Apple denies DoJ allegations of collusion, says it broke up Amazon monopoly - Page 3

Well according to some recent report, apps on App Store's are cheaper than those of Android, so this doesn't even make much sense to begin with.

If Apple colludes with Android (or any of its competitors) and artificially raise the price for apps, then, now, we have a case.

Um, Amazon = Walmart ..... Whole towns have been destroyed by one retailer -- goals of Amazon are the same and the results will be the same. Bye bye brick and mortar booksellers. I truly believe Apple here.

Man this guy Eric Holder. Is this what I expect the nations top Law enforcement officer to be "worried" about.? This is another Obama admin blunder.

While it is technically true that selling at a loss is not illegal, when you combine selling at a loss with having a very dominant share of the market (as Amazon did), it is likely to fall under predatory pricing rules:
http://en.wikipedia.org/wiki/Predatory_pricing

And, TBell, I believe the publishers stated that Amazon was selling some items at prices below what they paid for it, so it's not speculation.

I wouldn't really label your arguments fallacies, more mistaken notions...


First, you seem to be comparing two different things, never a good thing for a sound argument. The App Store is not the iBookstore, so your comparisons are invalid. Furthermore, Amazon is well known for imposing rapacious terms on everyone, and there's no reason to think customers will be any different once they have no where else to go. When Amazon has you by the balls, it's their practice to squeeze hard.


This is a rewrite of history. The Kindle is a cheap piece of plastic crap. Prices were ridiculously high until the iPad was released, at which point they suddenly dropped dramatically. The rest of your argument seems to be that since other companies would like to control entire industries, it's ok that Amazon does, which is farcical, to say the least.


Music and books are not the same industries, so comparisons aren't valid. I know, you want everything as cheap as possible, but the only way you get that is for someone to get the short end of the stick, which, in this case, will be publishers and authors, and eventually customers.

Apple is kind of acting like a monopoly:

1. Pricing is kind of limited
2. Books are suppose to be exclusive to Apple.

How to fix it:
1. Open up more pricing options
2. Allow books to be sold anywhere

Where did you get this from?

Apple doesn't set it.


No.

In the short term, yes, consumers would pay more. But in the long term, it would have made Amazon a monopoly and then prices would have steadily climbed anyway. Or, Amazon, being a monopoly would have put pressure on the publishers to lower the wholesale price just as WalMart has forced manufacturers to lower their wholesale prices. Do you know what that led to? Declining quality and the move of manufacturing to China, India, etc.

Low online prices do give us short-term benefits, but in the long term, it also destroys physical retail. Do you really want to walk down Main Street and see nothing but drug stores, dirty delis, liquor stores, check cashing places, fast food restaurants and gas stations? Because that's where the massive move to online purchasing is taking us.

Furthermore, Amazon still has to make a profit. So they lower prices on some items to gain market share, but raise prices on others. WalMart is also a good example of this. They'll sell a DVD player for $25 to get you in the store, but check out lots of other products and they sell at list price. So in the long run, even with Amazon, if you buy a variety of products, you'll pay more.

Apple asked for and got a "most favored nation" clause. All it said was that when the Publisher establishes the price, it can't be one list price in the Apple store and a different list price when they sell to Amazon or any other store. It didn't say that (as far as I know) that Amazon still couldn't sell for a lower price. (If it did, that will definitely be thrown out).

Have you ever done business with a State or the U.S. Government? Guess what they put in almost every contract? A "most favored nation" clause. You can't sell to anyone else for less than you sell to them for the same product/service.

And there's one other issue: when you consistently sell below wholesale price, that can be considered to be "predatory pricing" and it's illegal. And that's what Amazon does in order to gain market share. Apple's not perfect and they probably did do a few things wrong in this case, but the Government went after the wrong party, as far as I'm concerned.

There's no question that Amazon was leveraging its dominant/monopoly position of online sales of physical books to dictate terms to the publishers for online sales of ebooks. That's the real antitrust issue here.

Your post makes a few major flaws... Let me quote from the DOJ case against the publishers, and apple. The following is the smoking gun against apple. If this can be proven by the DOJ, then it is clear that apple is guilty of collusion:



This states that apple was informing each of the publishers what the other was doing, so that none of the publishers had to "act first". The publishers knew they couldn't raise prices on their own because it would destroy their sales,while competitors books would still sell well. They all had to move in unison, and apple allegedly helped coordinate them.

With a couple of the publishers settling already, all it takes is for them to surface a few emails showing that apple helped facilitate the cross-industry change in pricing. Even if this isn't proven, it's clear that apple knew the publishers were colluding, and setup a system to enable all of the publishers to change their pricing simultaneously. Otherwise, no logical publisher would EVER sign a contract like they did with apple.. It's not worth giving so much control to a minority player in the market.


