Judge denies Apple, publishers' motion to dismiss e-book civil suit

Posted:
in General Discussion edited January 2014
A federal judge on Tuesday denied petitions by both Apple and a group of five major publishing houses to dismiss a class-action lawsuit accusing the companies of collusion in e-book price fixing.

Judge Denis Cote of the U.S. District Court for the Southern District of New York handed down the e-book price-fixing suit's first substantive ruling since the case was filed in August 2011.

In the ruling, Judge Cote cites numerous examples of possible collusion between Apple and the publishers, concluding that the companies' alleged pricing scheme warrants further investigation.

?We thought that Judge Cote?s ruling was spot on, especially when she noted that we?ve gone above and beyond in illustrating the legitimacy of our case,? said Steve Berman, lead counsel and managing partner of Hagens Berman, the law firm handling the suit. ?We are eager to push forward with the case.?

The class-action suit claims that Apple, Hachette, Simon & Schuster, Macmillan, HarperCollins and Penguin conspired to raise the prices of e-books by using the so-called agency sales model rather than the predominant wholesale model used at the time.

Under the agency model, a publisher is free to set e-book prices and sell them directly to consumers through an "agent," which in this case is Apple and its iBookstore. In exchange for making the content available, Apple receives a percentage of every e-book sold. The opposing wholesale model used by market leader Amazon gives retailers the power to price e-books purchased from a publisher, allowing them to sell the content at below-cost prices to consolidate market share. According to the class-action suit, the publishers feared that Amazon's discounted prices would translate into an increase of cheap e-book adoption.

?Fortunately for the publishers, Apple was also terrified of Amazon?s pricing and the popularity of its Kindle device,? said Berman. ?Rather than compete on merit, price and convenience, we intend to prove that the cabal simply tried to game the system.?

Apple and the five publishing houses's sales strategy has been criticized as being anticompetitive due in part to a "most favored nations" clause which disallows publishers to sell their product through other retailers at lower prices.



In the ruling, Judge Cote notes that there is tangible evidence in inter-company correspondence that points to an exhibited willingness on the part of the publishers to "work together to effect market change, and specifically, to raise the prices of eBooks through collusion." Most notable are the "windowing" efforts used by the houses to stagger release dates of physical books and e-books in an attempt to up revenue. This strategy, used in 2009 before Apple entered the market, was ultimately unsuccessful.

Also cited was an excerpt from Steve Jobs' biography (emphasis highlighted in ruling):
Amazon screwed it up. It paid the wholesale price for some books, but started selling them below cost at $9.99. The publishers hated that -- they thought it would trash their ability to sell hard-cover books at $28. So before Apple even got on the scene, some booksellers were starting to withhold books from Amazon. So we told the publishers, ?We?ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that?s what you want anyway.? But we also asked for a guarantee that if anybody else is selling the books cheaper than we are, then we can sell them at the lower price too. So they went to Amazon and said, ?You?re going to sign an agency contract or we?re not going to give you the books.? . . . Given the situation that existed, what was best for us was to do this aikido move and end up with the agency model. And we pulled it off.
Tuesday's ruling allows the civil case, which seeks to "compensate e-book purchasers for losses incurred as a result of the alleged price-fixing scheme," to continue, though subsequent hearing dates have yet to be announced.

Earlier this month an amended complaint filed by 17 U.S. states revealed that Apple co-founder Steve Jobs pushed for the agency model. A congruent criminal case is being pursued by the U.S. Department of Justice, though in that instance three of the five publishers settled out of court. The issue is also being examined by the European Commission and is the target of a class-action suit in Canada.
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Comments

  • Reply 1 of 53
    tallest skiltallest skil Posts: 43,399member


    This is proof that Apple colluded and should be punished.


     


    Sorry. Zither's gone, so I figured I should step in. image

  • Reply 2 of 53
    dasanman69dasanman69 Posts: 12,985member

    Quote:

    Originally Posted by Tallest Skil View Post


    This is proof that Apple colluded and should be punished.


     


    Sorry. Zither's gone, so I figured I should step in. image



    I thought you said it was already established that they didnt. 

  • Reply 3 of 53
    diddydiddy Posts: 282member

    Quote:

    Originally Posted by dasanman69 View Post


    I thought you said it was already established that they didnt. 



    Tallest Skill is yanking people’s chain here.  He’s being sarcastic with his response.

  • Reply 4 of 53
    gtrgtr Posts: 3,231member

    Quote:

    Originally Posted by Tallest Skil View Post


     


    Zither's gone, so I figured I should step in. image



     


    ZZZ's dead, baby.


     


    ZZZ's dead.


