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DoJ suit against Apple over e-book pricing may arrive this week

post #1 of 41
Thread Starter 
The U.S. Department of Justice is readying an antitrust suit against Apple over alleged e-book price fixing and could launch the complaint as early as Wednesday, a new report claims.

People familiar with the matter said the DoJ could file suit against Apple and settle with "several publishers" this week, Reuters reported on Tuesday. The tipsters said the suit could come as early as Wednesday, but they also noted that a final decision has yet to be made.

A report last month claimed that the Justice Department had warned Apple and five of the "Big Six" publishers of its intent to sue. Simon & Schuster, Hachette, Penguin, Macmillan and HarperCollins have reportedly been negotiating with the federal agency over a potential settlement to avoid the suit.

At issue is whether Apple colluded with publishers to switch from the wholesale model used by Amazon to an agency model where publishers set their own prices for e-books. According to late Apple co-founder Steve Jobs, the publishers were willing to switch to the new model with Apple because they "hated" Amazon's practice of selling Kindle e-books below cost.




The European Union is also said to be investigating the issue. Apple and the publishers already face a class-action complaint over the matter. The complaint blames the iPad maker and the publishers for a price increase after Apple's iBookstore launched.

Late last month, reports emerged that Apple and the publishers were close to a settlement with the DoJ that would head off the lawsuit. However, The Wall Street Journal claimed last week that Apple did not agree to settlement terms from either the U.S. and E.U. Three of the publishing houses are reportedly amenable to the settlement, while the remaining two are believed to be unhappy with the terms.

[ View article on AppleInsider ]
post #2 of 41
Apple: "Fine."

And then they lower the price of all their eBooks to $0.99 and drive every other bookstore out of business.

Apple: "Is that what you wanted, DoJ?"

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post #3 of 41
Quote:
Originally Posted by Tallest Skil View Post

Apple: "Fine."

And then they lower the price of all their eBooks to $0.99 and drive every other bookstore out of business.

Apple: "Is that what you wanted, DoJ?"

As if Apple didn't already do that to every record store? - drive them out of business.

Who cares? Greedy publishers meet greedy music producers.
It's too bad the newspaper publishers won't be affected with their pricing scams. Can you hear me NYT?
post #4 of 41
Ok, the way I understand it, Amazon was basically setting prices on their own and destroying the market for the ip owners by selling at a loss.
So, Apple comes in and says "Hey, we'll let you set your own prices for your own ip."
And Apple is the bad one here?
post #5 of 41
I didn't think America were such a bunch of socialists, government dictated pricing regimes are no substitute for a free market.

Enjoy comrades.
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post #6 of 41
Quote:
Originally Posted by iSheldon View Post

As if Apple didn't already do that to every record store? - drive them out of business.

Rampant piracy was driving the record stores out of business before the iTunes store even existed.
post #7 of 41
All of this is rumor. It's rumor that the DOJ ever started looking, that anyone has settled, that they are going to file a suit etc.

and it's rumor what they are going to file it about. It's less likely they give a fig about whether the pricing is wholesale or agency. Stores have a right to set up whatever system they like.

All the DOJ is likely to be concerned about is the favored nation clause and if there's anything in Apple's terms that force publishers to demand agency pricing with other stores. Because those are the types of actions that might be anti-trust. But if the publishers are free to make whatever demands they want and they choose to say 'agency or we won't renew' that's not on Apple

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post #8 of 41
Quote:
Originally Posted by quinney View Post

Rampant piracy was driving the record stores out of business before the iTunes store even existed.

THe $0.99 per song model driven by Steve Jobs drove the final nail in the coffin.
post #9 of 41
Quote:
Originally Posted by iSheldon View Post

THe $0.99 per song model driven by Steve Jobs drove the final nail in the coffin.

Yeah right
In point of fact, it's what saved the entire industry.
post #10 of 41
Quote:
Originally Posted by studiomusic View Post

Ok, the way I understand it, Amazon was basically setting prices on their own and destroying the market for the ip owners by selling at a loss.
So, Apple comes in and says "Hey, we'll let you set your own prices for your own ip."
And Apple is the bad one here?

We're on the same page. From my perspective Amazon was the one using unfair business practices, Amazon was setting the price to drive the competition out of business. Apple appears to be more free market oriented - let the publishers set the price. I'm not saying I'm right, that's just how it appears to me. If someone could explain the opposing point of view, enlighten me, I sincerely want to understand.