At the end of the day, it really doesn't matter is all the publisher settle, or if apple does, because a couple of the publishers have settled. As long as they're forced to return to their previous publishing model (turning back the clock on their illegal behavior), the other publishers will be forced to follow suit, or canibalize their sales.

I know this is an apple forum, but it's amazing how many people here think apple can do no harm. This makes sense if you have a large portion of apple stock, but for common people.. why? You're defending a company that actively made things more expensive for you. I personally love my ipad, but refuse to buy from apple's ebook store. There are a lot of apple's stores I won't use because I don't agree with their policies, as they seem to be all about extracting the last cent out of my bank account, and transfer as much of the money as possible to apple. I'll still buy apple's hardware because it's the best out there, but I'm looking forward to cheaper ebooks becoming available on amazon (another company who I give lots of business to, and support... just like google).

Phil

so you're basically claiming that apple's contract will be marked Null by your own admission.

Apple's contract said that if any other store attempts to sell an ebook for less than apple does, apple can charge the same price the other store is charging, and then only give the publishers their 70% cut of the new price. This effectively says that the publishers have to set the selling price that other book sellers can charge.

As for your arguments about how lowering prices will kill the industry... It might just... spur innovation in the industry. Considering the VAST majority of the book sale's revenues go to the publisher and not the authors (and the publisher does little more than provide an editor for many books... if that), there is a LOT of room amongst the publishing houses to cut out the fat.

Authors are working for peanuts already, why do you think they'll stop working when their publishers earn less money. Sure, some of the publishers will go out of business if they don't change their ways... Is this a horrible thing? Capitalism relies on businesses failing to get the most efficient usage of resources. Lots of typewriter manufacturers either changed their products, or went out of business when the PC industry took off, why should this be any different? I have no sympathy for these failing companies, it's still the most efficient way to allocate resources. I do feel bad for many of their workers, but most of them manage to get back on their feet before too long, and everyone benefits from a more efficient allocation of workers.

Phil

Prosecutors make a lot of grandiose claims in their filings, and it always sounds like they have a smoking gun, but it often turns out to be nothing more than hot air.

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The DoJ is colluding with Amazon to resurrect its monopolistic enterprise. The AG is putting the cart before the horse. He is siding with a monopolist which has more than 90% of the market, achieved through price gouging and product dumping. Just because Amazon is charging below cost price does not mean it is good for the consumers in the long run. Books are a cultural thing and once you destroy this intellectual aspect of the industry, the long-term result would be disastrous, leading to mediocre standards. Nobody is going to do serious research to write a good book if he is going to be paid a pittance. Just as the US has lost many industries to others through short-sightedness of politicians and bureaucrats, the book industry will also migrate to such places as India and China. Workers will be thrown out of job and thousands of stores will be shuttered for good. Think tanks will say that the workers can go and do other jobs because the US is resilient. But the politicians have screwed up so many areas of human endeavors in the US that the rate of resiliency itself has become a victim of neglect. So why has the US, which was the premier country in so many areas of disciplines two decades ago, declined so precipitously? This has to do with the poor quality of narcissistic politicians and bureaucrats running the country now.

Are we going to see the same scenario of the devastating result of the collusion of politicians with the banking industry being repeated again? At that time the politicians and their think-tanks claim that cheap loans and credit will help consumers realize the American dream. In the short-term it seemed that this tactic was working, and consumers were led down the garden path, but soon the banks were gouging customers with high interest rate for their cheap loans. In the long run the whole economy tanked, thanks to the unconscionable conduct of the greedy bankers and stupidity of ivory-tower intellectuals.

Amazon is becoming such a creature in the making. Nobody with a thinking brain would believe that Amazon could sustain itself on perpetual losses. A time would come when it will have to recover for all such losses. And Amazon being a monopolist, you know the answer to the final outcome.

You need not continue on after saying this, because if this were true, there'd hardly be any new books written today. Aside from a handful of best-seller authors, most barely receive a pittance. The publisher rake in money, and the authors might get a few thousand dollars. For many authors, writing is NOT their day job, as it cannot pay the bills.

What's the biggest racket of them all though is the textbook market. Professors and graduate students basically write these books for free... Well, not really for free, but the university (or government grants etc) pays them, and they spend some of their time working on these books. Then the publisher releases the book, and, if the authors lucky they MAY get royalties from it (I have a friend who wrote an entire chapter for a text book,and his "reward" was that he could buy a copy of the book for a discounted price... He didn't even get a copy of the book he helped to write!). One of my professors wrote a book that is used in enough courses across the country, and his income from the book might be a few thousand a year... I'm pretty sure it's less that that. Considering he spent months of his life writing this, he obviously didn't write it for the money. Of course, these publishers that you're protecting are charging hundreds of dollars for these books, and seeing to it that the authors change the questions in them every couple years so that they can sell a new edition and kill the used textbook markets.

