Apple e-book price fixing trial set for 2013

Posted:
in General Discussion edited January 2014
A U.S. judge on Friday said that Apple will go to trial in 2013 over alleged collusion with a number of major publishing houses to fix the price of e-books sold through the iBookstore.

U.S. District Court Judge Denise Cote of the Southern District of New York said that Apple and two publishers will face a United States antitrust lawsuit in a bench trial on June 3, 2013 that will decide whether the companies conspired to fix e-book prices before the iPad was launched in 2010, reports Reuters.

The U.S. government first leveled its antitrust suit against Apple and the two publishing houses in early April following a Department of Justice investigation into the matter. Apple denies the allegations and goes further, saying that it broke up Amazon's purported e-book monopoly. Amazon was, and still is, the predominant leader in the e-book market thanks in part to the company's Kindle line of eReaders.

Fighting alongside Apple are Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck GmbH, and the Pearson-owned Penguin Group. The original U.S. complaint named five publishers, but News Corp's HarperCollins Publishers Inc, CBS Corp's Simon & Schuster Inc and Lagardere SCA subsidiary Hachette Book Group all settled out of court.



At the heart of the trial is Apple's so-called "agency model" which allows publishers set e-book pricing under a "most favored nations" clause that disallows them to sell the content to other resellers at a cheaper price. The system is the polar opposite of Amazon's "wholesale model" which allows retailers to set below-cost prices in hopes of drumming up sales.

The agency model is more attractive to publishers that have been stung by the quick adoption of relatively inexpensive e-books, though some argue that the scheme is anticompetitive and harms consumers. A number of class-action lawsuits have sprung up regarding the matter in both the U.S. and Canada.

Noted in the government's filing was an email from Apple founder Steve Jobs which is being used, some say improperly, as evidence to Apple's collusion.

The iPad maker appears up to the challenge and sought out a trial itself shortly after the government filed the antitrust suit.

According to court documents the government is giving nine months for fact discovery with a deadline set for March 22, 2013, a period deemed fair for an antitrust case of this size.
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Comments

  • Reply 1 of 83
    markbyrnmarkbyrn Posts: 609member
    Apple better have it's ducks in order and considering his track record, I don't think Mr Sewell is up to the task.

    [URL=http://forums.appleinsider.com/image/id/169077/width/512/height/512][IMG]http://forums.appleinsider.com/image/id/169077/width/512/height/512[/IMG][/URL]
  • Reply 2 of 83
    cycomikocycomiko Posts: 716member


    Good

  • Reply 3 of 83
    hill60hill60 Posts: 6,992member
    Maybe the first thing they can discover is the net effect of Apple's entry into the eBook market.

    Prices have either fallen, risen or remained the same.

    The price of ALL eBooks should be included not just a few examples which may have had discounts applied in the past.

    It is up to the free market to decide fair prices, not the government to dictate them.
  • Reply 4 of 83
    dasanman69dasanman69 Posts: 12,985member
    It
    hill60 wrote: »
    Maybe the first thing they can discover is the net effect of Apple's entry into the eBook market.
    Prices have either fallen, risen or remained the same.
    The price of ALL eBooks should be included not just a few examples which may have had discounts applied in the past.
    It is up to the free market to decide fair prices, not the government to dictate them.

    And is ok for Apple to set prices like when they set the price for songs?

    The prices of ebooks have risen, fallen, and remained the same. That leads me to believe that Amazon was under-pricing some while over-pricing others. There's nothing wrong with the agency model but there's a problem when one agreement conflicts with another.
  • Reply 5 of 83
    jpdlvmhjpdlvmh Posts: 72member
    Please don't say "cheaper price"
    A price doesn't cost anything.
    A price is either "high" or "low", and therefore "higher" or "lower".
  • Reply 6 of 83


    How can they possibly be accused of price fixing when Apple lets the publishers choose the price?

  • Reply 7 of 83
    anonymouseanonymouse Posts: 6,581member


    I think this will end as an embarrassment for the DoJ. Not reported here on AI, Barnes and Noble is officially contesting the settlement made with some publishers on the grounds that outlawing agency pricing effectively installs Amazon with a monopoly in e-books. It's likely that the DoJ will lose this trial and that the settlement will be thrown out.

  • Reply 8 of 83

    Quote:

    Originally Posted by ArchAngel21x View Post


    How can they possibly be accused of price fixing when Apple lets the publishers choose the price?



     


    My understanding of the whole thing may be a little off, but, basically, Apple's conversation with the major publishers went something like this:


     


     


    "We're interested in entering the eBook market, but we don't want to have to compete with Amazon's and other retailers' prices. We hear you don't like how Amazon is charging low prices for your eBooks and that you want to make more money off of your books by making Amazon charge higher prices. We know that, traditionally, you sell your books to a retailer at your designated wholesale price and the retailer is free to set prices however they wish. We think we can help you change that.


