Apple says DoJ lawsuit 'fundamentally flawed,' could harm consumers

Posted:
in General Discussion edited January 2014
In a Tuesday court filing with the U.S. District Court in Manhattan, Apple claims that the Department of Justice's antitrust lawsuit regarding alleged e-book price fixing sends the wrong message to the market by retroactively questioning a 'perfectly proper' business strategy.

Apple reiterated its initial stance that it did not collude with five major book publishers to artificially inflate the prices of e-books sold through the iBookstore in an attempt to dethrone market leader Amazon, reports Reuters.

"For Apple to be subject to hindsight legal attack for a business strategy well-recognized as perfectly proper sends the wrong message to the market," the company said in Tuesday's court filing. "The government's complaint against Apple is fundamentally flawed as a matter of fact and law."

Going further, Apple claims it created an option to Amazon in a veritable vacuum of competition, alluding that the lawsuit could discourage new entrants to the market and thus be harmful to consumers.

"Apple's entry into e-book distribution is classic procompetitive conduct," Apple said.

From Apple's filing:
The Government sides with monopoly, rather than competition, in bringing this case. The Government starts from the false premise that an eBooks ?market? was characterized by ?robust price competition? prior to Apple?s entry. This ignores a simple and incontrovertible fact: before 2010, there was no real competition, there was only Amazon.
The DoJ first filed suit against Apple in April, alleging that the company colluded with Simon & Schuster, Hachette, Penguin, Macmillan and HarperCollins to fix the price of e-books under the so-called "agency model."

In short, the agency model allows publishers to set content prices in exchange for a "most favored nations clause" that bars the houses from selling e-books to competing retailers at lower prices. The strategy is diametrically opposed by the "wholesale model" used by Amazon which lets resellers incentivize purchasing by offering products at below-cost prices.

iBooks


The Justice Department asserts that the alleged collusion cost e-book buyers millions of dollars on particular popular titles since the iBooks launched alongside the original iPad in 2010.

"Apple?s entry spurred tremendous growth in eBook titles, range and variety of offerings, sales, and improved quality of the eBook reading experi- ence. This is evidence of a dynamic, competitive market. These inconvenient facts are ignored in the Complaint," Apple said. "Instead, the Government focuses on increased prices for a handful of titles. The Complaint does not allege that all eBook prices, or even most eBook prices, increased after Apple entered the market."

Earlier in May it was revealed that the government had cited an email from Apple co-founder Steve Jobs as a proof that the companies conspired to boost fair market prices, though the Cupertino company denied that the quote was "accurately characterized."

Fighting alongside Apple are publishing houses Macmillan and the Penguin Group, while HarperCollins Publishers, Simon & Schuster and Hachette Book Group all settled out of court.
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Comments

  • Reply 1 of 156
    rfhjrrfhjr Posts: 44member


    Apples' "Agency Model" encouraged a wider selection of e-books to be released coincident with the conventional hardback books.  Prior to Apple's entry into the field, publishers withheld new titles from the ebook market.


     


    The DoJ's arguments are hard to follow, in that the consumer is free to purchase from Amazon or Apple.  If the DoJ is eager to prosecute, it should be considering suit against Amazon for predatory pricing.  It routinely sells books at or below cost, driving traditional retailers, from giants like Borders to the local "Mom & Pop" to bankruptcy.  This is classic market manipulation, and reminiscent of the tactics of Rockefeller's Standard Oil.


     


    I guess that when a company gets to be as successful as Apple, we have to expect overeager and ambitious prosecutors to attack. 


     


    Unfortunately, they are attacking a great American company, and doing it with our tax dollars.

  • Reply 2 of 156
    hill60hill60 Posts: 6,992member


    So what other industries should also become subject to DoJ enforced Government set pricing models?


     


    I thought America was a land of free enterprise.

  • Reply 3 of 156


    Collusion kept prices artificially high and that didn't hurt consumers?  But a lawsuit hurts consumers. 


     


    Yes, competition usually results in lower prices.  But, Amazon is always trying to be the low price leader.  So I don't see that with this type of competition, the consumer is better off.

