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Penguin Books CEO gives mixed testimony in Apple e-books suit

post #1 of 68
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On day two of the U.S. Department of Justice's antirust suit against Apple, Penguin Books CEO David Shanks took the stand to offer testimony regarding the Cupertino company's role in an alleged e-book price fixing scheme.

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According to in-court reports from Reuters, Shanks testified on Tuesday that Apple inserted a provision in its e-book contract with Penguin which forced the publisher to modify its existing agreements with other retailers, including market leader Amazon.

The stipulation Shanks referred to is Apple's most favored nations clause, which is part of the so-called "agency model" that holds a publisher can set content pricing as long as it doesn't sell said content to another retailer for less.

"The fact that the parity clause was in the contract more or less made it a given we'd have to be at agency," Shanks said in a previously recorded deposition that was played in court.

In his testimony, Shanks added that Apple's clause was "certainly a factor" in moving rivals over the agency model where publishers have control over pricing. Retailers like Amazon use the wholesale model where content owners sell bulk rights to retailers, which can resell the e-books at or below cost.

The most favored nations system is one of the DOJ's targets in its suit, as it claims consumers were hurt by fixed prices resulting from collusion between Apple and five major publishing houses. All the accused publishers, including HarperCollins, Simon & Schuster, Hachette Book Group and Macmillan, settled out of court.

Penguin was the last of the five publishers to settle with the Justice Department, doing so in December 2012. The firm also paid a $75 million settlement to 33 state attorneys general for a parallel suit in May.

While the first part of Shanks' testimony appeared to strengthen the government's case, upon cross-examination sentiment shifted toward Apple. The CEO admitted that there was concern over the low content pricing from Amazon, which at the time was one of Penguin's biggest customers and accounted for some 90 percent of its e-book sales. This suggests, as Apple had argued, the negotiations were tough, making collusion a less likely option.Penguin CEO David Shanks admitted there was concern over Amazon's wholesale pricing model.

Under Amazon's wholesale model, however, the Internet retail giant was selling new hardcovers at prices far from the average normally fetched for first run titles. Publishers routinely release hardcover versions ahead of cheaper paperbacks in a profit-making practice called "windowing."

"What transpired was by having e-books now at $9.99, it was cannibalizing hardcover editions, which sold on average at $26," he said.

Later, Shanks said Penguin "strongly resisted" the most favored nations model as it feared Apple would not only match Amazon's low prices, but also require its usual iTunes commission. In the end, however, Penguin inked a deal after seeing the other major publishers hop on board.

Once the most favored nations system was established, with bookseller Barnes & Nobel also adopting the model, Penguin tried to get Amazon to move to it as well. According to Shanks, the market leader didn't take the news well.

"They yelled and screamed and threatened," he said. "It was a very unpleasant meeting."

Shanks was the first executive from the five publishing houses to testify in court. Also scheduled to take the stand during the three-week trial is Apple's vice president of Internet Software and Services Eddy Cue.
post #2 of 68
And they're going after Apple instead of Amazon because...???
post #3 of 68

Sheesh.

 

Apple needs to treat their government department with the respect that they deserve.

 

Pay 'em, f*ck 'em, then kick 'em out of your bed, Apple.

 

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post #4 of 68
The DOJ views Amazon's model as benefitting the consumer, which it probably does in the short term. But in the medium term it destroys quality publishing, by devaluing quality content. Of course it has also led to a de facto monopoly by Amazon, but the DOJ would claim that's a separate issue, and maybe they'll pursue them next. If Amazon were broken up into separate entities, I wonder if selling books as loss leaders would still be a viable practice.

In Germany, the agency model was actually required by law, and has meant bookshops were able to survive much longer (not being undercut by Amazon), and publishers can afford to publish and develop a much broader range of content (which they do).
post #5 of 68
So, let me get this straight. Apple has a deal where publishers can set prices, and they have to offer the lowest price on iBookstore. And the DoJ claims this "hurt consumers" because it "fixed prices"? Flexibile pricing with a proviso that the consumer be given the lowest price offered anywhere is neither fixed nor hurting consumers.

This persecution is so illogical it proves that it is politically motivated.

Which is why we need to repeal the entirety of anti-trust regulations--which have always been used anti-competitively to favor one business over another-- in this case, near monopolist Amazon is being defended from having to compete with Apple when Apple dared to offer publishers better terms.

