or Connect
AppleInsider › Forums › General › General Discussion › Penguin to settle e-book price fixing allegations with DoJ
New Posts  All Forums:Forum Nav:

Penguin to settle e-book price fixing allegations with DoJ

post #1 of 20
Thread Starter 
Book publisher Penguin on Tuesday proposed a settlement with the U.S. Department of Justice regarding an ongoing antitrust investigation related to e-book price fixing, which leaves only Apple and Macmillan as remaining defendants.

Book publishers
Late Apple cofounder Steve Jobs introduces iBooks iPad app and partner publishers in 2010. | Source: Apple


The U.S. Justice Department confirmed in a statement that the Pearson Plc.-owned Penguin Group has proposed and filed a settlement in New York District Court which, if approved, would bring an end to the publisher's role in the antitrust lawsuit filed by the department in April. Under the agreement's terms, Penguin would end its current dealings with any e-book seller, including Apple, and will be barred for two years from signing deals with resellers which limit promotions or discounts.

In the civil suit, the DoJ accused five publishers and Apple over alleged e-book price-setting in the iBooks digital bookstore. Three of the publishing houses, Hachette, HarperCollins and Simon & Schuster, settled almost immediately, leaving only Penguin, Macmillan and Apple as defendants. With Tuesday's proposed agreement, Apple and Macmillan will stand alone against the DoJ's allegations.

"Since the department's settlement with Hachette, HarperCollins and Simon & Schuster, consumers are already paying lower prices for the e-book versions of many of those publishers' new releases and bestsellers," said Chief of Staff and Counsel at the Department of Justice's Antitrust Division Jamillia Ferris. "If approved by the court, the proposed settlement with Penguin will be an important step toward undoing the harm caused by the publishers' anticompetitive conduct and restoring retail price competition so consumers can pay lower prices for Penguin's e-books."

At issue is the so-called agency model that Apple and its partner publishers used to set e-book prices in iBooks. Unlike Amazon's low-margin wholesale model, which lets retailers buy content in bulk and sell it at or below cost, the agency model allows publishers to set e-book pricing in a "most favored nations" agreement that forbids them from offering the same content to another reseller at a lower price. According to the DoJ, the model used by Apple and its partners falsely inflated the price of e-books.

The DoJ said it plans to move forward with litigation against Apple and Macmillan for "conspiring to raise e-book prices to consumers."

Tuesday's news comes just days after it was announced an identical European Union antitrust probe was officially terminated after Apple and four publishing houses agreed to loosen pricing restrictions on retailers for a period of two years.
post #2 of 20
I don't understand Amazon's business model of selling below cost.
post #3 of 20
Originally Posted by Stourque View Post
I don't understand Amazon's business model of selling below cost.

 

They make it up in volume.

 

So why was it, again, that Amazon is allowed to do whatever they want but when Apple comes to remove Amazon's monopoly they're accosted and sued?

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
Reply

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
Reply
post #4 of 20

Quote:

Originally Posted by Stourque View Post
I don't understand Amazon's business model of selling below cost.

 

Quote:
Originally Posted by Tallest Skil View Post

 

They make it up in volume.

 


You can make up for small margins with volume. You cannot make up for losses with volume (unless you're talking about volume in other merchandise). Amazon's business model is actually similar to that of Facebook or Google - provide service or goods at very low margin, at a loss or even for free in order to bait you into their ecosystem, then a two-way training relationship begins. They learn about your likes and dislikes based on your behavior (including the data and metadata you provide). At the same time, they also steer you around their ecosystem in order to (a) keep you there as long and as often as possible, and (b) to train you to generate and provide them more data and metadata about yourself. Of course, the final piece of the puzzle is to monetize that knowledge. Pundits criticize Google and Facebook as if they are the first offenders in this realm. But Amazon beat them to it. Long ago, they had a system in place that started with your registration. With every book or product you bought or even perused, they were accumulating data on you. Because we didn't upload photos or other conventionally personal information, we didn't realize the entrapment was taking place. Now, it's quite clear.

 

All to say, Amazon, Google and Facebook are three sides of the same coin. Not that I see anything wrong with it.

 

Quote:
Originally Posted by Tallest Skil View Post

 

So why was it, again, that Amazon is allowed to do whatever they want but when Apple comes to remove Amazon's monopoly they're accosted and sued?

 

IMO, this is why: Amazon used bully tactics to make their pricing scheme work. Apple "colluded" with the publishers. Collusion, in whatever guise, is frowned upon, even if it is about cooperating to defeat a bully.


Edited by ankleskater - 12/18/12 at 5:24pm
post #5 of 20
Dear DOJ, Amazon had a monopoly and used anti-competitive practices to drive business away from other ebook resellers and physical book resellers.
post #6 of 20
Originally Posted by jungmark View Post
Dear DOJ, Amazon had a monopoly and used anti-competitive practices to drive business away from other ebook resellers and physical book resellers.

