Apple's loss in e-book antitrust case likely to give advantage to Amazon

Posted:
in General Discussion edited January 2014
The big winner in the U.S. government's antitrust victory over Apple is Amazon, experts say, as the online retailer will now be able to price e-books however it wants.

DOJ


While Amazon is already the e-book market leader, the company will be able to continue its aggressive pricing strategy to gain further market share, market watchers who spoke with Bloomberg said. Some even believe the ruling could affect Apple in areas other than the e-book market.

"Any Financial penalty is pocket change for Apple, but this decision can have a long-term effect," said David Balto, former policy director for the U.S. Federal Trade Commission. "The government can extend this beyond books."

For her part, U.S. District Judge Denise Cote, who handed down the ruling on Wednesday, said her decision was based solely on events that occurred as Apple entered the e-book market. The judge said she does not "seek to paint with a broader brush."

The main issue for Apple in the trial was the fact that Amazon's low-price business model favors consumers, while antitrust laws are designed to protect consumers. Amazon sells titles under the so-called "wholesale model," which gives the retailer the power to set its own prices, sometimes at or below cost.

Book sellers opposed Amazon's use of the wholesale model, because it undercut their ability to have pricing parity with other e-book platforms, or even physical books. For that reason, they aligned with Apple to switch to the "agency" pricing model, which let them set their own prices ? a move that brought on antitrust scrutiny from the U.S. government.

Major publishers opted to settle with the government out of court rather than fight the antitrust case, but Apple decided to hold out and go to trial. After Wednesday's ruling, the company vowed to continue the fight and appeal Cote's decision.

Apple has much to gain by pushing forward in spite of the setback, according to Reuters. In particular, Apple may wish to preserve its negotiating leverage for future content deals, especially in its ongoing talks with Hollywood studios and record companies.

According to the report, Apple's current discussions have been inspired by "aggressive forays" into the digital music and movie markets by competitors Google and Amazon. While Amazon is the market leader for e-books, Apple's iTunes remains the go-to destination for buying digital music, movies and TV shows.
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Comments

  • Reply 1 of 84
    gatorguygatorguy Posts: 18,585member
    Apple can do the same can't they? I don't thin k the government was trying to restrict Apple's price options. They certainly have a huge advantage from a revenue standpoint and can easily afford to price match Amazon.
  • Reply 2 of 84
    chandra69chandra69 Posts: 638member


    Why can't Apple just mimic the strategy of Amazon and keep the price as same as Amazon? I believe people will come to Apple even if it same as Amazon price.

  • Reply 3 of 84
    Whether or not Apple is guilty, the Justice department really must go after Amazon now. It's abusing both it's (near) monopoly status and it's ability to sell below cost to (a) drive other retailers out of business, and (b) reduce the value of books to the point that no publisher will be able to support serious authors (i.e. that don't sell in sufficient quantity). While the pricing may appear consumer friendly in the short term, this is not consumer or author friendly in the medium-long term.
  • Reply 4 of 84
    mazda 3smazda 3s Posts: 1,516member

    Quote:

    Originally Posted by AppleInsider View Post


    Apple's loss in e-book antitrust case likely to give advantage to Amazon


     



     



     


    In all honesty though, I will simply buy eBooks from whoever has them the cheapest.

  • Reply 5 of 84
    don108don108 Posts: 79member
    Considering that Apple is appealing the decision and it's quite possible that it will be reversed on appeal, this article is currently just guesswork.
  • Reply 6 of 84
    drblankdrblank Posts: 3,383member
    From what I read, the book publishers messed up with their inititial pricing model with Amazon and Apple was just trying to create an even playing field in which there were decent profits for all parties concerned.

    The emails that I read written by Jobs were more of giving the book publishers some viable methods of achieving that.

    There is NOTHING wrong with companies having a reasonable profit margin and for companies to be priced competitively. If they all get essentially the same pricing and there is a decent profit margin, each reseller does have the final decision on whether or not they want to offer discounting.

    I don't know of too many businesses that don't have a suggested retail price and then they let the resellers sell them at whatever they want, but mfg can limit whether or not companies can advertise pricing. Some companies won't allow resellers to publish pricing or even sell certain products on-line or through mail order.

    I think this case was decided improperly. This was, in my opinion, just a way for the Feds to force a settlement and going after Apple since they are jealous that Apple has more cash than they do.

    I think the Feds need to go after Samsung's business practices as that is threatening more jobs in the US. Samsung makes components for most of the tablet and smartphone industry and they compete with their own component customers. To me, that's conflict of interest.