Really, people should belong in jail for this-- and I mean, people in the government. It's criminal.
post #6 of 68
Quote:
Originally Posted by MattBookAir View Post

The DOJ views Amazon's model as benefitting the consumer, which it probably does in the short term. But in the medium term it destroys quality publishing, by devaluing quality content

FWIW, in the 1990s when Japanese companies were selling RAM below "market cost", which greatly benefited consumers of RAM and american businesses selling computers with RAM, the DoJ and others claimed that this was "hurting consumers" and was "dumping."

 

It's so political... they just claim whatever they want. 

 

But no doubt, someone subsidizing something benefits the buyers.  We really need to shut down the DoJ.  All the money they waste on market manipulation like this hurts consumers, and that's on top of the money they blow in taxes.

post #7 of 68
Keep in mind that Steve was trying to get the price of textbooks down. Way down. From 100 dollars to as high as 200 dollars. That's what the 15 dollar price point meant for our society. Trash pop novels would go up by 1 or 2 dollars, but textbooks would come down by 85 to 185 dollars.

There was no collusion on the part of Apple. Not one shred of evidence to support that. The email to Murdock and the 15 dollar price point was really about textbooks. Understand that and you'll understand what Steve was really trying to do.

Ask the DOJ this. Is America better off with 15 dollar science and math textbooks or is it more important that we all save 2 dollars on 50 shades of pink?
post #8 of 68
They're trying to spin it backwards.

Apple didn't insist they raise their prices, they insisted that their users don't get shafted by higher prices, so they made sure that the publishers sold their content for the same prices that was sold elsewhere.

Apple was in no position to collude, they had no leverage... they had ZERO percent of the ebook market. It sounds a lot to me like the publishers got together and Apple was caught in the middle. I'm guessing that's why they all settled out of court.
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post #9 of 68
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Originally Posted by scotty321 View Post

And they're going after Apple instead of Amazon because...???

 

Apple aren't playing by the "rules", the pigs need more in the trough, hence the Capital Hill shakedown.

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post #10 of 68
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Originally Posted by applesupertramp View Post

Keep in mind that Steve was trying to get the price of textbooks down. Way down. From 100 dollars to as high as 200 dollars. That's what the 15 dollar price point meant for our society. Trash pop novels would go up by 1 or 2 dollars, but textbooks would come down by 85 to 185 dollars.

There was no collusion on the part of Apple. Not one shred of evidence to support that. The email to Murdock and the 15 dollar price point was really about textbooks. Understand that and you'll understand what Steve was really trying to do.

Ask the DOJ this. Is America better off with 15 dollar science and math textbooks or is it more important that we all save 2 dollars on 50 shades of pink?

 

50 shades came from a different publisher, it was $9.99 in Apple's iBook store.

 

Such is the power of a free and open market.


Edited by hill60 - 6/5/13 at 2:59am
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post #11 of 68
So this guy is a CEO, and says in one paragraph that Apple allowed the publishers to set the prices, then that he "Later, "strongly resisted" the most favored nations model as it feared Apple would not only match Amazon's low prices, but also require its usual iTunes commission. In the end, however, Penguin inked a deal after seeing the other major publishers hop on board."

Which is it? I have a feeling Apple is fine with this circus because they know they did nothing wrong.
post #12 of 68
Imo the problem is not the agency model, its the "books cant by cheaper elsewhere" rule made by Apple. The end results is the same prices everywhere. I am affraid Apple will lose this. It should be, you cant sell for a lower price BEFORE the reseller cut elsewhere. That would allow different priçes depending on the reseller cut percentage.
Edited by herbapou - 6/5/13 at 4:19am
post #13 of 68
Quote:
Originally Posted by hill60 View Post

Apple aren't playing by the "rules", the pigs need more in the trough, hence the Capital Hill shakedown.

Perhaps they are, perhaps they aren't.

But even if Apple isn't doesn't mean that Amazon was or is. They have the same MFN clause that Apple demanded which is why they could get away with offering books in the Starbucks promo for free despite having no such deal with the publisher for that sale. The MFN gave them the power.

But no one is going after Amazon.

As for Apple. What exactly does the contract say. The implication is that the clause says that all retailers must be forced to go to agency but how they read it and what it says are two different things. So lets see the literal wording. Not just hear some DOJ lawyers spin on what the clause means

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post #14 of 68

I get the feeling the DOJ is more interested in a show piece win than finding the truth. Start with a conclusion and work backwards. The publishers who did wrong settled, and I bet part of that settlement was a promise to help drag Apple into their mess.

post #15 of 68
Quote:
Originally Posted by starbird73 View Post

So this guy is a CEO, and says in one paragraph that Apple allowed the publishers to set the prices, then that he "Later, "strongly resisted" the most favored nations model as it feared Apple would not only match Amazon's low prices, but also require its usual iTunes commission. In the end, however, Penguin inked a deal after seeing the other major publishers hop on board."