 

"La la la, not listening, Apple makes news, la la la…"

 

Sort of shocking when even your government only goes after the companies that make news, eh? lol.gif

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
Reply

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
Reply
post #7 of 20

As a consumer, I don't see what's wrong with what Amazon is doing. Lowering the price of ebooks to below cost will only hurt consumers if Amazon can eliminate competition and then raise price later. But this will never happen in the modern world because companies like Apple or Google will keep staying in the market no matter what (because they want to be the 1-stop shop to everything). 

post #8 of 20

This is just my personal view. Amazon has two faces. On one side, it is the customer service oriented online wonderchild. On the other hand it is a predatory piranha that will kill many businesses by the time it is done. Amazon has pulled the wool over the DOJs eyes, so that they see only the good side. In the past Amazon have avoided being charged with 'predatory pricing' (which is intended solely to put competitors out of business) because they have 'made' a profit overall. Not last quarter. If Amazon loses money again and continue to sell books below costs, this should come up. But then again, the DOJ and Amazon are good in bed together, because attacking Apple and the publishers looks good to consumers. I am very glad I am not in a business that tries to compete with the Bezos Bunch.

But what will the price be when there are no more competitors?

And what where will books come from when there are no more publishers?

post #9 of 20
Quote:
Originally Posted by Tallest Skil View Post

 

They make it up in volume.

 

So why was it, again, that Amazon is allowed to do whatever they want but when Apple comes to remove Amazon's monopoly they're accosted and sued?


Not sure. The math does not add up even for high volume. Amazon has been able to do this as within their 'model', they have not lost money on the book section, even though they must lose money on e-books. Until last quarter. They are running at a loss despite billions of revenue. Alarms should be going off.

post #10 of 20
Originally Posted by TeeJay2012 View Post
Not sure. The math does not add up even for high volume.

 

That's the joke.


Alarms should be going off.

 

P/E of 3,000+. Eventually something will happen.

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
Reply

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
Reply
post #11 of 20
Quote:
Originally Posted by ankleskater View Post

Quote:

 


You can make up for small margins with volume. You cannot make up for losses with volume (unless you're talking about volume in other merchandise). Amazon's business model is actually similar to that of Facebook or Google - provide service or goods at very low margin, at a loss or even for free in order to bait you into their ecosystem, then a two-way training relationship begins. They learn about your likes and dislikes based on your behavior (including the data and metadata you provide). At the same time, they also steer you around their ecosystem in order to (a) keep you there as long and as often as possible, and (b) to train you to generate and provide them more data and metadata about yourself. Of course, the final piece of the puzzle is to monetize that knowledge. Pundits criticize Google and Facebook as if they are the first offenders in this realm. But Amazon beat them to it. Long ago, they had a system in place that started with your registration. With every book or product you bought or even perused, they were accumulating data on you. Because we didn't upload photos or other conventionally personal information, we didn't realize the entrapment was taking place. Now, it's quite clear.

 

All to say, Amazon, Google and Facebook are three sides of the same coin. Not that I see anything wrong with it.

 

 

IMO, this is why: Amazon used bully tactics to make their pricing scheme work. Apple "colluded" with the publishers. Collusion, in whatever guise, is frowned upon, even if it is about cooperating to defeat a bully.


And when this is seen by the consumer as price lowering by the DOJ and Amazon, almost everyone is happy. For now.

post #12 of 20
Quote:
Originally Posted by Tallest Skil View Post

 

That's the joke.

 

P/E of 3,000+. Eventually something will happen.


Got it now. Sorry.

The PE is a joke as well as Amazon share price rises each day, even as they lose money,  like fumes from a pile of ...

post #13 of 20
Quote:
Originally Posted by TeeJay2012 View Post

And what where will books come from when there are no more publishers?

 

How would that be the case? Amazon is still paying the publishers whatever they agreed to. Amazon is taking the 'loss'. Amazon isn't driving out the publishers. Amazon is influencing the consumer psychological price range for ebook marketplace, which they largely created, and naturally makes it harder for others to compete. Nothing Amazon does is illegal in that realm, it has nothing to do with 'who's in bed with the DOJ'. How do you explain Barnes and Noble's e-prices then?

 

You're post sounds very similar to small grocery and hardware store owners when they saw Walmart show up in town. They've been doing the same sort of practice for decades. 

 

 

 

Quote:
 They are running at a loss despite billions of revenue. Alarms should be going off.

Your oversimplifying Amazon's business model. I wouldn't want to run it at all, I like to sleep at night. However there's a lot more to it than what a top line quarter number shows. You should read the financials a little closer on all the Cap Ex money and reinvestment they spend. The loss is almost intentional (taxes). Last quarter was the living social writedown anyway. When the revenue starts declining QoQ in a meaningful way, then sound that alarm. Yes, the stock price is a joke. Wouldn't touch it.


Edited by thataveragejoe - 12/18/12 at 6:14pm
I'm not a pessimist. I'm an optimist, with experience.
Reply
I'm not a pessimist. I'm an optimist, with experience.
Reply
post #14 of 20
I see Amazon and Apple's model as actually selling you something. Amazon mines your information so they can sell you something you might want. Similar to iTunes, where they give you a list of stuff others with similar taste, bought.

