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Amended class-action lawsuit alleges Apple, publishers engaged in 'price-fixing conspiracy'

post #1 of 104
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Even as Apple unveiled new partnerships with publishers focusing on ebooks and digital textbooks earlier this week, lawyers have amended a class-action lawsuit against Apple and five of the six big publishers accusing them of "deep antagonism" toward Amazon and its pricing scheme.

Law firm Hagens Berman filed the original lawsuit last August on behalf of a group of consumers who allege Apple and most of the publishing industry colluded to introduce an agency e-book pricing model for the iBookstore to disrupt Amazon's wholesale model.

HarperCollins, Hachette, Macmillan, Penguin and Simon & Schuster were named in the legal action. Random House was the only "big six" publisher left off the lawsuit, as it had elected not to sell its books using the agency model on iBooks for nearly a year before eventually caving last March.

The updated complaint, submitted Friday, contains new allegations, as well as information believed to support its case, such as quotes from late Apple CEO Steve Jobs and a number of publishing executives.

“The information we’ve included in this new filing shows the deep antagonism that publishers had toward Amazon for its consumer-friendly pricing,” said Steve W. Berman, managing partner at the firm and lead counsel on the case. “Since we began the action last August we’ve uncovered statements from executives at several publishers that demonstrate they viewed Amazon as a significant threat to the long-term survival of their profitability.”

Berman went on to assert that publishers took drastic and illegal action to protect their profits as their traditional business models were threatened.

“We intend to show that the big publishers saw the sea change in the delivery of books, and agreed to a price-fixing conspiracy as a last-gasp attempt to maintain profit margins,” he said.

The amended complaint gathered several possibly incriminating quotes from publishing CEOs. For instance, David Young, Chairman and CEO of Hatchett Book Group, said on record in 2009 that Amazon's $9.99 e-book pricing could represent "game over" for the publishing industry if it was "allowed to take hold in the consumer's mind."

Macmillan CEO John Sargent stated in a blog post that the agency model had made the market "stable and rational" by righting a "fundamentally unbalanced" situation. Meanwhile, Hatchett executive Arnaud Noury allegedly told an Amazon executive that a small price increase of two to three dollars would alleviate the "industry" problem.

“Noury’s meeting with Amazon is just one piece of a growing body of evidence that that the publishers were coordinating a plan to force Amazon to increase e-book prices, one way or another,” Berman said.

The lawsuit even drew upon Walter Isaacson's biography on Jobs by including the following excerpt as supposed evidence of a price-fixing conspiracy:

According to the complaint, following the release of the iPad and iBooks, the five publishers raised e-book prices by 30 to 50 percent and "completely changed the competitive pricing landscape that had existed for decades in the industry."

"As a direct result of this anticompetitive conduct as intended by the conspiracy, the price of eBooks has soared," the filing alleged. "The price of an eBook in many cases now approaches -- or even exceeds -- the price of the same book in paper even though there are almost no incremental costs to produce each additional eBook unit."

The lawsuit is asking for "damages for the purchasers of e-books, an injunction against pricing e-books with the agency model and forfeiture of the illegal profits received by the defendants."

From Kindle 1 to iBooks 2

Amazon made waves in November 2007 when it released its Kindle e-reader. The device was billed as the "iPod of reading" and quickly sold out. Adoption of e-books was aided by the fact that Amazon was willing to sell some titles at a loss in order to satisfy both customers' expectations and publishers' profit margins.




However, publishers chafed at Amazon's insistence on low-priced e-books. They also reportedly feared that the online retailer would eventually use its market power to reduce their share of profits for both e-book and physical book sales.

Recognizing a market opportunity, Apple stepped in to offer its upcoming iPad tablet and accompanying iBooks app as a possible alternative to Amazon. The tablet and accompanying e-reader software were unveiled in January 2010.




At the time, Jobs credited Amazon with pioneering the e-book market, while noting that Apple intended to improve on its model. "We're going to stand on their shoulders and go a bit further," he said.