Which is it? I have a feeling Apple is fine with this circus because they know they did nothing wrong.

I would say a key bit is the 'resisted'. Allegedly Apple was in cahoots with the publishers so why the resistance. Doesn't fair well for convincing someone that there was a conspiracy going on.

As for his fear, yep they would take their 30% even if they invoked the MFN. That was how it was all written. And I bet if we could see the actual contract there is nothing about how everyone else must be forced into agency model terms. So that move was the publishers pushing that themselves to avoid this feared situation. And no one likely has proof otherwise

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post #16 of 68
Quote:
Originally Posted by herbapou View Post

Imo the problem is not the agency model, its the "books cant by cheaper elsewhere" rule made by Apple. The end results is the same prices everywhere. I am affraid Apple will lose this. It should be, you cant sell for a lower price BEFORE the reseller cut elsewhere. That would allow different priçes depending on the reseller cut percentage.

In most cases there is no cut percentage. Most items including traditional books, are sold on the warehouse model. The only diff is that publishers were allowed to set pricing guidelines which limited how much someone could mark something down. Which is why, for example, you never saw a new Harry Potter on sale for 75% off at release.

But when Amazon started their Ebook program they didn't sign such deals so they got pricing control and all the publishers could do was set the warehouse price. Amazon had the same MFN and defended it as saying the that publishers got their money so they had no right to gripe if Amazon was pricing for a loss. And so on. And no one has ever said boo about this 'illegal' activity from them. So the DOJ saying MFNs are illegal is thin when they aren't calling out Amazon, etc as well

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post #17 of 68
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Originally Posted by AppleInsider View Post

On day two of the U.S. Department of Justice's antirust suit against Apple, Penguin Books CEO David Shanks took the stand to offer testimony regarding the Cupertino company's role in an alleged e-book price fixing scheme.

According to in-court reports from Reuters, Shanks testified on Tuesday that Apple inserted a provision in its e-book contract with Penguin which forced the publisher to modify its existing agreements with other retailers, including market leader Amazon.

The stipulation Shanks referred to is Apple's most favored nations clause, which is part of the so-called "agency model" that holds a publisher can set content pricing as long as it doesn't sell said content to another retailer for less..

The only problem for the DOJ is that MFN clauses are legal. There's nothing in this testimony that supports the claim that Apple did anything wrong.

It's looking more and more like grandstanding by the DOJ (just like the Senate hearings). Throw out lots of stuff that might look bad to a layman but which doesn't break any laws. Try to extort some kind of concessions from Apple.
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post #18 of 68
Quote:
Originally Posted by herbapou View Post

Imo the problem is not the agency model, its the "books cant by cheaper elsewhere" rule made by Apple. The end results is the same prices everywhere. I am affraid Apple will lose this. It should be, you cant sell for a lower price BEFORE the reseller cut elsewhere. That would allow different priçes depending on the reseller cut percentage.

Really? So please explain which law makes most favored nation clauses illegal?

In fact, MFN clauses have been upheld by the courts and are completely legal. The fact that you're alleging that Apple will lose solely because of MFN suggests that you have absolutely no experience with contract law.
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post #19 of 68
Quote:
Originally Posted by jragosta View Post

Really? So please explain which law makes most favored nation clauses illegal?

In fact, MFN clauses have been upheld by the courts and are completely legal. The fact that you're alleging that Apple will lose solely because of MFN suggests that you have absolutely no experience with contract law.

FWIW:
http://www.ftc.gov/opa/2012/08/mfn.shtm
"The most commonly used MFN provisions guarantee a customer that it will receive prices that are at least as favorable as those provided to other buyers of the same seller, for the same products or services. Although at times employed for benign purposes, MFNs can under certain circumstances present competitive concerns. This is because they may, especially when used by a dominant buyer of intermediate goods, raise other buyers’ costs or foreclose would-be competitors from accessing the market. Additionally, MFNs can facilitate collusion and stabilize coordinated pricing among sellers."

Even someone as experienced at contract law as yourself might still be able to learn a few new things from researching the subject. Stuff changes.
Edited by Gatorguy - 6/5/13 at 6:26am
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post #20 of 68
Quote:
Originally Posted by Jessi View Post

So, let me get this straight. Apple has a deal where publishers can set prices, and they have to offer the lowest price on iBookstore. And the DoJ claims this "hurt consumers" because it "fixed prices"? Flexibile pricing with a proviso that the consumer be given the lowest price offered anywhere is neither fixed nor hurting consumers.