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post #11 of 41
Quote:
Originally Posted by iSheldon View Post

THe $0.99 per song model driven by Steve Jobs drove the final nail in the coffin.

Trying to rewrite history I see. As pointed out by other posters it was piracy not iTunes. The move to digital music was going to happen with or without iTunes.
post #12 of 41
Quote:
Originally Posted by Tallest Skil View Post

Apple: "Fine."

And then they lower the price of all their eBooks to $0.99 and drive every other bookstore out of business.

Apple: "Is that what you wanted, DoJ?"

They don't have to go $0.99 per book. All they have to do is 50% less than the cheaper than the lowest offer.
post #13 of 41
Quote:
Originally Posted by studiomusic View Post

Ok, the way I understand it, Amazon was basically setting prices on their own and destroying the market for the ip owners by selling at a loss.
So, Apple comes in and says "Hey, we'll let you set your own prices for your own ip."
And Apple is the bad one here?

My thoughts exactly. How is Apple wronging anyone?!? By not letting Amazon screw the writers/publishers?
post #14 of 41
Flex them muscles DOJ. Hrumph. See my pecks. GRRRRRR. The big bad US DOJ. Look out Apple they went after Microsoft now they are coming after you. Wheres the beef?
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post #15 of 41
Quote:
Originally Posted by iSheldon View Post

As if Apple didn't already do that to every record store? - drive them out of business.

Who cares? Greedy publishers meet greedy music producers.
It's too bad the newspaper publishers won't be affected with their pricing scams. Can you hear me NYT?

TechStud, you are an unusually resistant superbug.

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post #16 of 41
Quote:
Originally Posted by diplication View Post

We're on the same page. From my perspective Amazon was the one using unfair business practices, Amazon was setting the price to drive the competition out of business. Apple appears to be more free market oriented - let the publishers set the price. I'm not saying I'm right, that's just how it appears to me. If someone could explain the opposing point of view, enlighten me, I sincerely want to understand.

Apple appears to help the publishers collude and fix prices, that's the concern. In a sense, it's not really Apple's business, the publishers are the ones who want to do price fixing, but the fact that Apple setup a model that allows/facilitates the price fixing is probably what's getting Apple in trouble right now. It has nothing to do with whether Apple is fixing prices or not (Apple isn't).
post #17 of 41
Quote:
Originally Posted by drobforever View Post

Apple appears to help the publishers collude and fix prices, that's the concern. In a sense, it's not really Apple's business, the publishers are the ones who want to do price fixing, but the fact that Apple setup a model that allows/facilitates the price fixing is probably what's getting Apple in trouble right now. It has nothing to do with whether Apple is fixing prices or not (Apple isn't).

Really? If that's the case what stopped Amazon from doing this ahead of time? Oh that's right! They're benevolent.

In reality, Amazon was undercutting Publishers to strike long-term contracts favorable to their aims and were pissed when Apple came in to aide the publishers not by allowing them to hike their product at high premiums [$15 Textbooks are a fraction of the cost of print textbook equivalents] but instead provided a platform that is consistent, the most popular amongst professional developers making money and the one that providing the richest publishing environment to reduce their costs of in-house development.

Source: http://investor.mcgraw-hill.com/phoe...554&highlight=

Quote:
For the first time ever McGraw-Hill is producing high school curricula specifically for the iPad. The initial group of McGraw-Hill Education titles made available as iBooks Textbooks includes Common Core State Standard editions of Algebra 1 and Geometry, as well as, Biology, Chemistry Matter and Change, and Physics Principles and Problems. McGraw-Hill's iBooks include key interactive features, such as:
  • Interactive images and 3D animations Students tap images to zoom, reveal information or rotate objects so they get multiple perspectives.
  • Keynote presentations These supplemental slideshows include highly interactive animations.
  • Multimedia Full-screen video and animations.
  • Interactive quiz questions Students test their knowledge by taking short, easy-to-use quizzes.
  • Additional features Including interactive glossary terms, highlighting/bookmarking capabilities, flashcard builder and cross-referencing of index terms.