According to one survey, 2010 e-book revenue jumped up more than 1200 percent from publishers' 2008 numbers. Net sales increased to 114 million in 2010 as the Kindle and iPad installed bases grew.

Amazon, in turn, stood on Apple's shoulders late last year to release the $199 Kindle Fire tablet. The device represented Amazon's first foray into the tablet industry, quickly selling millions of copies. The online retailer is looking to join the iPad in offering colorful, interactive and multimedia e-books.



Jobs reportedly communicated to publishing executives last June that he had a vision to revolutionize the textbook industry with the iPad, but he unfortunately did not live to see it realized.

Apple on Thursday held a media event in New York City to announce several new e-book and education initiatives. The Cupertino, Calif., iPad maker released iBooks 2 with additional features for e-books. It also announced an iBooks Author tool that can create digital books to either sell on iBooks or distribute for free.




The company also succeeded in bringing the major publishers on board with its plan for interactive digital textbooks. iBooks 2 launched with several textbooks priced at $14.99 or less, a significant discount from traditional paper textbooks.
post #2 of 104
This is why we can't have nice things.

I really hope the pricing never changes. I'm considering buying the ipad 3 (my first Apple product purchase since the iphone 3g) simply as an INVESTMENT if textbook prices remain that low.

I really don't want this to be ruined.

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post #3 of 104
is it just high school text books that low, what about tertiary texts?

Its all pointless anyway. I can not purchase any content from teh ibook store whether i want to or not.
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post #4 of 104
Lawyers looking for payday. Case dismissed.

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post #5 of 104
I wonder if these lawyers have considered that Apple could have made no conditions about pricing etc and most of the major publishers would have jumped ship from Amazon as soon as they could for the vendor that lets them set the price.

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post #6 of 104
*looks at Kindle image*

No, what? That was an actual Kindle? No, that's just a prototype. They didn't actually

They released something that looked that hideous? That THING was not just SHOWN to the public, but SOLD?!

THAT. THAT THING.

How did I miss that?!

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post #7 of 104
Quote:
Originally Posted by Tallest Skil View Post

*looks at Kindle image*

No, what? That was an actual Kindle? No, that's just a prototype. They didn't actually

They released something that looked that hideous? That THING was not just SHOWN to the public, but SOLD?!

THAT. THAT THING.

How did I miss that?!

You missed it because the entire industry laughed at it and dismissed it.
post #8 of 104
<insert animated GIF of someone grasping at straws>

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post #9 of 104
Quote:
Originally Posted by mdriftmeyer View Post

You missed it because the entire industry laughed at it and dismissed it.

Sure... If that's what you need to believe, but the FACT is that the Kindle 1 sold very well for its time, especially for a first generation device from a company not known for selling their own hardware.

http://techcrunch.com/2008/08/01/we-...s-sold-240000/

They topped Amazon's sales charts numerous times, and we're often sold out during that first year, and continue to sell extremely well today.

"Why iPhone"... Hmmm?
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post #10 of 104
It wasn't the low prices on Amazon ebooks that drove publishers mad. It was the cracy 70-30 split of revenue. Amazon 70% and publishers 30%. This is the reason why many ebooks are more expensive then retail books.
post #11 of 104
Quote:
Originally Posted by DaHarder View Post

Sure... If that's what you need to believe, but the FACT is that the Kindle 1 sold very well for its time, especially for a first generation device from a company not known for selling their own hardware.

http://techcrunch.com/2008/08/01/we-...s-sold-240000/

They topped Amazon's sales charts numerous times, and we're often sold out during that first year, and continue to sell extremely well today.


189K sold devices in a year is good?
Ipad1 sold more in the first hour.
post #12 of 104
Quote:
Originally Posted by shompa View Post

189K sold devices in a year is good?
Ipad1 sold more in the first hour.

