DoJ accuses Apple of prolonging price fixing suit for financial gain

Posted:
in General Discussion edited January 2014
In a reply memorandum filed on Wednesday, the U.S. Department of Justice said Apple's request to block a summary judgment is driven by the company's unwillingness to compete in the e-book market.

The DoJ document, first reported by paidContent, is in response to an Apple memo filed a little over one week ago which opposed the government's request for a summary judgment regarding a proposed settlement.

In Wednesday's memo, the DoJ rebuked Apple's opposing remarks and once again asked presiding judge Denise Cote to approve the ruling in lieu of a hearing, claiming "in reality, what troubles Apple is that the decree returns pricing discretion not just to Apple, but also to its retail competitors."

From the memo:
In reality, what troubles Apple is that the decree returns pricing discretion not just to Apple, but also to its retail competitors — competitors which Apple fears may choose to exercise that restored authority in order to lower e-book prices. In that event, Apple's e-book customers might find less expensive alternatives. Apple's desire to avoid price competition for as long as possible is the unstated reason why it seeks to undo or forestall the settlements.

In short, Apple's own interests motivate its objections to the proposed decree, interests that are not in any way linked to the public interest inquiry mandated by the Tunney Act.
The governement argues that delaying a final ruling on the matter would "deprive Settling Defendants, the United States, and consumers of the immediate benefits of the settlements for no reason other than to preserve the Apple Agency Agreements." The memo goes on to claim those specific deals with publishing houses "almost literally overnight" caused a substantial increase in e-book pricing.

Apple and its partner defendants have countered such claims, saying the DoJ has no evidence to back their claims besides "secret" sales data not made available to corporations. The Cupertino company went as far as to call the summary judgment request unlawful and fundamentally unfair.



Getting into the details of the most recent memo, the DoJ attempts to table arguments that the e-book trade is unlike any other industry by noting there have been numerous pleas for special treatment under antitrust laws in the past. "Railroads, publishers, lawyers, construction engineers, health care providers, and oil companies are just some of the voices that have raised cries against 'ruinous competition' over the decades," the government writes.

The DoJ also takes the publishers' opposing arguments into consideration. In attempting to dismantle publishing house Penguin's claims, the government presented charts comparing pricing between new release e-books with older titles, noting a significant increase in both. The stats came from content sold through Amazon.

Penguin was one of the first to question the DoJ's market research and requested the accompanying documents be handed over since it seems to be the basis of the government's argument. The DoJ declined, saying "There is simply no basis for Penguin's assertion that the United States must produce internal economic analyses to support its settlement."

Macmillan also asked to see the "secret" research, but more importantly requested the DoJ prove the proposed settlement wouldn't result in an Amazon monopoly. The publisher was unsuccessful in both requests, with the government brushing off the Amazon monopoly argument citing existing competition from "established companies such as B&N, Google, Apple, and Sony."

Judge Cote has not yet ruled on the matter.
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Comments

  • Reply 1 of 86


    This is such a bizarre suit. I don't understand the motivation behind the DOJ here. It's completely baffling to me. Before Apple entered the market, Amazon had almost complete monopoly power and had already shown the willingness to abuse that power.

  • Reply 2 of 86
    richlrichl Posts: 2,213member

    Quote:

    Originally Posted by sessamoid View Post


    This is such a bizarre suit. I don't understand the motivation behind the DOJ here. It's completely baffling to me. Before Apple entered the market, Amazon had almost complete monopoly power and had already shown the willingness to abuse that power.



     


    ... and then Apple entered the market and prices went UP rather than DOWN. It's really no surprise that the DoJ are investigating. Competition is supposed to lead to lower prices. Any other scenario is highly suspicious. 

  • Reply 3 of 86


    Prosecutors, cops, and almost any government officials are the most arrogant A holes ever. Any time you want them to show you a regulation or prove what they are claiming about laws or regulations gets them extremely mad. How dare the prosecution not produce their research which is the basis for their claims that Apple is breaking a law! That is insane; and why hasn't the judge just ordered them to disclose their information?


     


    I'm not necessarily for Apple in this case but it makes me mad when government is just trying to attack something without fully disclosing its sources or motives.

  • Reply 4 of 86
    herbapouherbapou Posts: 2,221member
    I still dont understand how letting the publishers set there own prices with apple taking a cut could possibly infringe price fixing laws.

    Imo price went up because amazon was abusing publishers or selling at lost. Simple.

    And apple is stalling because it makes so much money with books... Really? Its not even pocket change of pocket change.
  • Reply 5 of 86
    Yeah, right. Apple is all about the few millions it can earn by stalling the case - a company with literally more cash than it knows what to do with.

    Whoever's in charge of this failed investigation is attempting some serious CYA action....
  • Reply 6 of 86
    tallest skiltallest skil Posts: 43,399member


    Originally Posted by RichL View Post

    Competition is supposed to lead to lower prices. Any other scenario is highly suspicious. 