"The McGraw-Hill curricula, together with iBooks Textbooks, combines McGraw-Hill's years of experience in developing comprehensive educational programs and Apple's iPad to improve learning outcomes," said Bob Bahash, president of McGraw-Hill Education. "At the same time, this combination provides a large and growing opportunity for McGraw-Hill Education since many school districts have turned to the iPad as a tool to drive student engagement and achievement."

The statement in bold is the reason Amazon is pressing the DoJ to investigate and proclaiming collusion and other hanky wrong doings.

They are getting cut out of the digital frontier meaning the Publishers have no designs of providing a Cloud Service subscription plan for the Kindle/Android Market.

The superior platform end-to-end is actually owning the market and that pisses off the competition.
post #18 of 41
Quote:
Originally Posted by studiomusic View Post

Ok, the way I understand it, Amazon was basically setting prices on their own and destroying the market for the ip owners by selling at a loss.
So, Apple comes in and says "Hey, we'll let you set your own prices for your own ip."
And Apple is the bad one here?

No, the issue is as follows. Amazon was paying what the publishers wanted for the e-books and then undercutting the price when they sold it. The publisher's lost no money from this, Amazon did. However, the publisher's did not want e-books to subplant the physical books. Kind of what Apple/iTunes did to the CD. Therefore they waited until Apple came along, colluded together to set the most favored nation clause, and then used this leverage to FORCE Amazon to change their model.

Regardless if you feel that Amazon was doing things wrong, according to the law they weren't. One company can take losses on any product they want and it's perfectly legal. However when a company colludes with other companies/competitors to artificially set prices that would either force competition out or force competition to adopt the same prices, then that is illegal.
post #19 of 41
Quote:
Originally Posted by quinney View Post

Rampant piracy was driving the record stores out of business before the iTunes store even existed.

Rubbish. The iTunes led change from album to single drove a major change in purchasing choices for music. Combine this with the large retailers moving music into a loss-leading proposition meant other smaller players failed.

Blaming piracy is the route of an industry failing to market evolution.
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post #20 of 41
Quote:
Originally Posted by djkikrome View Post

My thoughts exactly. How is Apple wronging anyone?!? By not letting Amazon screw the writers/publishers?

What makes you so certain that Amazon isn't saving the publishing industry? Apple comes in with .99 songs via iTunes, killing off whatever remained of the independent record stores, yet credited with saving industry as a whole. Isn't that the same thing Amazon was doing yet this time it's Apple and the publishers resisting change? I think a whole lot of books have been sold thru Amazon that otherwise would never have been distributed via the traditional methods. Doesn't sound so different from the music wars to me.
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post #21 of 41
Collusion isn't part of a free market. I think Apple illegally increased prices of books.

Old schoolers want electronic versions of books and music to be the same price as physical copies are/were. The truth is they're just being greedy.
post #22 of 41
Quote:
Originally Posted by gerbinto View Post

No, the issue is as follows. Amazon was paying what the publishers wanted for the e-books and then undercutting the price when they sold it. The publisher's lost no money from this, Amazon did. However, the publisher's did not want e-books to subplant the physical books. Kind of what Apple/iTunes did to the CD. Therefore they waited until Apple came along, colluded together to set the most favored nation clause, and then used this leverage to FORCE Amazon to change their model.

Regardless if you feel that Amazon was doing things wrong, according to the law they weren't. One company can take losses on any product they want and it's perfectly legal. However when a company colludes with other companies/competitors to artificially set prices that would either force competition out or force competition to adopt the same prices, then that is illegal.

You skipped over the part where Amazon was using predatory pricing, dumping e-books on the market, to drive other booksellers out of business, using their dominance in traditional book and and general e-tailing to offset the losses. How long do you think Amazon's cheaper prices were going to last once they were the only game in town, and how long until Amazon decided how much they were paying publishers for books once there were no other outlets? Amazon was using it's profits in other areas of business to take complete control of the publishing industry, and apparently now to lobby the DoJ to serve their ends.
post #23 of 41
Quote:
Originally Posted by anonymouse View Post

Amazon was using it's profits in other areas of business to take complete control of the publishing industry, and apparently now to lobby the DoJ to serve their ends.

I just thought that part was worth repeating.
post #24 of 41
"Collusion"? DOJ, are you kidding me? This is how you waste taxpayer's money?

