Apple ridicules ebook pricing conspiracy theory of class action lawsuit filing

Posted:
in iPad edited January 2014


Apple has asked that a class action lawsuit claiming the company conspired with book publishers to raise the price of ebooks be thrown out, stating that the plaintiffs' arguments didn't make sense and that "this allegation just strings together antitrust buzzwords."



According to a report by PaidContent.org, Apple argued "that its business plan was to sell as many e-books as possible and that it had no incentive to raise prices. It also claims that is was a new and inexperienced player in a business in which Amazon dominated with 90 percent marketshare."



The plaintiffs in the case have based their claims largely upon Steve Jobs' comment to Walt Mossberg of the Wall Street Journal, which suggested that publishers "unhappy" with Amazon's efforts to mandate a standard $10 ebook price would likely just withhold their titles from Amazon's store.



Apple's attorneys say Jobs' words were being "mischaracterized" by the plaintiffs, explaining that Jobs simply thought Apple's business strategy was more attractive than Amazon's.



The plaintiffs in the case argue that Apple conspired with publishers to raise the price of ebooks in order to blunt the impact of Amazon's Kindle on the tablet market, something Apple's attorneys described as a nonsensical "Kindle Theory."



This “Kindle theory,” Apple's filing stated, does not "make sense on its own terms. For example, if Amazon was a 'threat' that needed to be squelched by means of an illegal conspiracy, why would Apple offer Amazon’s Kindle app on the iPad?"



Sarcastically alluding to Amazon's loss leader book pricing, Apple's legal argument added the zinger, "Why would Apple conclude that conspiring to force Amazon to no longer lose money on eBooks would cripple Amazon’s competitive fortunes?"



The filing further asked, "And why would Apple perceive the need for an illegal solution to the 'Kindle threat' when it had an obvious and lawful one which it implemented – namely, introducing a multipurpose device (the iPad) whose marketing and sales success was not centered on eBook sales?"











Set prices vs the agency model



Apple pioneered the concept of selling digital content at a fixed low price in iTunes with 99 cent songs, followed by similarly low standard pricing of videos and movies, all prices the music labels and studios balked at supporting. Apple has since relaxed its standard pricing to allow publishers to sell their content at variable prices.



In ebooks however, Apple found such resistance for pushing the price of digital titles down to the $9.99 price set by Amazon that it allowed publishers to adopt their own pricing from the start, often closer to $12.99, under a model known as "agency pricing," the same model Amazon uses to sell Android apps.



Under Apple's agency pricing model, publishers selling titles in its iBookstore couldn't also sell their same titles at a lower price elsewhere, another term Amazon similarly sought to use to prevent Android app developers from undercutting its own sales.



Amazon Kindle users and other readers upset by the $2 difference in ebook prices set by Amazon and publishers working with Apple have asked the US Department of Justice to get involved, which has announced plans to sue Apple and book publishers Simon & Schuster, Hachette, Penguin, Macmillan and HarperCollins over the Kindle Theory conspiracy.



[ View article on AppleInsider ]

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Comments

  • Reply 1 of 53
    Quote:

    This “Kindle theory,” Apple's filing stated, does not "make sense on its own terms.



    I believe this is also known as "The Chewbacca defense."
  • Reply 2 of 53
    mdriftmeyermdriftmeyer Posts: 7,293member
    Can we go back to the days of Law where my Uncle passed the Bar in '69 which required 3 days of oral examinations and 3 days of written examinations instead of 1/1?



    We'd sure get higher quality lawyers and that would benefit society.



    Apple's lawyers clearly come from the 3/3 days of law comprehension.
  • Reply 3 of 53
    nagrommenagromme Posts: 2,834member
    It would sound more like anti-trust/conspiracy if Apple HAD adopted the same model as Amazon.
  • Reply 4 of 53
    rattyukrattyuk Posts: 15member
    I am wondering if this was bought to the justice's attention by someone who might have some skin in the game. Like a dominant player that had to completely change their deals once Apple entered the field.
  • Reply 5 of 53
    f1ferrarif1ferrari Posts: 262member
    Quote:
    Originally Posted by Suddenly Newton View Post


    I believe this is also known as "The Chewbacca defense."