     


    And yet the telecoms' prices have been going UP for a decade, despite having competition, and the DoJ has said boo. Every single time. Huh.


     


    Maybe Apple just didn't feel like paying anyone off to enter the market.

  • Reply 7 of 86
    cash907cash907 Posts: 893member

    Quote:

    Originally Posted by herbapou View Post



    I still dont understand how letting the publishers set there own prices with apple taking a cut could possibly infringe price fixing laws.

    Imo price went up because amazon was abusing publishers or selling at lost. Simple.

    And apple is stalling because it makes so much money with books... Really? Its not even pocket change of pocket change.


     


    So why were prices substantially lower when Amazon was leading the market, and didn't go up until after Apple joined the game?


     


    I can agree that prices were perhaps too low initially, but things have gotten out of hand with eBooks retailing 2 dollars less than hardback copies in many cases. I'm sorry, but that's absolutely ridiculous.

  • Reply 8 of 86

    Quote:

    Originally Posted by herbapou View Post





    And apple is stalling because it makes so much money with books... Really? Its not even pocket change of pocket change.


    This is the most befuddling of the DOJ's argument. So much so that it's got to be disingenuous.

  • Reply 9 of 86
    lkrupplkrupp Posts: 7,088member

    Quote:

    Originally Posted by Cash907 View Post


     


    So why were prices substantially lower when Amazon was leading the market, and didn't go up until after Apple joined the game?


     


    I can agree that prices were perhaps too low initially, but things have gotten out of hand with eBooks retailing 2 dollars less than hardback copies in many cases. I'm sorry, but that's absolutely ridiculous.



    Can we stop with the bovine excrement about how e-book pricing should be a fraction of the print edition. It has NOTHING to do with how much it costs to distribute either form. It's about compensating the author for their intellectual work and artistic endeavor. It is the height of stupidity to equate how much the paper and ink costs with the value of the content. It's not about the book or electronic file, its about what's in it.

  • Reply 10 of 86
    dasanman69dasanman69 Posts: 12,980member
    And yet the telecoms' prices have been going UP for a decade, despite having competition, and the DoJ has said boo. Every single time. Huh.

    Maybe Apple just didn't feel like paying anyone off to enter the market.

    Really? I'm paying less now for 2 smartphones than I used to pay for 2 feature phones, plus there are plenty of options of getting unlimited everything for $50 or less.
  • Reply 11 of 86
    zoetmbzoetmb Posts: 2,447member

    Quote:

    Originally Posted by RichL View Post


     


    ... and then Apple entered the market and prices went UP rather than DOWN. It's really no surprise that the DoJ are investigating. Competition is supposed to lead to lower prices. Any other scenario is highly suspicious. 



     


    Except when there's predatory pricing, which is selling at a loss to gain market share.    And that's exactly what Amazon does - they sell at a loss to gain market share and push the competitors out.  And then down the road, they will increase prices.


     


    The other problem with the DOJ suit is that a few  years back, the Supreme Court ruled that manufacturers could enforce minimum selling prices, not just minimum advertised prices.    Maybe that ruling only applied to hard goods manufacturers like electronics and camera makers, but I don't see how it wouldn't also apply to publishers.    I sincerely disagreed with that ruling, because permitting manufacturers to set minimum selling prices sounds an awful lot like price fixing to me.    But in some respects, it's a moot point, because the manufacturers (including Apple) have also raised wholesale prices to be so close to selling price, that it's almost impossible to discount even if the manufacturers didn't dictate selling prices.  However, if the Supreme Court ruled that manufacturers could fix min selling prices, then what's the point of the DOJ suit?


     


    And I think that's what will eventually happen in the book industry:   publishers will simply raise the wholesale price of ebooks, even though this wouldn't necessarily force Amazon to raise prices because they seem willing to lose money for long lengths of time.    


     


    The DOJ is looking at this too narrowly.  They have to look at the impact on the entire industry.     Otherwise, they could kill off the industry.   Look at the recording industry - it's now less than half the size that it was in 1999 and that doesn't even include inflation.   

  • Reply 12 of 86
    jragostajragosta Posts: 10,473member
    richl wrote: »
    ... and then Apple entered the market and prices went UP rather than DOWN. It's really no surprise that the DoJ are investigating. Competition is supposed to lead to lower prices. Any other scenario is highly suspicious. 

    cash907 wrote: »
    So why were prices substantially lower when Amazon was leading the market, and didn't go up until after Apple joined the game?

    I'd like to see either of you support that contention.

    The DOJ's own documents showed that prices went down after Apple entered the market.

    Furthermore, there's absolutely no guarantee that competition will bring down prices in the short run. Amazon was selling below cost in order to gain monopoly control of a new market. It's not surprising that they were keeping prices artificially low. Once they had sufficient control of the market, they would have had free rein to raise prices or control content or anything else they wanted.

    It's a red herring argument, anyway. The DOJ's job is not to bring prices down. Their job is to encourage competition - and then the market will take care of prices. Apple created competition in this market, Amazon was well on its way to a controlling monopoly. The DOJ's position is 100% wrong. It appears that Amazon got to someone important with a sob story and that person jumped without checking the facts.