Of all the crap going on with our "free market" this is what they want to go after. How did Amazon get out of this one? Publishers are more worry about Amazon's pricing practices than Apple right now.

I'm still waiting for smack down on Wall Street that is long over due. How about it DOJ?
post #25 of 41
Quote:
Originally Posted by Tallest Skil View Post

Apple: "Fine."

And then they lower the price of all their eBooks to $0.99 and drive every other bookstore out of business.

Apple: "Is that what you wanted, DoJ?"

Which would promptly lead to DOJ lawsuit #2 for a textbook case of predatory pricing.
post #26 of 41
Quote:
Originally Posted by Asherian View Post

Which would promptly lead to DOJ lawsuit #2 for a textbook case of predatory pricing.

Then they'd have to go after $0.99 music.

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post #27 of 41
Quote:
Originally Posted by hill60 View Post

I didn't think America were such a bunch of socialists, government dictated pricing regimes are no substitute for a free market.

Enjoy comrades.

The point is collusion to pricefix prohibits a free market.

A free market doesn't mean companies can do whatever they want. It means there's a level of fair competition in the marketplace. When companies collude to fix prices and raise them, whether it be oil companies or technology companies, it's against the law and it has been against the law for decades. This has absolutely nothing to do with capitalism vs communism.
post #28 of 41
Quote:
Originally Posted by diplication View Post

We're on the same page. From my perspective Amazon was the one using unfair business practices, Amazon was setting the price to drive the competition out of business. Apple appears to be more free market oriented - let the publishers set the price. I'm not saying I'm right, that's just how it appears to me. If someone could explain the opposing point of view, enlighten me, I sincerely want to understand.

A small number of publishers form an oligopoly on the marketplace. The issue is until Apple came along and miraculously "convinced" all of the publishers to tear up existing agreements with Amazon and switch everyone over to this agency model, the wholesale model was in place.

It's the exact same model used by the bookstores since they first came into existence. Publishers agree to sell books wholesale to resellers like Barnes & Noble, Amazon, etc and get that fixed price for book. Publishers set a suggested retail price (MSRP) but the reseller can price it however they choose. They can sell it far above cost, or they can sell it at cost or below cost.

If you consistently sell things way below cost intentionally to drive others out of business (like many accuse Amazon of), then it's called predatory pricing. This is against the law. If this is the issue, the DoJ would've been investigating Amazon's ebook pricing.

I am a Kindle (and iPad) owner and I've seen this first hand. When I first got my Kindle, I could buy new books for $9.99 -- a reasonable price. Ever since Apple introduced this agency model with publishers, all these new books start out at $18.99 or so. I can actually go to my local brick & mortar store and buy a brand new physical hardcover for cheaper than the fixed price on the iBookStore or Kindle Store.

And that's just wrong. Many people could see the pending DoJ suit coming as soon as this agency model came into existence and prices doubled virtually overnight across all sites. It's just not legal for someone to make agreements saying other sites or vendors can NEVER sell it for cheaper than they do.

There's simple no defense for this. Apple should just mea culpa and go wholesale.
post #29 of 41
Quote:
Originally Posted by Tallest Skil View Post

Then they'd have to go after $0.99 music.

No, that's an absurd comparison. If Apple bought albums at $10 and sold them for $0.99, it'd be predatory pricing. It is not predatory pricing to invent new delivery mechanisms for content and price them differently.
post #30 of 41
Quote:
Originally Posted by gerbinto View Post

No, the issue is as follows. Amazon was paying what the publishers wanted for the e-books and then undercutting the price when they sold it. The publisher's lost no money from this, Amazon did. However, the publisher's did not want e-books to subplant the physical books. Kind of what Apple/iTunes did to the CD. Therefore they waited until Apple came along, colluded together to set the most favored nation clause, and then used this leverage to FORCE Amazon to change their model.

Regardless if you feel that Amazon was doing things wrong, according to the law they weren't. One company can take losses on any product they want and it's perfectly legal. However when a company colludes with other companies/competitors to artificially set prices that would either force competition out or force competition to adopt the same prices, then that is illegal.

This is exactly right. Many of you would be well served to spend 10 minutes reading wikipedia on predatory pricing, most favoured nation clause, etc.

If the DoJ files suit over this, it'll be an open and shut case.
post #31 of 41
Quote:
Originally Posted by brutus009 View Post

I just thought that part was worth repeating.