    "If Chewbacca lives on Endor, you must acquit! The defense rests."
  • Reply 6 of 53
    charlitunacharlituna Posts: 7,215member
    Quote:
    Originally Posted by nagromme View Post


    It would sound more like anti-trust/conspiracy if Apple HAD adopted the same model as Amazon.



    Not so much as it would reek of collusion.



    If Apple's terms had said that they couldn't sell titles sold in the ibooks store anywhere else and there was no Kindle etc app, then you could make a stronger case for anti-trust etc
  • Reply 7 of 53
    jd_in_sbjd_in_sb Posts: 1,486member
    I love Apple's comments about this suit. They are so STEVE.
  • Reply 8 of 53
    SpamSandwichSpamSandwich Posts: 31,334member
    Quote:
    Originally Posted by F1Ferrari View Post


    "If Chewbacca lives on Endor, you must acquit! The defense rests."





    Chewbacca lives on Kashyyyk! Case dismissed!
  • Reply 9 of 53
    galbigalbi Posts: 968member
    Apple is becoming the very company it despised some 30 years ago.
  • Reply 10 of 53
    Quote:
    Originally Posted by Galbi View Post


    Apple is becoming the very company it despised some 30 years ago.



    Apple has not changed. Anything for a buck was and is their MO.
  • Reply 11 of 53
    solipsismxsolipsismx Posts: 19,566member
    It's great that realitycheck got booted for trolling but I see a couple others that do nothing but try to stir up trouble.
  • Reply 12 of 53
    zoetmbzoetmb Posts: 2,473member
    I'm not one to defend Apple in all circumstances -- I think they do plenty wrong. But they're not wrong in this case. You might not like the Agency model, but it's perfectly legitimate.



    However, what really makes no sense in terms of the Dept of Justice going after Apple on this is that the Supreme Court ruled several years ago that manufacturers can not only enforce minimum advertised prices, but also enforce minimum selling prices (even though I personally disagree with that decision). (And in recent weeks, all of the major electronics manufacturers have announced their intention to do so on the upper-line products.) So the Agency Model is only slightly different: the publisher is setting THE price. But since no one ever sells for more than list price, it's a moot point: effectively, they're both the same.



    Furthermore, when a company like Amazon sells products at a loss in order to gain market share, that used to be called predatory pricing. I don't know whether it's still illegal but you used to be able to get sued over it. So the DOJ might actually be going after the wrong party.



    So it seems to me that if the DOJ thinks Apple has done something wrong, it's really Agency Model pricing that they don't like and if that's the case, then Congress should make the Agency Model illegal and pass new legislation that will pass constitutional muster eliminating the right of manufacturers to set minimum prices.
  • Reply 13 of 53
    alnormalnorm Posts: 37member
    Quote:

    The plaintiffs in the case argue that Apple conspired with publishers to raise the price of ebooks in order to blunt the impact of Amazon's Kindle on the tablet market, something Apple's attorneys described as a nonsensical "Kindle Theory."



    This ?Kindle theory,? Apple's filing stated, does not "make sense on its own terms. For example, if Amazon was a 'threat' that needed to be squelched by means of an illegal conspiracy, why would Apple offer Amazon?s Kindle app on the iPad?"



    I don't think this defense is going to fly. The alleged conspiracy was to make ebooks the same price across the board. When all ebook prices are identical, the Kindle app on the iPad would actually make the iPad more desirable and the Kindle less desirable. There would be no pricing benefits of the content on the Kindle, so why buy a Kindle when you can do what the Kindle can on an iPad, which has more features? The cost of the unit then becomes the consumer's major concern.