This persecution is so illogical it proves that it is politically motivated.

Which is why we need to repeal the entirety of anti-trust regulations--which have always been used anti-competitively to favor one business over another-- in this case, near monopolist Amazon is being defended from having to compete with Apple when Apple dared to offer publishers better terms.

Really, people should belong in jail for this-- and I mean, people in the government. It's criminal.

It has essentially fixed prices because it's started a rule where no other retailers can sell a product cheaper than Apple. In turn no other company would want to be more expensive than Apple so the price is fixed the same everywhere. The fact that the price is chosen by Penguin isn't relevant as it isn't there price that there's an issue with.

 

These rules effectively remove any price competition between the retailers on books as none of them would be able to lower the price for special offers etc.

post #21 of 68
^ "especially when used by a dominant buyer"

So Amazon then?

Edited: Meant for GG.
post #22 of 68
I found a picture of the CEO…

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post #23 of 68
Of course the Penguin CEO would give "mixed testimony". ALL testimony is mixed when you look at both sides (examination and cross examination).

Interesting Apple took the high ground, refusing to comment until the trial while the DOJ has been releasing "one side" of the evidence in bits and pieces. I can't wait to hear what happens with the Jobs e-mails since he isn't here to clarify them. Pretty weak evidence, IMO.
post #24 of 68
I just found a picture of the procession's legal defense…

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post #25 of 68
Quote:
Originally Posted by timgriff84 View Post

It has essentially fixed prices because it's started a rule where no other retailers can sell a product cheaper than Apple. In turn no other company would want to be more expensive than Apple so the price is fixed the same everywhere. The fact that the price is chosen by Penguin isn't relevant as it isn't there price that there's an issue with.

 

These rules effectively remove any price competition between the retailers on books as none of them would be able to lower the price for special offers etc.

 

This is what I think too, regardless of if that MFN clause is legal or not. The end result is this. If the MFN clause is legal than the law needs to be changed. What Apple is doing is trying to transfert its cut rate to the publisher. The Publisher are left with the hot patato of dealing with consumer pricing and resellers rates. To me its simple, if Apple takes a higher cut than Amazon, then why cant the price be higher in the ibookstore? Its Apple problem, not the pusblisher problem. 

 

On the other hand, the Amazon model was not clean either. Dumping a book at $9.99 when you trying to sell a new release hardcopy at $25 hurts the publishers.

 

another interesting question would be to know if this MFN claused is used in the Music and Apps stores.


Edited by herbapou - 6/5/13 at 6:58am
post #26 of 68
Quote:
Originally Posted by EricTheHalfBee View Post

^ "especially when used by a dominant buyer"

So Amazon then?

Edited: Meant for GG.

It's not just the eBook market getting a close-up exam over the Most-Favored-Nation clause. There's even more FTC and DoJ attention being given to similar clauses invoked by health insurance providers. BlueCross/BlueShield hardly holds a monopoly position in health insurance. In fact they barely crack the top 10 in market share. Yet they've attracted antitrust concerns and a DoJ lawsuit that's being closely watched, challenging their use of MFN as an anti-competitive practice.
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post #27 of 68

I fail to see understand why DoJ is being lambasted here. It seems to me that their case has some merit to it. Possibly over zealous, but it's so apparent that there is indeed some logic in their objectives.

 

Perhaps folks here, in addition to be Apple-biased, are only seeing this as an Amazon v. the world situation. DoJ, I believe, is thinking of other distributors and retailers of books.

post #28 of 68
Quote:
Originally Posted by MattBookAir View Post

The DOJ views Amazon's model as benefitting the consumer, which it probably does in the short term. But in the medium term it destroys quality publishing, by devaluing quality content. Of course it has also led to a de facto monopoly by Amazon, but the DOJ would claim that's a separate issue, and maybe they'll pursue them next. If Amazon were broken up into separate entities, I wonder if selling books as loss leaders would still be a viable practice.

In Germany, the agency model was actually required by law, and has meant bookshops were able to survive much longer (not being undercut by Amazon), and publishers can afford to publish and develop a much broader range of content (which they do).