     

  • Reply 4 of 156
    myapplelovemyapplelove Posts: 1,515member
    Lol, they have some nerve saying it could harm consumers when they are responsible for a close to 40% increase in ebook prices, why don't they just act like good boys and settle like 5/6 publishers have done already? The are more in the news these days about their lawyers than about their products. And the doj has a very good case indeed,maybe their smart ass lawyers should remember what happened to Microsoft, before they dragg apple into this. Apple hurt both the consumer and the competition here, and the evidence of collusion is pretty damning, they probably wouldn't want more publicity on this...
  • Reply 5 of 156

    Quote:

    Originally Posted by BanExtremists View Post


    Collusion kept prices artificially high and that didn't hurt consumers?  But a lawsuit hurts consumers. 


     



     


    Look at the facts.  If Amazon had been allowed to sell for such low prices, then they would have raised them in the long run.  Apple did us all a favor by making Amazon charge a little more now, instead of a lot more later.


     


    But the government won't let any good deed go unpunished, especially if it is Apple.

  • Reply 6 of 156
    dickprinterdickprinter Posts: 1,060member

    Quote:

    Originally Posted by BanExtremists View Post


    Collusion kept prices artificially high and that didn't hurt consumers?  But a lawsuit hurts consumers. 


     


    Yes, competition usually results in lower prices.  But, Amazon is always trying to be the low price leader.  So I don't see that with this type of competition, the consumer is better off.

     



    I don't get what you're saying. Switching to a different sales model is not collusion. It's an attempt at preventing the tail from wagging the dog. Products have a certain value to them. The companies (in this case publishers) place a value on the product they are selling and it's up to the retailer to set their own selling price. If Amazon wants to sell ebooks at a loss, say $10 each, they should also be paying the same price for the ebook from the publisher and the publisher has all the right to set their price. Just because Amazon chooses to lose money on every sale doesn't mean the publishers have to, also.  This is a bogus, tax dollar-wasting case by the DoJ.

  • Reply 7 of 156
    drdoppiodrdoppio Posts: 1,132member


    IANAL, but I think Apple's defense strategy is a hard sell. Yes, the agency model may have advantages, and yes, Apple may have entered the market in a moment when Amazon have been doing something that would have proven detrimental in the long term. However this trial is not about Apple's motifs, noble as they may have been, but about whether Apple broke the low. It is immaterial what Amazon would have done with its position on the market; Apple is not the DoJ and fixing prices and colluding isn't the way to correct Amazon's actions, regardless how sinister the latter may have seemed.


     


    It's of course the court that will be deciding who's guilty and who isn't, we shouldn't condemn Apple in advance; all I'm saying is that the defense could focus on proving that Apple didn't collude, rather than try to wake sympathy by asserting that whatever Apple did was for everyone's good...

  • Reply 8 of 156
    myapplelovemyapplelove Posts: 1,515member
    Look at the facts.  If Amazon had been allowed to sell for such low prices, then they would have raised them in the long run.  Apple did us all a favor by making Amazon charge a little more now, instead of a lot more later.

    But the government won't let any good deed go unpunished, especially if it is Apple.

    Lol, why would they charge a lot more later? If they charged more later a competitor would charge less and still keep prices low for the comsumer. Do you understand how inane what you are saying is? That apple force raising prices in collusion with publishers and disallowing Barnes and noble, amazon, and any other bookseller to compete on price is favourable to the consumer, unbe-effinglieavble..
  • Reply 9 of 156
    myapplelovemyapplelove Posts: 1,515member
    I don't get what you're saying. Switching to a different sales model is not collusion. It's an attempt at preventing the tail from wagging the dog. Products have a certain value to them. The companies (in this case publishers) place a value on the product they are selling and it's up to the retailer to set their own selling price. If Amazon wants to sell ebooks at a loss, say $10 each, they should also be paying the same price for the ebook from the publisher and the publisher has all the right to set their price. Just because Amazon chooses to lose money on every sale doesn't mean the publishers have to, also.  This is a bogus, tax dollar-wasting case by the DoJ.