If Amazon was guilty of predatory pricing, a DoJ lawsuit would've been eminent.

It doesn't matter, though. That is completely not relevant to this thread. Amazon being guilty or not of predatory pricing does not give Apple the right to pricefix. And don't even try to argue this point, please -- the price fixing is spelled out clear as day in the contracts Apple has signed. That's literally the whole point of their agreements with publishers, to ensure a minimum price.

What is that if not price fixing?
post #32 of 41
Quote:
Originally Posted by Asherian View Post

The point is collusion to pricefix prohibits a free market.

A free market doesn't mean companies can do whatever they want. It means there's a level of fair competition in the marketplace. When companies collude to fix prices and raise them, whether it be oil companies or technology companies, it's against the law and it has been against the law for decades. This has absolutely nothing to do with capitalism vs communism.

Still waiting for you to provide evidence that Apple participated in collusion to fix prices.

"We'll let you set whatever price you want and we keep 30%" is the exact opposite of price fixing.

Quote:
Originally Posted by Asherian View Post

This is exactly right. Many of you would be well served to spend 10 minutes reading wikipedia on predatory pricing, most favoured nation clause, etc.

If the DoJ files suit over this, it'll be an open and shut case.

Really? Pray tell exactly which clause of which law Apple has broken - and what evidence you have for that.

Quote:
Originally Posted by Asherian View Post

If Amazon was guilty of predatory pricing, a DoJ lawsuit would've been eminent.

I have a hard time taking legal advice from someone who doesn't understand the difference between 'eminent' and 'imminent'. That aside, the DOJ mostly goes after cases where they have received a complaint from someone. The fact that they didn't pursue Amazon may simply be a matter of no one complaining about Amazon's model but someone (presumably Amazon) complaining about Apple's model.

Quote:
Originally Posted by Asherian View Post

It doesn't matter, though. That is completely not relevant to this thread. Amazon being guilty or not of predatory pricing does not give Apple the right to pricefix. And don't even try to argue this point, please -- the price fixing is spelled out clear as day in the contracts Apple has signed. That's literally the whole point of their agreements with publishers, to ensure a minimum price.

What is that if not price fixing?

How does "you can set whatever price you want and we'll take 30%" constitute price fixing? Quote the exact clause of any law which would cover that.

Even the most favored nation clause is not illegal. The courts have been quite willing to accept that clause in written agreements.
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post #33 of 41
Quote:
Originally Posted by drobforever View Post

Apple appears to help the publishers collude and fix prices, that's the concern. In a sense, it's not really Apple's business, the publishers are the ones who want to do price fixing, but the fact that Apple setup a model that allows/facilitates the price fixing is probably what's getting Apple in trouble right now. It has nothing to do with whether Apple is fixing prices or not (Apple isn't).



Apple said that no publisher could sell books on another website at a price lower than the book is sold on apple's website.

So Apple is innocent. It is the publishers who are doing wrong.
post #34 of 41
Quote:
Originally Posted by Asherian View Post

The point is collusion to pricefix prohibits a free market.

A free market doesn't mean companies can do whatever they want. It means there's a level of fair competition in the marketplace. When companies collude to fix prices and raise them, whether it be oil companies or technology companies, it's against the law and it has been against the law for decades. This has absolutely nothing to do with capitalism vs communism.

"You will obey the proletariat and not be allowed to set your own prices" from the new laws governing publishers in the Soviet Socialist United States of America.


Quote:
Originally Posted by Asherian View Post

It's the exact same model used by the bookstores since they first came into existence. Publishers agree to sell books wholesale to resellers like Barnes & Noble, Amazon, etc and get that fixed price for book. Publishers set a suggested retail price (MSRP) but the reseller can price it however they choose. They can sell it far above cost, or they can sell it at cost or below cost.

Rubbish, books have been sold to bookstores, on consignment using an agency model.

Books that didn't sell were returned to the publishers.

They were then either destroyed or ended being onsold to cheap bookstores, often with parts of the covers removed.
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post #35 of 41
Quote:
Originally Posted by jragosta View Post

Still waiting for you to provide evidence that Apple participated in collusion to fix prices.

Really? Pray tell exactly which clause of which law Apple has broken - and what evidence you have for that.