    I think they should be investigated if anyone.

    Plus I think Google should be investigated in light of the latest security issues. They are finding that their Android OS since 1.6 release has a security flaw. And they are just finding out about this now? I'm wondering how long Google has known about this and what they are planning on doing about it. Some phones can't be updated with the latest OS so what's Google planning on doing? Haven't heard a peep about it. Does Google think that if they don't mention anything that it will just go away?
  • Reply 7 of 84
    leaotleaot Posts: 2member

    Quote:

    Originally Posted by MattBookAir View Post



    Whether or not Apple is guilty, the Justice department really must go after Amazon now. It's abusing both it's (near) monopoly status and it's ability to sell below cost to (a) drive other retailers out of business, and (b) reduce the value of books to the point that no publisher will be able to support serious authors (i.e. that don't sell in sufficient quantity). While the pricing may appear consumer friendly in the short term, this is not consumer or author friendly in the medium-long term.


     






    Distributing e-books costs next to nothing.


    But I agree on the point, that the justice department should keep an eye on Amazon, to prevent them from having a full monopoly.

  • Reply 8 of 84
    hill60hill60 Posts: 6,989member


    Time for Apple to introduce $2.99 eBooks and see how long Amazon can match that price.


     


    When Amazon can't produce the profits Wall Street is anticipating they will implode.


     


    As far as other competitors in the eBook market go, the DoJ and this judge have basically said "F*ck 'em".

  • Reply 9 of 84
    This case stinks of lobbyists. Amazon is spending money hand over fist on lobbying the government and apparently buying judges. No one following the case thought that the DOJ met their burden of proof and even the judge had to moderate her comments. Guess Amazon came thru with another payment just in time for the formal decision because it was another 180 change in course.

    Apple should just shrug this one off and move on to the appeals court. Pre-trial we all thought Apple would get a raw deal but with the defense lighting up DOJ witnesses we felt false hope. It seems now more than ever the outcome of this trial was pre-determined and the trial itself was just going thru the motions.

    It will be interesting while this is on appeal what if anything will change however. The book labels already changed pricing structure with Amazon and I honestly don't expect much to change in the short to medium term unless Apple faces further defeats in the appeals court.
  • Reply 10 of 84
    malaxmalax Posts: 1,598member

    Quote:

    Originally Posted by leaot View Post



    Distributing e-books costs next to nothing.


    But I agree on the point, that the justice department should keep an eye on Amazon, to prevent them from having a full monopoly.



    Distributing, yes.  Creating/marketing books is (can be) very expensive.


     


    It's funny that we talk about "books" are if they are a commodity product like wheat or oil.  Especially for books from established authors, every book is to some extent a monopoly unto itself.  It's not like someone would say "Oh, publisher X is selling the series finale Game of Thrones book for $25, but publisher Y is selling the next Twilight book for $23.99, guess I'll snap up that sparkly vampire book."  So publishers will also have some degree of market power.  If one thinks that they aren't getting enough money at the wholesale market and they have books people want they can raise their prices.  Let Amazon sell it for $10 and take a loss if they want.

  • Reply 11 of 84
    malaxmalax Posts: 1,598member

    Quote:

    Originally Posted by hill60 View Post


    Time for Apple to introduce $2.99 eBooks and see how long Amazon can match that price.


     


    When Amazon can't produce the profits Wall Street is anticipating they will implode.


     


    As far as other competitors in the eBook market go, the DoJ and this judge have basically said "F*ck 'em".



     


    It would be interesting to see what happened.  Would Amazon go crying to DoJ about it?

  • Reply 12 of 84
    "For that reason, they aligned with Apple to switch to the "agency" pricing model, which let them set their own prices %u2014 a move that brought on antitrust scrutiny from the U.S. government."

    NO NO NO NO NO!

    That is NOT what "brought on antitrust scrutiny".

    What "brought on antitrust scrutiny" was that Apple ALSO got the companies to agree to *raise* prices on Amazon. Price fixing is illegal, and when multiple parties agree to do something illegal that's a conspiracy. THAT is what this court case is about.
  • Reply 13 of 84
    sipsip Posts: 210member

    Quote:

    Originally Posted by MattBookAir View Post



    Whether or not Apple is guilty, the Justice department really must go after Amazon now. It's abusing both it's (near) monopoly status and it's ability to sell below cost to (a) drive other retailers out of business, and (b) reduce the value of books to the point that no publisher will be able to support serious authors (i.e. that don't sell in sufficient quantity). While the pricing may appear consumer friendly in the short term, this is not consumer or author friendly in the medium-long term.