    Quote:

    Sarcastically alluding to Amazon's loss leader book pricing, Apple's legal argument added the zinger, "Why would Apple conclude that conspiring to force Amazon to no longer lose money on eBooks would cripple Amazon?s competitive fortunes?"



    The loss leader strategy appears to have buoyed Kindle sales. The short-term impact of raising prices may have increased Amazon profits, but the loss in market-share of the Kindle, if demonstrable and relevant, may render moot the defense's point.



    Quote:

    The filing further asked, "And why would Apple perceive the need for an illegal solution to the 'Kindle threat' when it had an obvious and lawful one which it implemented ? namely, introducing a multipurpose device (the iPad) whose marketing and sales success was not centered on eBook sales?"



    And this is the million dollar question (but you the affected party, as in all class-action lawsuits, will only receive a coupon for 10% off your next ebook purchase).



    This lawsuit will boil down to one simple question. Did Apple conspire with the publishers, by putting them all on the same page, in order to implement a sweeping change in the way ebooks are priced by all companies, e.g., the agency model? If the plaintiff can show this, the motivations of Apple--or inanity thereof--will not matter.



    Unfortunately for the defense, the DOJ and European Regulators are also investigating these claims of collusion. The Plaintiffs in this lawsuit may potentially receive access to records and files that are not typically available in these types of lawsuits.



    My prediction: Expect to see Apple and the Publishers settle on the DOJ and EU complaints. This will deprive the class-action plaintiffs of extra evidence, thus also reaching a settlement. The agency model will become more limited in scope, perhaps allowing retailers leeway on their profit margins, i.e., the publisher will set an MSRP and receive the 70% of that price, but the retailer can lower the retail price by cutting down their 30%.
  • Reply 14 of 53
    All this from the idiots that brought us fast and furious gun running, 500 million in wasted Solyndra cash and government healthcare. Concentrate on managing the government not screwing over one of the few premier businesses left that are born and bred in the USA. Leave Apple alone and try managing the country.
  • Reply 15 of 53
    addaboxaddabox Posts: 12,660member
    So then I wonder why there hasn't been similar scrutiny of the one-size-fits-all pricing for music? Seems very similar, did Apple conspire with the music labels to set prices? Or movie and TV show rentals and purchases-- are those prices the result of Apple colluding with the studios?



    It's part of Apple's business model to offer content in the iTunes store at a fixed price per category, with slight variations. They've long insisted that it results in a better customer experience if a given price is "the" price of a given piece of content. I'm not seeing what makes eBooks so different/illegal, and if they are why I haven't heard anyone alleging that the prior deals were suspect. I'd be interested in knowing what's unique about books.
  • Reply 16 of 53
    addaboxaddabox Posts: 12,660member
    Quote:
    Originally Posted by Galbi View Post


    Apple is becoming the very company it despised some 30 years ago.



    What Apple despised 30 years ago was shoddy design and poor user experiences, just like now. They used the IBM/rebel hook because caring about things like typography, WYSIWYG displays, ease of use, elegance, new possibilities for computing platforms, etc. were values that didn't really obtain in the PC market, which treated computers as inflexible tools towards a dreary end.



    Imagining that that somehow meant Apple was comprised of a bunch of hippies that didn't care if they turned a profit or not, or who didn't have a business plan and didn't bother with money making ventures is delusional (although I realize you don't really care and are just casually concern trolling).
  • Reply 17 of 53
    gatorguygatorguy Posts: 20,932member
    Quote:
    Originally Posted by addabox View Post


    So then I wonder why there hasn't been similar scrutiny of the one-size-fits-all pricing for music? Seems very similar, did Apple conspire with the music labels to set prices? Or movie and TV show rentals and purchases-- are those prices the result of Apple colluding with the studios?