    As for the content of this story, it's one of the stupidest things I've seen the DOJ say - and that's saying quite a bit. Apple doesn't think there's any merit to the suit and allowing the court to enforce an injunction before Apple gets a chance to prove its case obviously hurts Apple and Apple has every right to fight it. What does the DOJ think Apple is going to do - just roll over and let the government take away all their rights?
  • Reply 13 of 86
    jungmarkjungmark Posts: 6,694member

    Quote:

    Originally Posted by RichL View Post


     


    ... and then Apple entered the market and prices went UP rather than DOWN. It's really no surprise that the DoJ are investigating. Competition is supposed to lead to lower prices. Any other scenario is highly suspicious. 





    Prices went up on some ebooks. the DOJ doesn't note that Amazon has exclusive rights to some ebooks in the NYT top seller list and can charge anything they want. Amazon is selling ebooks at a loss so that weeds out other competitors because they actually want to make money on these items. How is that fair? Amazon had a near monopoly and there were barely any competition. Now with a level playing field, there is plenty of competition.

  • Reply 14 of 86
    misamisa Posts: 827member
    richl wrote: »
    ... and then Apple entered the market and prices went UP rather than DOWN. It's really no surprise that the DoJ are investigating. Competition is supposed to lead to lower prices. Any other scenario is highly suspicious. 

    I guess you haven't seen the prices for Cloud Computing. Nobody is competing with Amazon, only matching Amazon's prices.
  • Reply 15 of 86
    tylerk36tylerk36 Posts: 1,037member


    In the mean time Samsung feels their partnership with Amazon and its financial investment in the DOJ has paid off.

  • Reply 16 of 86
    dasanman69dasanman69 Posts: 12,980member
    herbapou wrote: »
    I still dont understand how letting the publishers set there own prices with apple taking a cut could possibly infringe price fixing laws.
    Imo price went up because amazon was abusing publishers or selling at lost. Simple.
    And apple is stalling because it makes so much money with books... Really? Its not even pocket change of pocket change.

    You're correct the eBooks were being sold at a loss by Amazon, but people don't really care about that fact. They got used to buying bestsellers for $9.99 and when that got taken away screamed bloody murder and I'd say it was a few with some political clout. Although I believe Apple did nothing wrong I don't believe the publishers are innocent.
  • Reply 17 of 86


    DoJ's memorandum is tantamount to "opposition is proof of guilt". No judge should countenance such self-serving drivel.

     

  • Reply 18 of 86
    hexorhexor Posts: 57member


    I'm sure Amazon having a near monopoly on on-line hard cover book sales would not allow them in any way to manipulate the nascent e-book market. <sarcasm>  Wasn't there already evidence that Amazon pressured publishers to allow them to sell e-books below cost?    If they didn't allow them their hard cover books would lose favor with Amazon.  So of course the prices went up when the publishers were able to have leverage against Amazon for this practice!  


     


    Sounds more to me like someone in the government has an axe to grind with Apple. 

  • Reply 19 of 86
    rob53rob53 Posts: 2,032member


    We're talking about books. Why is the DOJ spending so much taxpayer money going after Apple when gas prices and the stock market are clearly manipulated. Where is the DOJ when we really need them. I spend a whole lot more money on gas in one month than I spend on books in an entire year. The person pushing this at the DOJ must really hate Apple. They basically let Microsoft off with a slap of the hand over their obviously predatory monopoly and here they want to completely shut the iBookstore down. I'd check to see what stocks and investments the DOJ people are holding. Must be in Amazon.

  • Reply 20 of 86
    hpodhpod Posts: 19member

    Quote:

    Originally Posted by dasanman69 View Post





    Really? I'm paying less now for 2 smartphones than I used to pay for 2 feature phones, plus there are plenty of options of getting unlimited everything for $50 or less.


     


    This is just absurd.


     


    Prices have clearly gone up for smart phones over the years.  If you pay less now for 2 smartphones than you used to pay for 2 feature phones, it means you were being ripped off or sold services you didn't know you had or even need back then.  There is simply no way.  Smartphones also require data plans, and there are no unlimited plans on AT&T or Verizon or Sprint for 50$ or less.  You MIGHT be able to get such a plan for a standard feature phone, but not a smartphone on one of the big 3 carriers.  A data plan alone costs 25$+, not even adding in the voice plan/text plan you are forced to buy with it.


     


    Data plans on AT&T used to start at 15$ ramping up to 30$ for unlimited.  The cheapest plan is now 25$, ramping upwards to over 50$.  Right.  Cheaper.


     


    I'm actually baffled that someone would want to defend the telcos as being cheap...seriously, why would you do that?


     


    Recently, AT&T upped the price of upgrading your phone...it went from 16$ to over 25$.  A month later Verizon did the same thing.  That's not cheaper...it's clearly more expensive.

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