    Amazon has already entered the market as a publisher by bidding for new manuscripts. Initially, Amazon will beat out the traditional publishing houses and once they're on their knees, Amazon will bid at lower prices and win because the publishing houses will simply downsize and survive on re-runs and copyrighted material.

  • Reply 14 of 84
    applezillaapplezilla Posts: 941member


    The American Justice System: Creating monopolies, making corporations people, and selecting our presidents since 2000 and beyond.

  • Reply 15 of 84
    mikejonesmikejones Posts: 323member


    Quote:

    Originally Posted by leaot View Post


    Distributing e-books costs next to nothing.


    But I agree on the point, that the justice department should keep an eye on Amazon, to prevent them from having a full monopoly.





    Because the only costs involved with ebooks is the distribution costs, right? It's not like the authors need to get paid, or there are marketing costs, or editing costs, or paying the people who create the ebook version, etc, right?


     


    Quote:


    Originally Posted by hill60 View Post


    Time for Apple to introduce $2.99 eBooks and see how long Amazon can match that price.


     


    When Amazon can't produce the profits Wall Street is anticipating they will implode.


     


    As far as other competitors in the eBook market go, the DoJ and this judge have basically said "F*ck 'em".



    Yeah the funny part is that if they did such a "pro-consumer" move they'd be sued for anti-competitive price dumping.


     



    Quote:

    Originally Posted by Maury Markowitz View Post



    What "brought on antitrust scrutiny" was that Apple ALSO got the companies to agree to *raise* prices on Amazon. Price fixing is illegal, and when multiple parties agree to do something illegal that's a conspiracy. THAT is what this court case is about.


    Care to cite exactly where Apple did such a thing? Amazon could have easily told the publishers to take a hike when it came to accepting the agency model. Easily leveraging their huge market share in bookselling to make them bend to their will. Amazon was not some small-time player with no leverage.



  • Reply 16 of 84
    john.bjohn.b Posts: 2,714member

    Quote:

    Originally Posted by AppleInsider View Post



    The big winner in the U.S. government's antitrust victory over Apple is Amazon, experts say, as the online retailer will now be able to price e-books however it wants.


     


    Wasn't that the plan all along?  :shrug:

  • Reply 17 of 84
    lkrupplkrupp Posts: 5,979member

    Quote:

    Originally Posted by Mazda 3s View Post


     


    In all honesty though, I will simply buy eBooks from whoever has them the cheapest.



     


    Which is precisely why iPhones are made in China and not the U.S. Same goes for textiles and every other consumer item, as well as industrial products. "Cheapest" trumps ethics, morals,  and social justice. Just ask any American consumer.

  • Reply 18 of 84
    mjtomlinmjtomlin Posts: 1,715member


    "The judge said she does not 'seek to paint with a broader brush.'"


     


    What this really means is... I am going to ignore all the things Amazon did to destroy the market and put competitors out of business by undercutting prices... Instead I'm only going to look at prices just before Apple entered the market, and then prices after they entered the market.


     


    Basically she's using a very finite period in time to determine whether prices "Went up". The fact is, Amazon unfairly drove prices down over the course of several years as they gained their monopoly position. This is unfair and anti-competitive to businesses that cannot sustain themselves if they have to match Amazon's prices. There have been many, many other companies sued by the DOJ for doing just that.

  • Reply 19 of 84
    jungmarkjungmark Posts: 6,543member
    "Anti trust" is not only about price, it's also about competition. If AMZ is preventing new competitors by undercutting them, that should be investigated.

    In addition, ebooks isn't a market by itself. It has to considered in the larger book market too.
  • Reply 20 of 84
    mjtomlinmjtomlin Posts: 1,715member

    Quote:

    Originally Posted by MikeJones View Post




    Care to cite exactly where Apple did such a thing? Amazon could have easily told the publishers to take a hike when it came to accepting the agency model. Easily leveraging their huge market share in bookselling to make them bend to their will. Amazon was not some small-time player with no leverage.


     



     


    Furthermore, the publishers could've told Apple to take a hike, but they didn't. They saw an opportunity to screw Amazon and used Apple to do it. When the DOJ knocked on the door, they all scrambled and went running, leaving Apple standing alone to defend itself.


     


    Publishers -> Guilty.


    Apple -> Not Guilty.


     


    It's freaken obvious what happened. The thing is, since the publishers settled, any evidence of wrong doing on their part cannot be used in this trial. Apple is left to completely justify the actions of everyone involved.

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