     


    7088071.jpg

  • Reply 5 of 53
    jragostajragosta Posts: 10,473member
    I'll go out on a limb again -

    This was just a preliminary hearing, so we don't know what's going to happen at the trial. However, if Apple loses, it WILL be reversed on appeal. Read the entire decision (you can find it on macsurfer.com). The judge has already convicted Apple and the publishers and hasn't even heard the evidence. He is clearly biased against them from the start.

    And, just in case zzzz comes back (or any of his Apple-hating friends), the above is not evidence of collusion. Jobs simply stated the obvious - the publishers would like to see the prices higher. There's absolutely nothing wrong with suggesting to someone that they'd be happier if they got more money for their product. Contrary to popular belief, raising prices is not illegal. In fact, it is clear that Amazon was guilty of predatory pricing - so in that case, illegal activity kept the prices lower than they would have been in a competitive situation.
  • Reply 6 of 53
    penchantedpenchanted Posts: 1,070member


    I can't believe that some people are so anxious to see Amazon re-emerge as a monopoly with full pricing power. 

  • Reply 7 of 53
    charlitunacharlituna Posts: 7,215member

    Quote:

    Originally Posted by Tallest Skil View Post


    This is proof that Apple colluded and should be punished.


     


    Sorry. Zither's gone, so I figured I should step in. image



     


    We didn't need Zither before and we certainly don't need anyone stepping in as Zither 2.0. 


     


    That said, this really isn't proof of collusion. Apple wanted folks to sign with them, the model they wanted was the same one that Apple was offering for everything else and would have offered the publishers no matter what. It was the publishers choice to push for Amazon to go agency. And it wasn't really needed in order to fulfill the favored nation clause (which might actually be wrongdoing on Apple and Amazon's part). The publishers could have stayed with wholesale but with a condition that Amazon couldn't lower the price before X amount without permission from the publishers as to the price and the period of time they could have the item 'on sale'. Then every time Amazon wanted to put something up for $9.99 they could veto it. or it was for say the opening week they could do the same on the ibooks store as a release special. Heck for major authors Apple might have offered them prime marketing space as part of one of their special promos


     


    Collusion is also hard to define in a category of items. With something like gasoline it is a very limited range of products and more clearly evident that something is up with the prices. With something as wide as books, music, movies it gets harder to work with. the DOJ making statements like consumers were over charged because they know the 'correct' price for ebooks is far fetched. Books are a value added type item. The price is based on the value the publishers think it has as much as the cost of producing the item. If the consumers agree with that value, they pay. If they don't, then they don't. It's not at all the same as a gallon of gas, or a pound of apples. 


     


    The DOJ has shown proof of the publishers saying they need to band together and present a united front to change the way books, especially ebooks are handled. That reeks of collusion. But there's no proof that Apple was part of that game. It all started well before Apple got into the ebooks world. Perhaps it was inspired by the way that Apple handles other media but that doesn't mean that Apple was part of their collusion against Amazon. Who by the by got off with some schemes of their own with possible predatory pricing games and then there was all that 'we won't sell your stuff in any form if you try to push this' tactics. Where was the DOJ then. 

  • Reply 8 of 53
    dasanman69dasanman69 Posts: 12,985member
    diddy wrote: »
    Tallest Skill is yanking people’s chain here.  He’s being sarcastic with his response.

    I know, and I was being equally sarcastic.
  • Reply 9 of 53
    charlitunacharlituna Posts: 7,215member

    Quote:

    Originally Posted by jragosta View Post



     Jobs simply stated the obvious - the publishers would like to see the prices higher. 


     


    It's also basically second time evidence. Steve likely wasn't telling it EXACTLY as it happened and exactly what was said. These comments from the biography will probably be shot down as heresay since there's no way to validate that it is a correct version of the events. After all no one was probably recording those meetings and phone calls and thus far no one has produced a letter or emails with those words. Just the one where Steve went to ONE publisher to make a second attempt at arguing why they should go with Apple and posed the notion that Amazon wouldn't change their methods or pricing etc. 

  • Reply 10 of 53
    dasanman69dasanman69 Posts: 12,985member
    penchanted wrote: »
    I can't believe that some people are so anxious to see Amazon re-emerge as a monopoly with full pricing power. 

