Apple reluctant to settle e-book pricing probe as antitrust specter looms

Posted:
in General Discussion edited January 2014


Three of the five international publishing houses involved in U.S. and E.U. investigations over e-book price fixing are reportedly ready to settle, but Apple along with the two other content providers don't agree to the terms and remain holdouts.



Citing people familiar with the matter, The Wall Street Journal reported on Wednesday that Apple is not willing to agree to settlement terms set forth by U.S. and European oversight authorities, which is pushing the Department of Justice closer to filing an antitrust suit against the iPad maker.



The sources say that the proposed settlement could see the shredding of current "agency model" contracts Apple has with Simon & Schuster, Hachette, Penguin, Macmillan and HarperCollins, to be replaced by the wholesale model used by competitor Amazon.



The "agency model" allows publishers to set e-book prices under so-called "most favored nations" agreements that ban the distributors from offering their wares to competitors for lower prices.



By allowing Amazon to revert to its original wholesale model, publishers would no longer be in control as they would sell e-book content to retailers that would in turn set their own prices. This allowed Amazon to sell content at a discounted rate in order to drum up business.



Publishers are afraid that by reverting to the "wholesale model," Amazon will begin selling e-books at below-cost prices which would put pressure on competing retailers. Apple, Barnes & Noble and other outlets would be forced to lower their prices to stay competitive or exit the market altogether.



Wednesday's rumors fly in the face of reports that Apple and the DoJ were nearing a deal not more than a week ago.



Apple and five major book publishers are suspected of colluding over inflated e-book pricing through the company's iBookstore that allegedly helped take some market share away from industry leader Amazon. Investigations are currently underway in the U.S. by the DoJ, while the European Commssion is handling the issue across the pond.



Europe's competition commissioner, Joaquin Almunia, has been working with the DoJ to investigate the matter.



"The companies involved know very well under which conditions we are ready to settle," Almunia said. "If our conditions cannot be met in a satisfactory way, we will continue our investigation."



Some publishers have reportedly offered to compromise and do away with the "most favored nation" agreement with Apple in exchange for retaining the "agency model." The DoJ has said that the solution is not enough and posits that the publishers were only able to reach the model as a result of collusion, according to sources.



People familiar with the case have said that the Justice Department has proposed a "cooling-off" period in which publishers would not be allowed to re-enter the "agency model" in an attempt to dispel any possibility of future collusion. The length of the "cooling-off" period is supposedly one of the topics being discussed at the settlement talks.



[ View article on AppleInsider ]

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Comments

  • mstonemstone Posts: 11,510member
    I think Apple is going to have to give up on the whole idea that you can't sell an e-book for less on some other store. If they want to make 30%, fine, then the publishers can set the price at the wholesale level however they see fit. It is not like the iOS app store where you can only get it from one source. Books are different. You don't have to make any API call in a book . You just read it. That is why I think Apple came up with the iBooks Author format. That way you do need API calls and Apple can control it beginning to end.
  • Typical Apple sort of behavior. When a company gets bigger than many governments, ISTM that they think that they are entitled do anything that they want to do.



    Apple is likely to fight this in court.
  • solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by mstone View Post


    I think Apple is going to have to give up on the whole idea that you can't sell an e-book for less on some other store.



    That's the first thing I thought of... And I hadn't considered it before this article.



    Quote:

    That is why I think Apple came up with the iBooks Author format. That way you do need API calls and Apple can control it beginning to end.



    I think it was less sinister than that. I think the primary reason was because there werre no options for making good interactive books that were not apps.



    EPUB simply wasn't up to the task but it's a great foundation. If they wanted it to be locked down they could have made the format much harder to copy.
  • mstonemstone Posts: 11,510member
    Quote:
    Originally Posted by SolipsismX View Post


    That's the first thing I thought of... And I hadn't considered it before this article.





    I think it was less sinister than that. I think the primary reason was because there werre no options for making good interactive books that were not apps.



    EPUB simply wasn't up to the task but it's a great foundation. If they wanted it to be locked down they could have made the format much harder to copy.



    But they could have used HTML5 and then added their own DRM but instead they used a format where you cannot read or edit the code which is unnecessarily proprietary and almost impossible to copy as it is completely binary executable.
  • drobforeverdrobforever Posts: 400member
    Would be a disaster to AAPL's price if they can't settle this. People should be worried, especially at this price level.
  • inklinginkling Posts: 731member
    Oh how I loathe the current DOJ. The idea that agency pricing is some nasty tool of evil, giant book publishers is total, utter bosh.



    Small publishers and self-publishing authors are so delighted by the agency model, that they insisted that Smashwords change its contract to the agency model. Agency pricing allows an author, no matter how unimportant, to hold special sales and test lower prices, knowing that giant retailers will have to change prices on their insistence. Without that those authors would simply be ignored. Amazon would set the price to whatever it wanted and there it would remain.



    Look at the facts. Before agency pricing, Amazon had some 90% of the ebook market and, by selling ebook, below cost, was well on the way to destroying all its competition. Now its market share is only about 70%. The reason? Agency pricing meant that Amazon couldn't use its deep pockets to destroy its competitors. We now have a far healthier and more competitive market. The DOJ wants to destroy that.



    My own hunch is that Amazon is behind this move. Money, perhaps untraceable money, has gone into certain pockets to bring this about. Never forget that our current administration is simply corrupt Chicago machine politics at the national level. That's where Obama spent virtually his entire political career. Not a single crooked Chicago politician was ever inconvenienced in the slightest by Obama in his entire career.
  • charlitunacharlituna Posts: 7,069member
    I don't see why the issue with the agency model. If that is how Apple wants to play they should be allowed to do so.