Google and Facebook on the other hand are mining your information which they use to generate revenue from a 3rd party (advertisers). They don't actually sell your information, because that is their source of all future revenue. They find advertisers and use various algorithms to place the various ads.

The problem I see with Amazon is they have a pricing strategy which eliminates competition. And like Apple they value your information. Don't know about Amazon, but I assume they, like Apple, guard the data they collect on buying habits very closely. Apple knows more about people's music buying habits than anyone - including the music industry itself. And Amazon probably knows more about book buying than the publishers. In both cases their data is extremely valuable and use it for their own purposes. The main difference between the two companies is Apple sells hardware at a generous profit and offers the media at a break even basis, whereas Amazon sells hardware at a break even point (or close to it) so you will buy their media, which is their main business.

Google and Facebook want you to invest your time on their content so you can view ads which they profit from. If google can keep you from dealing with amazon or apple they profit from it. As far as facebook is concerned they are just whores with no morals when it comes to your data, and they will do anything to get it.
post #15 of 20
Quote:
Originally Posted by Tallest Skil View Post

They make it up in volume.

So why was it, again, that Amazon is allowed to do whatever they want but when Apple comes to remove Amazon's monopoly they're accosted and sued?

Make it up in volume? I don't know about your math but in mine no matter how much one sells below cost they'll never make any money.
"Few things are harder to put up with than the annoyance of a good example" Mark Twain
"Just because something is deemed the law doesn't make it just" - SolipsismX
Reply
"Few things are harder to put up with than the annoyance of a good example" Mark Twain
"Just because something is deemed the law doesn't make it just" - SolipsismX
Reply
post #16 of 20
Quote:
Originally Posted by TeeJay2012 View Post


Not sure. The math does not add up even for high volume. Amazon has been able to do this as within their 'model', they have not lost money on the book section, even though they must lose money on e-books. Until last quarter. They are running at a loss despite billions of revenue. Alarms should be going off.

They'll continue to sell and that's what Wall Street sees.
"Few things are harder to put up with than the annoyance of a good example" Mark Twain
"Just because something is deemed the law doesn't make it just" - SolipsismX
Reply
"Few things are harder to put up with than the annoyance of a good example" Mark Twain
"Just because something is deemed the law doesn't make it just" - SolipsismX
Reply
post #17 of 20
Publishers don't have to sell their books to Amazon. They can focus on Barnes & Noble and cut deals with other online retailers and eliminate their contracts with mobi formatted books via Amazon.

No one can stop them.

They'd be wise to strike a two phased book print/digital print strategy with B&N and only offer the books in ePub 3.x format.

Amazon can then be limited to a used book store.
post #18 of 20
This should be a piece of cake for Apple's lawyers, especially the backpatting statement regarding price falls CAUSED by the DoJ's actions.

It looked more like traditional supply and demand market forces in a free market to me.
Better than my Bose, better than my Skullcandy's, listening to Mozart through my LeBron James limited edition PowerBeats by Dre is almost as good as my Sennheisers.
Reply
Better than my Bose, better than my Skullcandy's, listening to Mozart through my LeBron James limited edition PowerBeats by Dre is almost as good as my Sennheisers.
Reply
post #19 of 20
Quote:
Originally Posted by thataveragejoe View Post

 

How would that be the case? Amazon is still paying the publishers whatever they agreed to. Amazon is taking the 'loss'. Amazon isn't driving out the publishers. .... Nothing Amazon does is illegal in that realm, it has nothing to do with 'who's in bed with the DOJ'. How do you explain Barnes and Noble's e-prices then?

 

You're post sounds very similar to small grocery and hardware store owners when they saw Walmart show up in town. They've been doing the same sort of practice for decades. 

Good questions and comments. Not familiar with BN so honestly do not know. I agree that Amazon is on 'this side of legal' as long as they show that their cut price model on the e-books allows a profit, as any company should expect. So gradually the competition disappears. Amazon can sustain losses for a long time - hell the shares will go up. Will the DOJ view this as predatory pricing and go after Amazon with the zeal they went after Apple for collusion? I bet not.

 

As far as Amazon 'coming to town', do you really think that a comparison to Walmart is fair? At least both the local merchant and Walmart had retail floor space to show real goods, battle prices and offer service, and both payed localized taxes. Not so for the Amazon that exists 'out there'.

post #20 of 20
Quote:
Originally Posted by Tallest Skil View Post

They make it up in volume.

Take it to PO, TS¡

http://attackmachine.com/blog/2012/08/10/obama-well-make-it-up-in-volume/
"Fibonacci: As easy as 1, 1, 2, 3..."
Reply
"Fibonacci: As easy as 1, 1, 2, 3..."
Reply
New Posts  All Forums:Forum Nav:
  Return Home
  Back to Forum: General Discussion
AppleInsider › Forums › General › General Discussion › Penguin to settle e-book price fixing allegations with DoJ