    Honestly most people don't care if there was a monopoly or not, nor are they aware of the wholesale vs agency models. People simply want to know why did the ebooks they used to pay $9.99 are now $12.99 since Apple came on the scene.
  • Reply 11 of 53
    dasanman69dasanman69 Posts: 12,985member
    jragosta wrote: »
    I'll go out on a limb again -
    This was just a preliminary hearing, so we don't know what's going to happen at the trial. However, if Apple loses, it WILL be reversed on appeal. Read the entire decision (you can find it on macsurfer.com). The judge has already convicted Apple and the publishers and hasn't even heard the evidence. He is clearly biased against them from the start.
    And, just in case zzzz comes back (or any of his Apple-hating friends), the above is not evidence of collusion. Jobs simply stated the obvious - the publishers would like to see the prices higher. There's absolutely nothing wrong with suggesting to someone that they'd be happier if they got more money for their product. Contrary to popular belief, raising prices is not illegal. In fact, it is clear that Amazon was guilty of predatory pricing - so in that case, illegal activity kept the prices lower than they would have been in a competitive situation.

    But they're not getting more money, the 30% increase is only gonna line the resellers pocket with cash not the publisher, and what do we get for an extra 30%? In Apple's case an inferior product. iBooks can only be read on iDevices whereas with the Kindle app a ebook can be read on multiple platforms and devices. We as consumers lose.
  • Reply 12 of 53
    hellacoolhellacool Posts: 759member
    I love denial. Not as much as fortune telling but the denial is cute.
  • Reply 13 of 53
    Quote:
    Originally Posted by jragosta View Post

    I'll go out on a limb again -

    This was just a preliminary hearing, so we don't know what's going to happen at the trial. However, if Apple loses, it WILL be reversed on appeal. Read the entire decision (you can find it on macsurfer.com). The judge has already convicted Apple and the publishers and hasn't even heard the evidence. He is clearly biased against them from the start.

    And, just in case zzzz comes back (or any of his Apple-hating friends), the above is not evidence of collusion. Jobs simply stated the obvious - the publishers would like to see the prices higher. There's absolutely nothing wrong with suggesting to someone that they'd be happier if they got more money for their product. Contrary to popular belief, raising prices is not illegal. In fact, it is clear that Amazon was guilty of predatory pricing - so in that case, illegal activity kept the prices lower than they would have been in a competitive situation.

     

    I’m sorry that I keep quoting you. You are not the only person to misapprehend the law, but you seem to make the tallest statements. Folks, this is a motion to dismiss. The judge must assume that the allegations set forth in the complaint are true. Then, she must decide whether these facts, so alleged, meet the elements or criteria of the legal causes of action. If so, no dismissal. In other words, it’s pretty difficult for a competent party to screw up the complaint such that it would be dismissed. But when you accuse a federal judge of being “clearly biased,” I’m sorry to say that you do the discussion no good.
  • Reply 14 of 53
    jragostajragosta Posts: 10,473member
    dasanman69 wrote: »
    But they're not getting more money, the 30% increase is only gonna line the resellers pocket with cash not the publisher, and what do we get for an extra 30%? In Apple's case an inferior product. iBooks can only be read on iDevices whereas with the Kindle app a ebook can be read on multiple platforms and devices. We as consumers lose.

    First, Apple's 30% is lower than the typical distribution cost when there is a competitive market. Typically, booksellers get a 50% discount on the price. And when it comes to things like apps, Apple's 30% was considerably lower than the going rate. The problem is that you're comparing a market where a monopolist was subsidizing eBooks by overcharging for printed books where they had a strong pricing power. That distorted the market, so a return to free market pricing caused the price of the eBooks to go up in the short run. In the end, the competition is likely to be good for consumers.

    dasanman69 wrote: »
    Honestly most people don't care if there was a monopoly or not, nor are they aware of the wholesale vs agency models. People simply want to know why did the ebooks they used to pay $9.99 are now $12.99 since Apple came on the scene.

    That's what happens when you look at things with a narrow, short term focus.

    It is true that prices went up after Apple entered the scene. But that's because Amazon was artificially depressing the prices to maintain their monopoly. After they had ensured that no one else could enter the market, they could have squeezed publishers to let Amazon control the market. Think about what happened to gasoline supplies in the 70s after the price was kept artificially low for a period of time.

    Furthermore, Amazon was still profitable. So they were using physical book sales to subsidize their predatory pricing on eBooks. So the consumers should have been asking "why are we overpaying for physical books so that Amazon can monopolize the eBook market?"
  • Reply 15 of 53
    dasanman69dasanman69 Posts: 12,985member
    jragosta wrote: »
    First, Apple's 30% is lower than the typical distribution cost when there is a competitive market. Typically, booksellers get a 50% discount on the price. And when it comes to things like apps, Apple's 30% was considerably lower than the going rate. The problem is that you're comparing a market where a monopolist was subsidizing eBooks by overcharging for printed books where they had a strong pricing power. That distorted the market, so a return to free market pricing caused the price of the eBooks to go up in the short run. In the end, the competition is likely to be good for consumers.
    That's what happens when you look at things with a narrow, short term focus.
    It is true that prices went up after Apple entered the scene. But that's because Amazon was artificially depressing the prices to maintain their monopoly. After they had ensured that no one else could enter the market, they could have squeezed publishers to let Amazon control the market. Think about what happened to gasoline supplies in the 70s after the price was kept artificially low for a period of time.
    Furthermore, Amazon was still profitable. So they were using physical book sales to subsidize their predatory pricing on eBooks. So the consumers should have been asking "why are we overpaying for physical books so that Amazon can monopolize the eBook market?"