     


    We'll help you get all publishers to agree to impose fixed, higher prices on all of your books and force those new terms on Amazon and other retailers so that they can't lower prices on them to give consumers 'fair' prices for cheap-to-make digital goods! In addition, no retailer can undercut another retailer's price on one of your eBooks so we eliminate competition entirely!


     


    As long as we still get our fat percentage on every sale, you get more money and we don't have to compete with Amazon's prices! Of course, higher prices means we get more money too! Its win-win for us sellers!"


     


     


    In other words, the switch to the Agency model where publishers fix the the price on all eBooks was all Apple's doing just so that they wouldn't have to compete with other online retailers.

  • Reply 9 of 83
    jragostajragosta Posts: 10,473member
    dasanman69 wrote: »
    It
    And is ok for Apple to set prices like when they set the price for songs?

    Since Apple doesn't set the prices, that's a moot question.
  • Reply 10 of 83
    trumptmantrumptman Posts: 16,458member

    Quote:

    Originally Posted by The Inevitable View Post




    Quote:

    Originally Posted by ArchAngel21x View Post


    How can they possibly be accused of price fixing when Apple lets the publishers choose the price?



     


    My understanding of the whole thing may be a little off, but, basically, Apple's conversation with the major publishers went something like this:


     


     


    "We're interested in entering the eBook market, but we don't want to have to compete with Amazon's and other retailers' prices. We hear you don't like how Amazon is charging low prices for your eBooks and that you want to make more money off of your books by making Amazon charge higher prices. We know that, traditionally, you sell your books to a retailer at your designated wholesale price and the retailer is free to set prices however they wish. We think we can help you change that.


     


    We'll help you get all publishers to agree to impose fixed, higher prices on all of your books and force those new terms on Amazon and other retailers so that they can't lower prices on them to give consumers 'fair' prices for cheap-to-make digital goods! In addition, no retailer can undercut another retailer's price on one of your eBooks so we eliminate competition entirely!


     


    As long as we still get our fat percentage on every sale, you get more money and we don't have to compete with Amazon's prices! Of course, higher prices means we get more money too! Its win-win for us sellers!"


     


     


    In other words, the switch to the Agency model where publishers fix the the price on all eBooks was all Apple's doing just so that they wouldn't have to compete with other online retailers.



     


    This is a good summation. The only bit I would add to it that I have read on other sites, but not this site is apparently the deal with Apple and the publishers required that a certain number of  publishers quickly agree to it or else the deal would he withdrawn for all publishers. If that indeed in the case then no amount of lawyering in the should be able to help Apple as that is textbook collusion.

  • Reply 11 of 83
    dasanman69dasanman69 Posts: 12,985member
    jragosta wrote: »
    Since Apple doesn't set the prices, that's a moot question.

    Then whose idea was it to sell sontgs for $.99?
  • Reply 12 of 83

    Quote:

    Originally Posted by ArchAngel21x View Post


    How can they possibly be accused of price fixing when Apple lets the publishers choose the price?



    Read some of the older stories about the DOJ accusations and the comments made upon them.  Go to unbiased sources like the WSj and the NYT.


     


     


    Edit:  The summary "conversation" above is not too bad of a summary.

  • Reply 13 of 83
    charlitunacharlituna Posts: 7,215member
    My understanding of the whole thing may be a little off, but, basically, Apple's conversation with the major publishers went something like this:

    That's what the DOJ wants folks to believe, but neither they nor has shown any proof of anything.

    Apple offered the same terms they were and are using in their other stores.

    If the DOJ wants to look at something they should take a heavy look at Amazons pre iBooks terms, predatory pricing etc
  • Reply 14 of 83
    charlitunacharlituna Posts: 7,215member
    trumptman wrote: »
    This is a good summation. The only bit I would add to it that I have read on other sites, but not this site is apparently the deal with Apple and the publishers required that a certain number of  publishers quickly agree to it or else the deal would he withdrawn for all publishers. If that indeed in the case then no amount of lawyering in the should be able to help Apple as that is textbook collusion.

    Collusion is about fixing prices, not terms.

    And so what if Apple pulled said deal. It doesn't mean they couldn't or wouldn't offer a different one. They only wanted to have one set of terms and if a majority didn't agree to the first deal, then they move to a different one. Like 'wholesale' but the publisher can still set the price sold, or some other scheme
  • Reply 15 of 83
    anonymouseanonymouse Posts: 6,581member
    Read some of the older stories about the DOJ accusations and the comments made upon them.  Go to unbiased sources like the WSj and the NYT.


    Edit:  The summary "conversation" above is not too bad of a summary.

    The bottom line is that the DoJ's action if successful and allowed to stand will result in not only effectively legitimizing an Amazon monopoly in e-books, gained by leveraging their dominance in other markets, but also further consolidate that monopoly by dictating the terms under which publishers must sell books, solely to Aamazon's advantage.