It was a much different time in the gadget-sphere, and those numbers were quite good for said time.
"Why iPhone"... Hmmm?
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post #13 of 104
Quote:
Originally Posted by DaHarder View Post

It was a much different time in the gadget-sphere, and those numbers were quite good for said time.

Fine, the original iPhone that predates the Kindle and started at price higher than the Kindle sold 50% more units in the first two days than the Kindle all year.

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post #14 of 104
Quote:
Originally Posted by SolipsismX View Post

Fine, the original iPhone that predates the Kindle and started at price higher than the Kindle sold 50% more units in the first two days than the Kindle all year.

So... \
"Why iPhone"... Hmmm?
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post #15 of 104
Quote:
Originally Posted by DaHarder View Post

So... \

Denial is a River you're drowning in.
post #16 of 104
Quote:
Originally Posted by DaHarder View Post

So... \

You said "It was a much different time in the gadget-sphere, and those numbers were quite good for said time." yet you claim that time didn't include the 2010 iPad launch 2 years later so I included a launch pre-dates the Kindle. Now your claim is that 2007 doesn't count? I can show you the iPhone sales for 2008 but it hurts your argument even more and I've already destroyed plenty of your arguments tonight so I think I'll let others take over from here.

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post #17 of 104
Quote:
Originally Posted by MaroonMushroom View Post

This is why we can't have nice things.

More than any other single characteristic, American culture is marked by an irrational, overweening sense of entitlement. Wherever did you people get the notion that you are entitled to nice things? It's particularly strange watching this play out as your for-hire government continues to work toward providing 95% of the wealth to 5% of the populace.

The question of entitlement aside, the average American will shortly be the equivalent of Walmart employees who have only Walmart things. The entire nation is becoming the 21st century equivalent of a company town - one sweatshop, under God.
post #18 of 104
Quote:
Originally Posted by rbryanh View Post

More than any other single characteristic, American culture is marked by an irrational, overweening sense of entitlement. Wherever did you people get the notion that you are entitled to nice things? It's particularly strange watching this play out as your for-hire government continues to work toward providing 95% of the wealth to 5% of the populace.

The question of entitlement aside, the average American will shortly be the equivalent of Walmart employees who have only Walmart things. The entire nation is becoming the 21st century equivalent of a company town - one sweatshop, under God.

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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post #19 of 104
Quote:
Originally Posted by rbryanh View Post

More than any other single characteristic, American culture is marked by an irrational, overweening sense of entitlement. Wherever did you people get the notion that you are entitled to nice things? It's particularly strange watching this play out as your for-hire government continues to work toward providing 95% of the wealth to 5% of the populace.

The question of entitlement aside, the average American will shortly be the equivalent of Walmart employees who have only Walmart things. The entire nation is becoming the 21st century equivalent of a company town - one sweatshop, under God.

Seriously, dude, take a f@$#%&g breath.

The "we can't have nice things" line you're responding to is an Internet meme, often invoked ironically to mock the very attitude you're trying to pin on your stereotype of Americans. I'd say if you crawl down off that high horse of yours a little more often and mingle with us common folk, you might have realized that instead of making a colossal ass of yourself with your holier-than-thou rant.
post #20 of 104
Amazon were just as guilty in ensuring there was little competition.

Remove the marketplace and consumers always have to pay the price you set.
post #21 of 104
I hope these lawyers aren't expecting to be paid a percentage of any damages obtained under an "agency model".

If I was defending the case it's a question I'd ask, along with an answer as to the reasons why.

Then suggest they should only be able to be paid a set amount, such as that paid to public defenders.

In a free market people can ask whatever price they want for what they produce..
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post #22 of 104
Quote:
Originally Posted by shompa View Post

189K sold devices in a year is good?
Ipad1 sold more in the first hour.

DaHarder bought 9 of them, 3 each for himself, his wife, and their dog.
post #23 of 104
Quote:
Originally Posted by shompa View Post

It wasn't the low prices on Amazon ebooks that drove publishers mad. It was the cracy 70-30 split of revenue. Amazon 70% and publishers 30%. This is the reason why many ebooks are more expensive then retail books.