    What free market? Those most favored nations clauses will eliminate competitive pricing.
    Unfortunately the vast majority of people in this country see things in a narrow short term way. Many will assume Apple is guilty because of the increase of price upon their arrival, simple case of cause and effect.
  • Reply 16 of 53
    ewtheckmanewtheckman Posts: 309member
    dasanman69 wrote: »
    Honestly most people don't care if there was a monopoly or not, nor are they aware of the wholesale vs agency models. People simply want to know why did the ebooks they used to pay $9.99 are now $12.99 since Apple came on the scene.

    Exactly. Here's a practical example:

    This evening I looked up "How To Win Friends and Influence People" by Dale Carnegie on Amazon. I was considering buying the Kindle version to replace my paper copy.

    The Kindle version is $12.99. That's a price set by Simon & Schuster.

    The hard back version is $13.98.

    The paperback version is $9.00.

    This is for a product that is far cheaper per unit than printed books which cannot be sold by the buyer when they're done with it. What value is there in the electronic version that makes it worth 44% more than the paperback version? I don't see it.

    If Amazon gave S&S $9.09 per electronic copy (70%, which is what they get from Apple), and Amazon turns around and sells it for $9.99, or $9.49, they can still make a profit, and S&S makes more than they obviously get for the more costly paper copies. But even if Amazon sells it for $7.99, who is S&S to say how much to charge? They're still getting their $9.09 per copy, which is clearly more profitable than for paper copies. They certainly don't tell resellers of paper copies what they have to sell them for.

    Congratulations S&S. Because of your greed, you just earned $0 on that lost sale.
  • Reply 17 of 53
    jragostajragosta Posts: 10,473member
    dasanman69 wrote: »
    What free market? Those most favored nations clauses will eliminate competitive pricing.

    You left off "black is white" and "war is peace".
  • Reply 18 of 53
    sleepy3sleepy3 Posts: 244member

    Quote:

    Originally Posted by jragosta View Post





    First, Apple's 30% is lower than the typical distribution cost when there is a competitive market. Typically, booksellers get a 50% discount on the price. And when it comes to things like apps, Apple's 30% was considerably lower than the going rate. The problem is that you're comparing a market where a monopolist was subsidizing eBooks by overcharging for printed books where they had a strong pricing power. That distorted the market, so a return to free market pricing caused the price of the eBooks to go up in the short run. In the end, the competition is likely to be good for consumers.

    That's what happens when you look at things with a narrow, short term focus.

    It is true that prices went up after Apple entered the scene. But that's because Amazon was artificially depressing the prices to maintain their monopoly. After they had ensured that no one else could enter the market, they could have squeezed publishers to let Amazon control the market. Think about what happened to gasoline supplies in the 70s after the price was kept artificially low for a period of time.

    Furthermore, Amazon was still profitable. So they were using physical book sales to subsidize their predatory pricing on eBooks. So the consumers should have been asking "why are we overpaying for physical books so that Amazon can monopolize the eBook market?"


     


    uhhhh yeah. I remember seeing something about consumers picketing for HIGHER prices outside of Amazon headquarters image

  • Reply 19 of 53
    jragostajragosta Posts: 10,473member
    sleepy3 wrote: »
    uhhhh yeah. I remember seeing something about consumers picketing for HIGHER prices outside of Amazon headquarters :lol:

    Your inability to come up with a rational argument is noted.

    No one ever denied that illegal predatory pricing resulted in lower prices to consumers FOR A SHORT TIME. In the long run, it is bad for consumers - which is why there are laws against it.
  • Reply 20 of 53
    gatorguygatorguy Posts: 21,112member

    Quote:

    Originally Posted by jragosta View Post





    Your inability to come up with a rational argument is noted.

    No one ever denied that illegal predatory pricing resulted in lower prices to consumers FOR A SHORT TIME. In the long run, it is bad for consumers - which is why there are laws against it.


    So to be clear, you are claiming Amazon was/is using the illegal practice of predatory pricing, since your reply was in regards to Amazon?

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