dare to do something of value for the consumer. If only Apple could cover their eBooks with mercury, and use child labor while paying authors nothing and jack the price up -- we'd never hear a word about "price fixing."
  • asherianasherian Posts: 144member
    Quote:
    Originally Posted by kent909 View Post


    Lets see. I bought two books this past week. I went to iBooks and saw that they were more expensive there, than Amazon. So I bought them in Kindle format from Amazon. What is the problem here?



    If this is true, which book it is?



    Because that publisher is in violation of their agreement with Apple -- assuming it was one of the major publishing houses.
  • asherianasherian Posts: 144member
    Quote:
    Originally Posted by FreeRange View Post


    How can this possibly be an anti-trust issue. Apple let the seller of the product set their own selling price!!!!! There is absolutely nothing illegal about that.



    Many people seem to not comprehend the issue. The issue is not the agency model (setting their "own price").



    The issue is Apple's condition that no one else ever sell it for less than Apple. This eliminates competition by definition. All other stores must use the price from the iBookStore and never offer it for less. This is quite literally price fixing. Price fixing is most definitely illegal.
  • mrstepmrstep Posts: 446member
    Quote:
    Originally Posted by island hermit View Post


    Looks like Apple is going to fight this and, imho, I think they should. It is at the core of Apple's business model for selling E-books.



    It's not like Apple doesn't have enough money to fight this for a long time.



    After all... Apple's lawyers were probably looking for something to do...



    I'm not sure that Apple saying "we'll offer you this pricing model, but only if you let us price lower if others price lower" qualifies as Apple cutting down on competition. Apple isn't the largest book seller, and the publishers themselves decided to make Amazon change models, which is (you'd think?) their right. If they shoot themselves in the foot doing so, that's their own problem.



    But the other interesting thing to me is just why publishers would care about setting the prices directly - they got to set a wholesale price (say it was 70% of the expected retail) that everyone paid. If Amazon wanted to sell at a loss to kill their competition let them, and presumably THAT would be investigated as it actually kills off the competitors. Them messing with the pricing model themselves just shifted the focus - I just can't imagine that Amazon under-pricing to run others out of business was somehow more legit than going to an agency model.



    But overall my issue with iBooks is that I can't read them on my Mac or Kindle thanks to the DRM - the DRM in general needs to go like it did with online music. It's not like you can't find book torrents out there, so locking them down is just another stupid RIAA/MPAA type of anti-consumer action. How about the government looks into that if they're looking to protect consumers?
  • noexpectationsnoexpectations Posts: 481member
    Apple has no right to control what prices a supplier provides to other customers. If they want a supplier to be exclusive, fine. However, Apple should not be able to interfere with other supplier contracts.
  • drblankdrblank Posts: 3,383member
    Quote:
    Originally Posted by Gatorguy View Post


    I'd be surprised if Apple thought books were so important to their business model that they'd take a loss on them. That doesn't sound very Apple-like.



    30% gross profit isn't that much gross profit. Apple spends money on maintaining, supporting iTunes, they also have to pay a portion of that money to Akamai for content delivery, which costs money that Apple pays for, and advertising their on-line store costs money. Books, videos, and music should be distributed where one company doesn't get any better pricing than another. Some companies have tiered pricing where you get better pricing for higher quantity which squeezes out the mom and pop stores.



    I think that the download version should be priced less than the physical version, just like download content and the actual physical CD, and these companies should be able to have a 30% markup. 30% is not that greedy.



    How this has been positioned is that Apple just wants to pay no more than anyone else. That's what I read when I review the articles written.
  • aaarrrggghaaarrrgggh Posts: 1,525member
    Monopoly abuse is using dominance in one market to gain an advantage in another. Apple is clearly guilty of that in forcing changes to Amazon's contracts with publishers.



    The question of what is right is secondary.
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