You asked the same question a dozen times so far and you know the answer to that. No one here is privy to the details other than the players and the DoJ. If Apple isn't hit with a anti-trust suit by them then your repeated guesses that there's nothing there, it's just a bluff and nothing was done wrong may be correct. If the DoJ does file suit then at least some of the evidence behind it will probably be made public knowledge, and your guess that there is no evidence will be wrong.

Perhaps within just another few days we'll have the answer to your question.

EDIT: And there you go. Your guess is apparently wrong and the DoJ does have evidence of wrongdoing for the basis of an anti-trust suit. That doesn't mean they can prove it of course.
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post #36 of 41
Quote:
Originally Posted by jragosta View Post

How does "you can set whatever price you want and we'll take 30%" constitute price fixing?

As usual, you are asking the wrong question.

The inquiry does not focus on the situation you identify. Instead, the most favored nation clause is the subject matter.
post #37 of 41
Quote:
Originally Posted by jragosta View Post

Still waiting for you to provide evidence that Apple participated in collusion to fix prices.

"We'll let you set whatever price you want and we keep 30%" is the exact opposite of price fixing.

Err. Except that's not the issue. They CAN'T set whatever price they want. Apple's agreement specifies NO ONE ELSE CAN EVER SELL THE BOOK FOR LESS THAN APPLE. That is by definition PRICE FIXING. And it certainly is not allowing them to "set whatever price they want".

Quote:
Really? Pray tell exactly which clause of which law Apple has broken - and what evidence you have for that.

Lucky for you, the DoJ has just formally charged Apple.

The evidence and clauses are there for you to read.

Quote:
I have a hard time taking legal advice from someone who doesn't understand the difference between 'eminent' and 'imminent'.

I'm not going to argue with children who bicker about spelling from posts made before the first cup of coffee rather than research issues.
post #38 of 41
Quote:
Originally Posted by gerbinto View Post

Regardless if you feel that Amazon was doing things wrong, according to the law they weren't. One company can take losses on any product they want and it's perfectly legal.

No, that's not correct. Done one way in a tight set of circumstances it is loss-leader and legal (see gaming console market), in most circumstances it is called dumping, a way to artificially generate market share by using profits from one business/product area to subsidize anti-trust behavior in another business/product area. That specifically is an anti-trust violation. Apparently nobody complained to DoJ about Amazon doing that since Amazon was the industry cash cow.
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post #39 of 41
Quote:
Originally Posted by Asherian View Post

Err. Except that's not the issue. They CAN'T set whatever price they want. Apple's agreement specifies NO ONE ELSE CAN EVER SELL THE BOOK FOR LESS THAN APPLE. That is by definition PRICE FIXING. And it certainly is not allowing them to "set whatever price they want".


Lucky for you, the DoJ has just formally charged Apple.

The evidence and clauses are there for you to read.


I'm not going to argue with children who bicker about spelling from posts made before the first cup of coffee rather than research issues.

Well other than the part where you are wrong that sounds impressive.

At the wholesale level that is simply a Most Favored Customer clause and it still does not restrict what Amazon may decide to charge for the books. It only means publishers will not sell to Amazon for less than they sell to Apple. Then grey area is that it looks like some publishers tried to leverage Amazon to stop dumping the e-books so Amazon could finish off Barnes & Noble (too late for Borders & B Dalton). The most grey part is probably that publishers threatened to pull books if Amazon didn't adjust pricing.
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post #40 of 41
Quote:
Originally Posted by gerbinto View Post

No, the issue is as follows. Amazon was paying what the publishers wanted for the e-books and then undercutting the price when they sold it. The publisher's lost no money from this, Amazon did. However, the publisher's did not want e-books to subplant the physical books. Kind of what Apple/iTunes did to the CD. Therefore they waited until Apple came along, colluded together to set the most favored nation clause, and then used this leverage to FORCE Amazon to change their model.

Regardless if you feel that Amazon was doing things wrong, according to the law they weren't. One company can take losses on any product they want and it's perfectly legal. However when a company colludes with other companies/competitors to artificially set prices that would either force competition out or force competition to adopt the same prices, then that is illegal.

I still don't see how Apple letting publishers set their own price makes Apple guilty of Anti-Trust laws.
Now, the publishers could have fixed prices together... Apple doesn't set the price.
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