Wrong and wrong. Amazon earns more money per ebook sale under the Agency model than they did under the Wholesale model. Secondly, Publisher's set the price under the Agency model which accounts for the higher prices (Because they do not allow Amazon, or others, to discount the "set" price.).
post #24 of 104
Quote:
Originally Posted by tbsteph View Post

Wrong and wrong. Amazon earns more money per ebook sale under the Agency model than they did under the Wholesale model. Secondly, Publisher's set the price under the Agency model which accounts for the higher prices (Because they do not allow Amazon, or others, to discount the "set" price.).

The entire argument is silly.

Amazon fixed prices. Apple allows publishers to set their own prices and takes a fixed percentage.

And the iBooks 2 for texts apparently still lets the publisher set the prices. But since hardcover texts are often over $100 and the e-texts are $15 or less, I'm having trouble understanding the damages to the consumer. Since prices for the new e-texts are lower than the prices for hardcover, does that mean the damages are negative and the petitioners will have to pay Apple?

So how is Apple guilty of price fixing?
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post #25 of 104
It seems to me that Amazon's original scheme of selling books at a loss was anticompetitive behavior and clearly not a business model they intended to continue once they developed and monopolized that market. Amazon is a business and they are in it to make money. There was a day when the overseas producers were selling semiconductors in the US under cost and it was called dumping and there were trade sanctions imposed to prevent it. The theory was that they would put US producers out of business and then raise the prices.

I don't exactly see how Apple's "agency model" that allows the content owners to set their own prices could be called "price fixing." Furthermore, they were not compelled to sign up with Apple.

Any honestly, the lawyers are alleging "deep antagonism?!!" How lame is that? I charge them with deep antagonism toward Apple.
post #26 of 104
Quote:
Originally Posted by AppleInsider View Post

Berman went on to assert that publishers took drastic and illegal action to protect their profits as their traditional business models were threatened.

Sounds like the RIAA and MPAA... and Congress, with this SOPA and PIPA nonsense.
post #27 of 104
Quote:
Originally Posted by DaHarder View Post


Hey! Look! I guess it is physically possible for Amazon to release their sales numbers!

Wonder why they don't do it anymore… maybe it has something to do with how terrible they are…

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post #28 of 104
Talking about iPad 3, has anyone considered that iPad 3 might be the same as current iPad 2 prices and that Apple might release the iPad 2 (The iPad E) at a much lower price only to educational institutions? This would hugely increase the uptake as many schools are strapped for cash, and would accelerate the Apple ebook model.
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post #29 of 104
Quote:
Originally Posted by digitalclips View Post

Talking about iPad 3, has anyone considered that iPad 3 might be the same as current iPad 2 prices and that Apple might release the iPad 2 (The iPad E) at a much lower price only to educational institutions?

I think that's everyone's belief at this point.

iPad 2 16GB: $399
iPad 3 16GB: $499
iPad 3 32GB: $599
iPad 3 64GB: $699

There's no need to give it a silly name or make it any cheaper.

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post #30 of 104
Funny how Amazon wasn't worried about this when the record companies came to them because they worried about iTunes having too much power and having set pricing for songs.
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post #31 of 104
Quote:
Originally Posted by Tallest Skil View Post

I think that's everyone's belief at this point.

iPad 2 16GB: $399
iPad 3 16GB: $499
iPad 3 32GB: $599
iPad 3 64GB: $699

There's no need to give it a silly name or make it any cheaper.

My thinking is a lot less that that, perhaps in the $250 range or even less. Not necessarily a silly name, it is not without precedent in the iMac range and does make tracking product easier.
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post #32 of 104
"Deep antagonism" equates to price-fixing? I'd like to be present if this plays out in court. It'll be hilarious to watch the judge kick the Hagens Berman attorney's ass up around his ears for even trying to make such a tortured argument.