So yeah, if the publishers profits are harmed by the free market, so be it, they've been milking the consumers for years, and it's about time a disruptive technology came along that challenged them. Stop pretending this is remotely about the author, I bet they were paid the same pittance regardless of whether the ebook was sold using the agency model or the wholesale model. The only thing apple has done for this industry is helped to maintain the publishers profits,while guaranteeing that they make the maximum possible profit off every book sold. It's reaching the point where apple is being as greedy as the publishers, making sure they get their share of the loot from the authors work (and 30% is a fairly nice piece of the pie for transferring a couple MB across the internet and processing a credit card order).

Phil

That's not entirely enough. If those lower Amazon e-book prices were shown to be below actual cost prices the fact the prices went up would not be due to collusion, but simply attributable to Amazon no longer willing to take the loss. Just because prices rose doesn't mean there was any illegal activity by anyone at all.

That argument seems to be a huge hole in the DoJs case if it ever makes it as far as a trial, since the Amazon actual cost has been reported to be in the $12.00 range. That would make $12.99 to $14.99 prices reasonable fair market value both on Amazon and iBookstore. That would mean bye-bye to beyond a reasonable doubt when the pricing changes are looked at. Remove that as a case motivator and there's nothing else left worth pursuing as the smoking gun got identified as a water pistol, not a smoking gun after all.

That's an interesting take with flaws of its own. How come the iTunes store music and video agency model has been tacitly allowed as legal when all the negotiations and assurances of equal treatment were made there too? That model has been very transparent for 10 years now, why should extending it to another market suddenly make an openly consistent agency model a collusory practice?

See, it's not as simple as you would like it to be. There are an tremendous number of unintended consequences awaiting the conclusion of this case because the exact thing that is being called the collusion in your analysis of the states writeup is the consistent application of the agency pricing model.

If the collusion stands does that make Apple's other agency model negotiations illegal by extension? That would not be far fetched.

If Apple's other iTMS negotiations are then called collusion by logical extension, who in government do we blame for being asleep at the switch and allowing this illegal collusory profiteering to last for over 10 years?

The iOS app store is probably safe as it is part of a singular vertical market where there is no notion of internal price competition to consider.

The other flaw in his argument is that books are not interchangeable commodities. Except for public domain "classics", each book is unique, so it's not like you can just buy another publishers version of most books. So the argument that other publishers might undercut your price is significantly muted.

Precisely. Apple only have to point to the benefits to both app developers and consumers of the agency model as implemented in the App Store to make the case against eBook sales look as ridiculous as it is. There is no need for wholesalers and retailers in an electronic marketplace, just someone to set up an electronic store in which transactions between developers/authors and their customers are facilitated. And it was Apple, and Steve Jobs, who was smart enough to do just that. And now Apple have developed iBooks Author which allows authors to get their eBooks out to their customers without the need for traditional book publishers. This is now a fantastic opportunity for both eBook authors and readers - the ones that really matter.

The DoJ should stop wasting its money on a case they must not win.

its nonsense that the case at hand is publishers + apple?

That is the case. Not amazon.

If the DoJ is working on hypothetical "what ifs: then they can join apple and amazon together with the "what if we colluded together argument.

the case at hand is the disccusion

It's nonsense to assert that the DoJ ought not to consider the public interest in enforcing antitrust law since the whole point of antitrust law is to protect the public interest. Justice may be blind, but it's not supposed to be stupid.

Oh dear. This case is just that, this case. The wider issues should be considered. However, the legal actions of those within this case is what is currently pursued. The hypothetical endpoint of the wider industry is not.

Unless you believe that DoJ should ignore what they see as illegal actions, but to rather focus on forecast potential actions of a corporate.

The question is about illegal actions. Is it necessarily illegal for prices to rise if the computation of that rise is solely based upon a single retailer selling items at al loss?

That's one of my primary problems with the case, DoJ thinks that it is illegal mainly because of comparison to temporary pricing which on it's own is legally in a gray area. Take away Amazon's below cost sales and the agency model and wholesale model generate approximately the same prices. How long was Amazon willing to lose money on every e-book sale before prices reverted to non-loss levels? And we get to subsidize a lawsuit over that?

So, your position is that the DoJ should pursue antitrust cases in a vacuum, with blinders on? OK, well, that's a point of view, not a very well thought out one, not a very informed one, not a very sensible one, but a very simple view to be sure. Unfortunately, the simple view is almost always the wrong one, the world not being a simple place.

There's nothing hypothetical about the current state of the publishing industry on the retail or publisher's side and there's nothing hypothetical in stating that Amazon has played a major role in bringing about the current sad state of affairs. Amazon has disproportionate and unhealthy power in the industry. The agency model helps restore equilibrium. Propping up Amazon in their quest to dominate will simply push the industry over the edge.