    It's part of Apple's business model to offer content in the iTunes store at a fixed price per category, with slight variations. They've long insisted that it results in a better customer experience if a given price is "the" price of a given piece of content. I'm not seeing what makes eBooks so different/illegal, and if they are why I haven't heard anyone alleging that the prior deals were suspect. I'd be interested in knowing what's unique about books.



    There was scrutiny of iTunes pricing. They reduced prices in the UK to avoid potential charges from EU regulators. There were even antitrust charges filed in California. With Apple even richer, powerful and more dominating a force now the questions are going to get tougher IMO. What they could slide by with a few years ago may not fly in new segments of the market.



    http://www.bloomberg.com/news/2011-0...t-dispute.html
  • Reply 18 of 53
    addaboxaddabox Posts: 12,660member
    Quote:
    Originally Posted by Gatorguy View Post


    There was scrutiny of iTunes pricing. They reduced prices in the UK to avoid potential charges from EU regulators. There were even antitrust charges filed in California. With Apple even richer, powerful and more dominating a force now the questions are going to get tougher IMO. What they could slide by with a few years ago may not fly in new segments of the market.



    http://www.bloomberg.com/news/2011-0...t-dispute.html



    The thing you're linking to doesn't have anything to do with fixed pricing-- it involved allegations that Apple was using it's near monopoly position in digital music downloads to unfairly limit consumer choice by locking its software to the iPod. Since they've subsequently abandoned DRM (and anyone can license AAC for their digital music player) this complaint is moot. It also doesn't really speak to Apple's intentions, since Apple themselves were an early critic of (studio mandated) DRM and were arguable instrumental in moving the industry past those limitations.



    The mandated price lowering in the UK is also a bit ironic, since the music labels big complaint with iTunes pricing was that it was too low.



    At any rate, none of that has anything to do with price fixing. So again I ask: if other media on iTunes can legitimately be sold at a flat rate per category, why is doing that with eBooks a conspiracy?
  • Reply 19 of 53
    nasseraenasserae Posts: 3,157member
    Quote:
    Originally Posted by addabox View Post


    The thing you're linking to doesn't have anything to do with fixed pricing-- it involved allegations that Apple was using it's near monopoly position in digital music downloads to unfairly limit consumer choice by locking its software to the iPod. Since they've subsequently abandoned DRM (and anyone can license AAC for their digital music player) this complaint is moot. It also doesn't really speak to Apple's intentions, since Apple themselves were an early critic of (studio mandated) DRM and were arguable instrumental in moving the industry past those limitations.



    The mandated price lowering in the UK is also a bit ironic, since the music labels big complaint with iTunes pricing was that it was too low.



    At any rate, none of that has anything to do with price fixing. So again I ask: if other media on iTunes can legitimately be sold at a flat rate per category, why is doing that with eBooks a conspiracy?



    That's how Gatorguy works. He do a google search about the subject and he links to the the first search results without even reading the article he links to. Just give it a try. Type "Apple iTunes Music Antitrust" in google and look at the first link
  • Reply 20 of 53
    alnormalnorm Posts: 37member
    Quote:
    Originally Posted by Gatorguy View Post


    There was scrutiny of iTunes pricing. They reduced prices in the UK to avoid potential charges from EU regulators. There were even antitrust charges filed in California. With Apple even richer, powerful and more dominating a force now the questions are going to get tougher IMO. What they could slide by with a few years ago may not fly in new segments of the market.



    http://www.bloomberg.com/news/2011-0...t-dispute.html



    It also has much to do with how technology has changed the way antitrust and anti-competition regulations are enforced. Certain practices used by technology companies are almost fruitless to pursue in court. Competition is so quick to change in this digital age that by the time anyone has a case, something new has come along that has replaced the ability of said company to exploit the aforementioned advantage.



    The government antitrust regulators have practically narrowed their scope to one question, which they can pursue: did the actions of said company affect the consumer in a negative way? (higher prices are usually the smoking gun).
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