 

An honest question...exactly what laws does everyone think Amazon has violated? Monopolies are not automatically illegal. And I would go so far as to suggest that "ebooks" are not a market onto themselves. Doesn't everyone remember when iTunes Store had the vast majority of of the downloadable music market? When people started complaining about Apple's "monopoly" many of the same people posting here were saying that can't be because you can still buy CDs. Well, I can still buy paper books. And I often do because they are CHEAPER than the ebooks!

And remember when the music publishers were complaining that Apple was ruining the value of their product by selling single songs all for the same price? Sound similiar to book publisher's complaints about Amazon? Apple is often credited here for saving the music industry from themselves. And Steve Jobs several years ago said book publishing was dead. But then Amazon and the Kindle and ebooks came along. It's not a perfect comparison, but there are a lot of similarities. Enough that a little objectivity is in order, I think.

You may not like Amazon. That's fine, don't shop there. But that doens't make their business model illegal.
Edited by Wiggin - 6/5/13 at 7:40am
post #29 of 68
Quote:
Originally Posted by Gatorguy View Post

FWIW:
http://www.ftc.gov/opa/2012/08/mfn.shtm
"The most commonly used MFN provisions guarantee a customer that it will receive prices that are at least as favorable as those provided to other buyers of the same seller, for the same products or services. Although at times employed for benign purposes, MFNs can under certain circumstances present competitive concerns. This is because they may, especially when used by a dominant buyer of intermediate goods, raise other buyers’ costs or foreclose would-be competitors from accessing the market. Additionally, MFNs can facilitate collusion and stabilize coordinated pricing among sellers."

Even someone as experienced at contract law as yourself might still be able to learn a few new things from researching the subject. Stuff changes.

Since when was Apple a dominant player in the ebook market? Even more impressive, It were dominant prior to entering the market.
post #30 of 68
Quote:
Originally Posted by jungmark View Post

Since when was Apple a dominant player in the ebook market? Even more impressive, It were dominant prior to entering the market.

The group of eBook publishers was the "dominant player", altho the statement you're using in your argument doesn't make industry dominance a requirement anyway does it? Apple got swept in accused of colluding with that "dominant" group. It shouldn't be that hard to understand. It doesn't of course mean they'll be found guilty of anything.
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post #31 of 68
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Originally Posted by StruckPaper View Post

I fail to see understand why DoJ is being lambasted here. It seems to me that their case has some merit to it. Possibly over zealous, but it's so apparent that there is indeed some logic in their objectives.

 

Perhaps folks here, in addition to be Apple-biased, are only seeing this as an Amazon v. the world situation. DoJ, I believe, is thinking of other distributors and retailers of books.

 

Such as the publisher of the best selling 50 Shades series, who sold their books on iBooks for $9.99?

 

Since Apple opened their iBooks store the price of eBooks fell from $7.97 on average to $7.34.

 

Which coincided with the "other distributors and retailers" of eBooks increasing their market share from 10 to 40%.

 

Apple actually fostered competition along with more choice for consumers.


Edited by hill60 - 6/5/13 at 8:19am
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post #32 of 68
Quote:
Originally Posted by hill60 View Post

Such as the publisher of the best selling 50 Shades series, who sold their books on iBooks for $9.99?

I don't remember which of the five publishers who made the MFN clause a requirement and subsequently accused of anti-trust violations supplied that particular series of books. Maybe you can remind me?
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post #33 of 68
Quote:
Originally Posted by Gatorguy View Post


I don't remember which of the five publishers who made the MFN clause a requirement and subsequently accused of anti-trust violations supplied that particular series of books. Maybe you can remind me?

 

Perhaps it was one of the other publishers who were also free to sell their wares in the iBooks store, for whatever price they wanted.

 

Seeing as how Apple set it up as a free market.

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post #34 of 68
Quote:
Originally Posted by Jessi View Post

So, let me get this straight. Apple has a deal where publishers can set prices, and they have to offer the lowest price on iBookstore. And the DoJ claims this "hurt consumers" because it "fixed prices"? Flexibile pricing with a proviso that the consumer be given the lowest price offered anywhere is neither fixed nor hurting consumers.

This persecution is so illogical it proves that it is politically motivated.

Which is why we need to repeal the entirety of anti-trust regulations--which have always been used anti-competitively to favor one business over another-- in this case, near monopolist Amazon is being defended from having to compete with Apple when Apple dared to offer publishers better terms.

Really, people should belong in jail for this-- and I mean, people in the government. It's criminal.

 

 

 

Quote:
that holds a publisher can set content pricing as long as it doesn't sell said content to another retailer for less.