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post #33 of 104
Quote:
Originally Posted by digitalclips View Post

My thinking is a lot less that that, perhaps in the $250 range or even less.

That would be seen as "legitimizing the Kindle as a competitor", which Apple doesn't need to do. If people are buying more iPads than Kindles at $499 vs. $199, they'll just be buying even MORE at $399 vs. $199.

MAYBE Apple would do BULK discount pricing for educational institutions, but I don't see them ever letting the public know of a price lower than $399.

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post #34 of 104
Quote:
Originally Posted by digitalclips View Post

My thinking is a lot less that that, perhaps in the $250 range or even less. Not necessarily a silly name, it is not without precedent in the iMac range and does make tracking product easier.

I think a camera-less iPad 2 (or front camera only) would be a great educational iPad - and I think $250 is very doable for an education only iPad.
post #35 of 104
Quote:
Originally Posted by Tallest Skil View Post

That would be seen as "legitimizing the Kindle as a competitor"

Meh - I think this perception crap is way overrated. Pricing aside, the user experience of the iPad vs Kindle Fire is night and day. I think Apple loves the Fire. It's the greatest gateway drug out there. It's cheap enough to get people who would never consider a tablet to get one, then once hooked on the concept leave desiring "the real thing". I've seen it twice in my family already - two Fires have been returned and replaced by iPads.

I do admit I liked the 7" form factor more than I thought, but if I had to pick one I would still go with the 10", and that's the rub for Apple. A 7" would sell, but would it sell enough to justify the extra tooling, retail space and software/platform issues? Variation introduces complexity and expense. Something Jobs has amply demonstrated from when he devised the original quad/four square Mac strategy with the first iMac and turned Apple back to profitability. Something I didnt think was possible at the time...

Quote:
MAYBE Apple would do BULK discount pricing for educational institutions, but I don't see them ever letting the public know of a price lower than $399.

Again Meh - in the eMac days anyone could log into the education version if Apples web store and see it and the sinificantly cheaper pricing and it didn't upset the iMac market

I expect Apple to agressvly go after the education market with the iPad. It's the perfect device, and generation three is about when (like with the eMac) they typically make their move. I think a sub $300 price is guaranteed.
post #36 of 104
Quote:
Originally Posted by shompa View Post

It wasn't the low prices on Amazon ebooks that drove publishers mad. It was the cracy 70-30 split of revenue. Amazon 70% and publishers 30%. This is the reason why many ebooks are more expensive then retail books.

Nope. There was no split before Apple did it. Amaon bought the books wholesale just like paper books but with a caveat they could set the price. Publishers were not happy with Amazon using the books as a loss leader for the Kindle hardware and the Amazon website

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post #37 of 104
Maybe I missed something, but who are the plaintiffs in this lawsuit? Are they filling the class action on behalf of everyone who has ever bought an ebook?
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post #38 of 104
Quote:
Originally Posted by Dr Millmoss View Post

Maybe I missed something, but who are the plaintiffs in this lawsuit? Are they filling the class action on behalf of everyone who has ever bought an ebook?

You missed something.

The second line if the article to be exact.


Law firm Hagens Berman filed the original lawsuit last August on behalf of a group of consumers who allege Apple and most of the publishing industry colluded to introduce an agency e-book pricing model for the iBookstore to disrupt Amazon's wholesale model.
post #39 of 104
Quote:
Originally Posted by digitalclips View Post

My thinking is a lot less that that, perhaps in the $250 range or even less. Not necessarily a silly name, it is not without precedent in the iMac range and does make tracking product easier.

That's the cost of the B&N Nook Color, a simple tablet-esque device with half the display real estate as the iPad. I think $399 would be the absolute lowest. It's not like the iPad isn't selling or losing favour.

Vendors at CES were even less focused this year than last on tablets. Apple is near winning here with a quality product that people love. There is no reason to hurt their profit or weaken their brand here.