    The only issue the DOJ should care about is Apple forcing their terms on other stores. And the favored nation issue. Publishers should be free to take whatever terms they wish.
  • hill60hill60 Posts: 6,960member
    Apple should stick to their guns, don't let those bozo's in Washington dictate how companies should sell their products.



    Don't these clowns realise that they will be effectively creating a monopoly for whoever has the deepest pockets and can afford to discount the "wholesale" model the longest.



    Typical politicians they can't see past their current term in office.
  • mstonemstone Posts: 11,510member
    Quote:
    Originally Posted by hill60 View Post


    Don't these clowns realise that they will be effectively creating a monopoly for whoever has the deepest pockets and can afford to discount the "wholesale" model the longest.



    That can be against the law if the intent is to create a monopoly or harm competitors. Many countries and states outlaw predatory pricing.
  • Quote:
    Originally Posted by drobforever View Post


    Would be a disaster to AAPL's price if they can't settle this. People should be worried, especially at this price level.



    My guess is that only a tiny fraction of Apple's profits are derived from eBooks. And nearly all of Apple's stock is owned by institutions, who will realize the small impact.



    Don't Panic.
  • hill60hill60 Posts: 6,960member
    Quote:
    Originally Posted by mstone View Post


    That can be against the law if the intent is to create a monopoly or harm competitors. Many countries and states outlaw predatory pricing.



    In this case they are condoning it i.e. what Amazon was actively doing before Apple came along to shake up the industry.
  • mdriftmeyermdriftmeyer Posts: 6,863member
    Quote:

    Apple, Barnes & Noble and other outlets would be forced to lower their prices to stay competitive or exit the market altogether



    Apple could buy Amazon. Apple is owning their markets. Now Barnes and Noble and other retailers will be screwed, so I'd expect Barnes and Noble to strike an alliance with Apple.
  • mdriftmeyermdriftmeyer Posts: 6,863member
    Quote:
    Originally Posted by drobforever View Post


    Would be a disaster to AAPL's price if they can't settle this. People should be worried, especially at this price level.



    Get serious. Apple's ebook business covers their cost of distribution. This is nothing to Apple who can set prices below Amazon if it wanted to do so.



    Believe it or not, Apple wants a healthy channel instead of crushing the channel so that eBooks provide a profit to publishers who then in turn open up their entire catalogue to the iOS environment knowing it's worth while investment.



    Amazon cannot match Apple's volume and they know it. They will wish they had not opened up this can of worms. Apple can under cut them and strike an advertising relationship with the publishers who then recoup their losses and effectively cut out Amazon all together.



    Google receives the 80%+ of it's mobile advertising revenue off of iOS, not Android.



    The revenue maker is Apple.
  • dunksdunks Posts: 1,167member
    I'd prefer if content was the same price everywhere until the entire industry can standardise around a single eBook format. I'm not interested in having half my digital media in Kindle and half in iBooks.



    Though the price does need to come down significantly, especially if the publishers are going to fork us over with DRM. In many cases it is still possible to order a single dead tree book on-line and have it shipped internationally for less than the cost of the same book on kindle or iBooks.



    Books are not impulse purchases for me so "delivered in 60 sixty seconds" pales against the ability to loan, resell, buy second-hand or display a printed book on a book shelf.
  • nagrommenagromme Posts: 2,834member
    I?m glad I?m not an author! There must be some middle ground between conspiracies to ?inflate prices? and selling at a loss to drive competitors out of the market.
  • solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by mstone View Post


    But they could have used HTML5 and then added their own DRM but instead they used a format where you cannot read or edit the code which is unnecessarily proprietary and almost impossible to copy as it is completely binary executable.



    EPUB3 has a fair amount of HTML5 in it. I haven't seen any DRM, just proprietary code, which is e pelted since they invented it. We've seen a lot of proprietary WebKit code that has become part of an open standards over the years. Will they do that with aspects of their iBooks Author formatting? Perhaps, but only if they think it betters their position in the market.
  • anantksundaramanantksundaram Posts: 16,913member
    Quote:
    Originally Posted by drobforever View Post


    Would be a disaster to AAPL's price if they can't settle this. People should be worried, especially at this price level.



    Absolute nonsense. As an Apple shareholder, given my time horizon, I would view it as a terrific buying opportunity.



    I hope Apple sticks to its guns.
  • anantksundaramanantksundaram Posts: 16,913member
    Quote:
    Originally Posted by I am a Zither Zather Zuzz View Post


    Typical Apple sort of behavior. When a company gets bigger than many governments, ISTM that they think that they are entitled do anything that they want to do.



    How are you coming up with the assertion that Apple is "bigger than many governments"? Especially the governments that are party to this investigation?



    Exactly what metrics are you comparing? Or, as usual, are you simply throwing out bombastic statements without any foundation?



    (Heads-up: If it's Apple's revenues to the governments' GDP, you would make no sense whatsoever.)
  • hellacoolhellacool Posts: 759member
    Don't understand the problem, lower prices, good for consumer. I am a consumer, good for me. This is a digital item, cost ZERO to reproduce so publishers will make the same money if you sell 100 eBooks for 3 dollars or 3 eBooks for 100 dollars. I would rather buy the eBook for 3 dollars.
  • nasseraenasserae Posts: 3,144member
    Apple.. Settle and sell all ebooks for $0.99 until you drive everyone else out of business. Maybe then the DoJ will be happy.
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