 

I agree as I did not understand this either and how this was price fixing. Furthermore, price fixing usually applies to fixing prices upward, not down. I don't see either how Apple making sure it has the lowest available pricing on the market, hurts customers. 

post #35 of 68
Quote:
Originally Posted by Gatorguy View Post

The group of eBook publishers was the "dominant player", altho the statement you're using in your argument doesn't make industry dominance a requirement anyway does it? Apple got swept in accused of colluding with that "dominant" group. It shouldn't be that hard to understand.

This knotted contrived defensiveness is hard to understand. Which dominant group did apple collude with?

Quote:
It doesn't of course mean they'll be found guilty of anything.

Oh thank god you hedged your bets. It would be awful if you were found to be completely and utterly wrong in thought or opinion. lol.gif
post #36 of 68
Quote:
Originally Posted by Jessi View Post

FWIW, in the 1990s when Japanese companies were selling RAM below "market cost", which greatly benefited consumers of RAM and american businesses selling computers with RAM, the DoJ and others claimed that this was "hurting consumers" and was "dumping."

 

It's so political... they just claim whatever they want. 

 

But no doubt, someone subsidizing something benefits the buyers.  We really need to shut down the DoJ.  All the money they waste on market manipulation like this hurts consumers, and that's on top of the money they blow in taxes.

 

That is slightly different. The reason why dumping is illegal is because the purpose of dumping is to undercut the competition to extinction. By dumping products on the market below cost in some instances, competition cannot compete and therefore go out of business, which leaves the dumper with (almost) all the market share and then they can set prices wherever they want. 

post #37 of 68
Quote:
Originally Posted by TimmyDax View Post

This knotted contrived defensiveness is hard to understand. Which dominant group did apple collude with?

Is dominance of an industry a requirement before the DoJ can investigate anti-trust concerns? If not then the question is irrelevant isn't it?

Quote:
Oh thank god you hedged your bets. It would be awful if you were found to be completely and utterly wrong in thought or opinion. lol.gif

It would be more "awful" if a factually incorrect claim were allowed to pass for the truth. Fortunately I've no doubt every time a post of mine is wrong someone here will be nice enough to let me know so that others aren't mislead with incorrect information. 1hmm.gif
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post #38 of 68
Quote:
Originally Posted by herbapou View Post

Imo the problem is not the agency model, its the "books cant by cheaper elsewhere" rule made by Apple. The end results is the same prices everywhere. I am affraid Apple will lose this. It should be, you cant sell for a lower price BEFORE the reseller cut elsewhere. That would allow different priçes depending on the reseller cut percentage.

 

Apple never said they could not sell for higher elsewhere, but that Apple would have the best pricing to offer their customers. And who sues someone for price fixing downward? 

post #39 of 68
Quote:
Originally Posted by Gatorguy View Post

Is dominance of an industry a requirement before the DoJ can investigate anti-trust concerns? If not then the question is irrelevant isn't it?

In the case of a lack of a dominant position, it should indeed be presumed that any price fixing damages the consumer, unless proven otherwise. The problem is that this is backwards when retailers are substantially decreasing the value of the products they sell through excessively aggressive pricing. This damages the market as a whole.

Quote:
It would be more "awful" if a factually incorrect claim were allowed to pass for the truth. Fortunately I've no doubt every time a post of mine is wrong someone here will be nice enough to let me know so that others aren't mislead with incorrect information. 1hmm.gif

I, for one, very much appreciate your contributions; they stop this forum from being a group of old men nodding in unison, or picking at pedantic unprovable beliefs.
post #40 of 68
Quote:
Originally Posted by Richard Getz View Post

 

I agree as I did not understand this either and how this was price fixing. Furthermore, price fixing usually applies to fixing prices upward, not down. I don't see either how Apple making sure it has the lowest available pricing on the market, hurts customers. 

 

Because by having an agreement with the publisher that all other retailers can't see the books for less than them, they are affectively forcing the publisher to have an agreement will all there other distributors that they can't sell the book for less than what Apple sells it for.

 

So if you assume the publisher gets $5 for the book irrespective of who sells it and Apple are selling it at $7. A bookstore who wants to sell a range of books at cost price at $5 for a promotion would be prohibited as they would not be allowed to undercut Apple. The publisher wouldn't be lowering the price on Apple site as it isn't them paying for the promotion. That is fixing a price up, not down.

 

Secondly the law is you can't agree with your competitors what the price of something is. That's what price fixing basically is. Having a contract that says a publisher must ensure all other retailers can't undercut them is basically the same as agreeing it with the other retailers.

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