For comparison the 8GB only 8GB! iPod Touch is $199 and the 32GB iPod Touch is $299. It's 1/8th the display real estate as the iPad and it hasn't even been updated since the year the original iPad was releaed.

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post #40 of 104
Quote:
Originally Posted by shompa View Post

It wasn't the low prices on Amazon ebooks that drove publishers mad. It was the cracy 70-30 split of revenue. Amazon 70% and publishers 30%. This is the reason why many ebooks are more expensive then retail books.


LOL. I usually ignore obvious fanboy comments. I love Apple but live in reality. But this comment was such over the top fiction that it was too much to ignore. Do you just make this stuff up?

Amazon NEVER got a 70-30 split in its favor. Prior to the pricing arrangement between Apple and the major publishers Apple that forced every retailer to conform to Apples pricing, Amazon had a wholesale e-book pricing model that was based on print books. So if the book was in hardcover and Amazon typically paid the publisher $15 for the book, they paid the publisher $13 for every e-book of that title sold as well. The publisher made the exact same take it did on print titles, and the authors got precisely the same commission as on print titles. Amazon was then free to set its own retail pricing just as they do for print, where the courts have already ruled that it is illegal for publishers to enforce fixed retail pricing. In many cases Amazon then took a loss on the sale of the e-book, selling a title that cost them $13 for $9.99 because they were more interested in marketshare at the time and every other retailer was free to set whatever pricing they wanted. Profit and loss was the decision of the retailer and the publishers and authors profited no matter what. Amazon usually made a profit on softcover-equivalent titles and a loss on new hardcovers.

Apples deal changed that. By requiring any publisher who wanted their distribution sales platform to contractually agree that no other retailer could have better pricing than Apple, by definition it required publishers to set retail pricing, a practice illegal in print books (but there was no case law for e-books yet). That Apple deal gave publishers 70% of the sales price and the retailer (Apple and others) 30%. In most cases this results in a smaller commission to authors than they were getting through Amazons deal. And, ironically, Amazons profit margin on a per-sales basis improves substantially, though their share is compromised by Apple (though since the market is growing so rapidally the net result is still growth for everyone).

The result was prices shot up substantially on major publisher e-books everywhere and there is now zero price competition in the marketplace prices are the same everywhere for major publisher e-books. Books that had been selling for $9.99 on Amazon before the Apple agreement went up to $14.99 and even $19.99. Before the Apple agreement it was extremely rare for the e-book not to be less expensive than the print book. After Apples agreement, it was commonplace for new mass market hardcover books.

So basically everything you wrote was the opposite of the facts. Nice work.

Whatever the outcome of the case, it is based on solid legal grounds and precedent. Apples deals with publishers has removed retail pricing competition from the marketplace. Thats the definition of marketplace collusion. Sure publishers dont need to make a deal with Apple but when a company with a meaningful share of the marketplace refuses access to the marketplace unless you agree to deals that exclude other companies in the marketplace from fair market competition, there is much case law that says thats not okay. Similarly, there is already clear legal precedent that its not legal for publishers to enforce fixed retail pricing for books. If nothing else this case will answer the open question as to whether a different and lesser standard will apply to e-books or a similar standard. If the courts believe that e-books should have consumer protection of retail pricing competition then they will rule against Apple and the publishers. If they believe the conditions of the marketplace are unique and different and that retail pricing protection is not necessary or appropriate, they will rule in their favor. If they rule against Apple and the publishers, Apple will be required to re-negotiate deals to not enforce best pricing guarantees and publishers will have to re-negotiate deals with other retailers like Amazon to only enforce wholesale pricing and not retail pricing. Amazon, BN and others will all be able to set their own pricing again, profiting or losing as they see fit for their individual business models.
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  • Amended class-action lawsuit alleges Apple, publishers engaged in 'price-fixing conspiracy'
AppleInsider › Forums › Mobile › iPad › Amended class-action lawsuit alleges Apple, publishers engaged in 'price-fixing conspiracy'