    Switching to a different model doesn't entail memos to publishers to "withhold books from amazon" and throw in with apple" for 12.99 and 14.99 books "the customer pays a little more, but that's what you want anyway", and no one can have it cheaper on top of that

    That's the definition of collusion.

    And don't divert the issue to amazon, no one can compete on price anymore after apple's collusion with them, because apple didn't want to compete with others, or run a proper bookshop, they wanted a guaranteed 30% cut per book for sitting on their ass in iTunes infrastructure and getting 30% per customer click for doing close to nothing, because at least in the app store they provide the os and the tools to create the applications.
  • Reply 10 of 156
    hill60hill60 Posts: 6,992member

    Quote:

    Originally Posted by myapplelove View Post



    Lol, they have some nerve saying it could harm consumers when they are responsible for a close to 40% increase in ebook prices, why don't they just act like good boys and settle like 5/6 publishers have done already? The are more in the news these days about their lawyers than about their products. And the doj has a very good case indeed,maybe their smart ass lawyers should remember what happened to Microsoft, before they dragg apple into this. Apple hurt both the consumer and the competition here, and the evidence of collusion is pretty damning, they probably wouldn't want more publicity on this...


     


    So do you have some figures comparing the AVERAGE price of eBooks before and after Apple entered the market, not just anecdotal evidence based on selected titles with discounts?

  • Reply 11 of 156
    chris_cachris_ca Posts: 2,543member
    [QUOTE]Apple reiterated its initial stance that it did not collude with five major book publishers to artificially inflate the prices of e-books sold through the iBookstore in an attempt to dethrone market leader Amazon, reports Reuters.[/QUOTE]
    Yeah, that's how you force someone out of business. Sell the same product for more than them.
  • Reply 12 of 156
    agramonteagramonte Posts: 345member


    so basically "the market was Trash so no one should care that we came and made it even crappier with our more retarded Trash"


     


    great logic.

  • Reply 13 of 156
    dickprinterdickprinter Posts: 1,060member

    Quote:

    Originally Posted by myapplelove View Post





    Switching to a different model doesn't entail memos to publishers to "withhold books from amazon" and throw in with apple" for 12.99 and 14.99 books "the customer pays a little more, but that's what you want anyway", and no one can have it cheaper on top of that

    That's the definition of collusion.

    And don't divert the issue to amazon, no one can compete on price anymore after apple's collusion with them, because apple didn't want to compete with others, or run a proper bookshop, they wanted a guaranteed 30% cut per book for sitting on their ass in iTunes infrastructure and getting 30% per customer click for doing close to nothing, because at least in the app store they provide the os and the tools to create the applications.


    Apple is providing a place (store front) where 250 million iOS device users can shop. If you don't think it costs money to keep an internet store working then I'm not going to argue with you. Do you expect an art gallery that rents retail space in, say, a shopping mall to allow artists to hang and sell their works there for free?

  • Reply 14 of 156
    tallest skiltallest skil Posts: 43,399member

    Quote:

    Originally Posted by Chris_CA View Post

    Yeah, that's how you force someone out of business. Sell the same product for more than them.


     


    Hey, it worked for that one company. You know, the one that… …has been relegated to the dustbin of history and exists only for the purpose of this illustration.



    Quote:

    Originally Posted by agramonte View Post


    great logic.




     


    Probably the same logic that allowed you to come to the fallacious conclusion that the iBooks Store is "more retarded trash".

  • Reply 15 of 156
    myapplelovemyapplelove Posts: 1,515member
    Apple is providing a place (store front) where 250 million iOS device users can shop. If you don't think it costs money to keep an internet store working then I'm not going to argue with you. Do you expect an art gallery that rents retail space in, say, a shopping mall to allow artists to hang and sell their works there for free?

    I didn't hear your response on how this is anything but collusion what with the evidence hat has surfaced.