    In other words, the DoJ is effectively acting to clear the field of competition for Amazon, an outcome that only a fool could argue will not harm consumers and ultimately result in higher prices, and less choice, by increasing the ever widening scope of control Amazon has in the publishing industry. In the future, not only will Amazon dictate how much you pay for books, but also what books get published -- i.e., what you are able to read.
  • Reply 16 of 83


    And, in other news, the government is considering retrying Roger Clemens...


     


    Frankly, I hope the government loses this one as it has many in the recent past. We sell books through Amazon and Apple, and Amazon has so many charges and rates that we never know what we're going to end up with. Basically, they do as they please. We have found Apple's rate is very easy to understand and fair.

  • Reply 17 of 83
    trumptmantrumptman Posts: 16,458member

    Quote:

    Originally Posted by charlituna View Post




    Quote:

    Originally Posted by trumptman View Post



    This is a good summation. The only bit I would add to it that I have read on other sites, but not this site is apparently the deal with Apple and the publishers required that a certain number of  publishers quickly agree to it or else the deal would he withdrawn for all publishers. If that indeed in the case then no amount of lawyering in the should be able to help Apple as that is textbook collusion.




    Collusion is about fixing prices, not terms.



    And so what if Apple pulled said deal. It doesn't mean they couldn't or wouldn't offer a different one. They only wanted to have one set of terms and if a majority didn't agree to the first deal, then they move to a different one. Like 'wholesale' but the publisher can still set the price sold, or some other scheme


     


    Terms can fix prices. It isn't just about a number. If my terms declare you have to raise your prices 30%, then I've dictated an aspect of the price to you. If my terms declare that no one else can be allowed to undercut the price at which I am selling something, I have fixed the prices there as well.

  • Reply 18 of 83
    hill60hill60 Posts: 6,992member

    Quote:

    Originally Posted by The Inevitable View Post


     


    My understanding of the whole thing may be a little off, but, basically, Apple's conversation with the major publishers went something like this:


     


    blah blah blah



     


    "Hey book guys, this is how we sell our music, movies, TV shows, newspapers, magazines and Apps.


     


    Want to sell your eBooks the same way?"

  • Reply 19 of 83
    trumptmantrumptman Posts: 16,458member

    Quote:

    Originally Posted by hill60 View Post




    Quote:

    Originally Posted by The Inevitable View Post


     


    My understanding of the whole thing may be a little off, but, basically, Apple's conversation with the major publishers went something like this:


     


    blah blah blah



     


    "Hey book guys, this is how we sell our music, movies, TV shows, newspapers, magazines and Apps.


     


    Want to sell your eBooks the same way?"



     


    It is a lot more complicated than that. It goes more like this....


     


    Apple - "Hey book guys, we realize we were just about the first or at least the biggest on the block when it came to selling music, movies, tv shows and apps. However there is already an "Apple" in this market and they even have pricing that undercuts our model of doing business. Normally being late, trailing edge and unable to match the current price model would be a problem, but we've got a solution to that!"


     


    Book Publishers - "Innovation? You've got a backlit e-ink, e-reader that will be standardized around the world, that you can support and push out through your numerous well supported stores that will net you better profits through less expensive hardware, but a great network effect and better eco-system?" "Oh, maybe you've got an e-reader app that has features that no other reader will be able to match for years." "Oh, one more thing, maybe you've got some sort of bundling deal, possible via all your other prior deals where you could add the book to the movie, the soundtrack or maybe the audiobook. Maybe you've got a nice solution where someone buys a physical book and gets the e-book download for free via iTunes since you have amazing background in managing and protecting intellectual property."


     


    Apple - "Hell's no to that bitches. We've got collusion baby. We need at least four out of the six of you to sign a deal with us that makes it impossible for someone to undercut our price and then you raise prices to match our need for 30%. We've got a similar e-reader app but it goes much fewer places and finally you'd better hurry up and sign or we aren't going to work with you and give you the best access to our 325 million devices, no pressure though. By best access we mean that our e-reader app is allowed to link to our store while everyone else's e-reader app isn't due to our terms and conditions. We aren't saying you have to sign up. We are just saying you all better line up and kiss the ring because we won't work with just one or two of you."

  • Reply 20 of 83


    If Apple creates a contract that prevents a book publisher from selling his goods at a lower price elsewhere it is price fixing. The same goes in reverse. If Apple says they can't sell the same products at a higher price is also price fixing, though Apple would probably like that. The law is strange regarding price fixing because it doesn't apply to all industries. That is how government created some more jobs for attorneys. They get to argue about it in court.


     


    Price fixing can relate to the selling and buying of items. It happens when people or businesses decide how to act together when buying or selling things.

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