    It certainly costs less money when you have a readied infrastructure and storage and bandwidth for ebooks is dwarfed by the other content you sell. If apple has a gallery then the ebooks would be selling out of the men's room. Aplle should have bought wholesale and managed a proper bookstore just like everyone else and not opt for a 30% guaranteed cut in collusion with publishers.
  • Reply 16 of 156
    myapplelovemyapplelove Posts: 1,515member
    hill60 wrote: »
    So do you have some figures comparing the AVERAGE price of eBooks before and after Apple entered the market, not just anecdotal evidence based on selected titles with discounts?
    Virtually overnight, this conspiracy to fix prices caused e-book prices to increase by as much $5 per unit, costing consumers tens of millions of dollars, according to the lawsuit: “Millions of e-books that would have sold at retail for $9.99 or for other low prices instead sold for the prices indicated by the price schedules included in the Apple Agency Agreements — generally, $12.99 or $14.99.” According to the suit, Apple boasted of the successful scheme as an “Akido move,” after the Japanese martial art.

    Read more: http://business.time.com/2012/04/12/how-apples-steve-jobs-book-publishers-cost-consumers-millions/#ixzz1vk4bR0au
  • Reply 17 of 156
    boredumbboredumb Posts: 1,416member


    I've been buying eBooks for over four years now, and I suspect that the majority of you DoJ trashers can't say that, and so don't really have perspective on this, except your usual perspective that everything Apple does is Golden.


    Now, I love Apple's accomplishments and products, but I don't have that particular brain-cloud...at least sometimes!


    Once you and Apple stop babbling about "free enterprise", the "value of competition", "better for consumers", and "a perfectly legitimate business model",


    one simple, consumer-related fact remains:


    The advent of Apple in the ebook market, and the general adoption of its "agency model", resulted in an immediate and universal rise in eBook prices, except perhaps in the oldest titles, and out-of-print (generally free anyway) titles.


    Its that simple...its irrefutable...and, so far, irreversible.


    It didn't result in greater selection - that was happening as that industry grew anyway, and the agency model can't claim credit for that.  And Amazon had and has the largest title selection, and was already working on that, and, to their credit, hasn't stopped.


    But this model did result in Amazon no longer being able to offer as deep a discount as they had been doing on newer titles.


    That's it: it has cost consumers money, and removed the freedom of the merchant to sell at their own rates (in this model, the minimum price is set solely by the publisher).  And the right of merchants to do that was decided in the Supreme Court in, I believe, the fifties - Google "Robert Haft" if you're curious.


    And I suspect that that might now serve as the basis of this anti-trust action.  


    So stop Apple-worshipping yourselves into arguing against your own best interests, which the DoJ is simply doing its job of trying to look out for.

  • Reply 18 of 156
    myapplelovemyapplelove Posts: 1,515member
    ...currently plenty of hardbacks sell for less than ebook counterparts at amazon, that's the lunacy of the system apple dragged us in...
  • Reply 19 of 156
    gatorguygatorguy Posts: 21,099member

    Quote:

    Originally Posted by hill60 View Post


     


    So do you have some figures comparing the AVERAGE price of eBooks before and after Apple entered the market, not just anecdotal evidence based on selected titles with discounts?



    Most of the comparisons I've seen show a slight decrease overall in eBook prices since 2007, but that's not where the price complaints are, nor what prompted the DoJ complaint. It's in the best-sellers segment which is the category the 5 big publishers (with Apple's assistance according to the DoJ) switched to minimum agency model pricing between $12.99 and $14.99, with a "most-favored nations" clause put in place at the same time. I've seen a few comments note that a printed version of some bestsellers are now less expensive than their eBook counterparts, since the agency model is not applicable to printed books. 

  • Reply 20 of 156


    There is more to competition than price.    


     


    I want a huge variety of books to pick from in addition to a decent price.   I am afraid that the Amazon model will drive publishers to produce only books likely to be blockbusters.   I want a price which will help pay publishers taking a chance on unknown people.  I want the almost popular books published.  I want the esoteric book published.


     


    In other words,  variety in books and ideas should also be considered part of competition.   I don't think that driving competitors out of business (Amazon)  is good for the industry  or consumers in the long run.

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