States want Apple to pay at least $280M in e-books antitrust case, push for $840M

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Comments

  • Reply 101 of 132
    dasanman69dasanman69 Posts: 12,972member
    ruddy wrote: »
    For anyone to enter the ebook market and go up against a dominant monopoly.....

    Now they'll go up against a dominant duopoly that they can't compete with on price.
  • Reply 102 of 132
    Quote:

    Originally Posted by ruddy View Post

     

    For anyone to enter the ebook market and go up against a dominant monopoly that artificially priced bestsellers at break-even or below-cost, they would have to be brain dead. Why enter a market where you can't make any money?


     

    By this argument you paint all loss-leader tactics as illegal, but in reality they are not illegal. Lower prices for the consumer is exactly the point of competition so while sellers might be getting a rougher deal because Amazon is willing to make almost no money, consumers got a great deal.

     

    Apple could easily have entered the market, used their insane profit margin from elsewhere to offer identical deals to Amazon. That would result in them losing money on books though but would have no major effect on their business.

     

    Quote:


    That changed when the publishers forced Amazon to source ebooks using the agency model. It fixed prices yes, but it leveled the playing field among _all_ ebook retailers. Since nobody could compete on price, nobody could compete on price unfairly as Amazon had been doing.


     

    Sorry, since when do you get to decide what price is fair? "Nobody could compete on price" is what you said, and that is the absolute benchmark for an illegal collaboration. How is it remotely fair to raise the prices of ebooks and prohibit them being sold for cheaper? It costs the consumer more and eliminates competition in the market.



     

    Quote:


    The result was _more_ competitors entered the ebook market once making a profit became possible. There was also a radical increase in ebook production and sales and the number of titles being offered. Many would argue that would have happened anyway under Amazon's unchallenged monopoly, it was a young and exploding market, but even so, the effect remains that after the vertical price restraints of the agency model, both the number of competitors in the market increased, and the number and availability of ebooks radically exploded. 

     



     

    How can more competitors be in the market when you have already said price competition was no longer possible. You are being incredibly dishonest here and have presented 0 facts to back your argument. You are just typing out a paragraph of fantasy.

     

    Quote:


    Increased competition and increased production are both pro-competitive effects that historically carry more weight than fixed prices. The Supreme Court, in its interpretation of the Sherman Antitrust Act, says both anticompetitive and procompetitive effects of any vertical price fixing scheme must be rigorously measured and weighed against the anti-competitive effect of higher prices. That's what Cote avoided doing.


     

    Because Cote ruled against the horizontal conspiracy, not vertical price fixing. Amazon's weight as a seller prevented publishers enforcing vertical price fixing agreements, and so they didn't need to be assessed.

     

    Provide some evidence. Even Apple submitted documents showing the price of the collaborating publishers jumped ridiculously. Tell me how 'competitors' can exist when price competition has been outlawed. It seems to me that you're absolutely fine with Apple using their iPad popularity to try and crush Amazon's Kindle Fire even if it costs consumers millions in increased ebook prices and destroys any real competition in the market. I am not.

  • Reply 103 of 132


    Or how about a reference starting the prior statement followed by 3 ellipses being active that has the content collapsed, by default, so if anyone wants to view it they can, within the thread?

    Nice suggestion.
  • Reply 104 of 132
    ruddyruddy Posts: 94member

    Quote:

     By this argument you paint all loss-leader tactics as illegal, but in reality they are not illegal.



    In most cases loss leading is not illegal. However, loss leading by a monopoly player most certainly is illegal.

     

    Quote:

     

    Apple could easily have entered the market, used their insane profit margin from elsewhere to offer identical deals to Amazon. That would result in them losing money on books though but would have no major effect on their business.



    Yup, brain dead. Just as easily Amazon could simply give away their entire inventory. Doesn't make it a sensible business strategy. 

     

    Quote:

    How can more competitors be in the market when you have already said price competition was no longer possible. You are being incredibly dishonest here and have presented 0 facts to back your argument. You are just typing out a paragraph of fantasy. 


    The plain fact is more competitors entered the market after the shift to agency and the number of ebook titles being published exploded. You could look it up in the trial evidence. 

     

    It might help you to understand that price is not the only factor by which competitors compete.

  • Reply 105 of 132
    Quote:

    Originally Posted by ruddy View Post

     

    In most cases loss leading is not illegal. However, loss leading by a monopoly player most certainly is illegal.


    Is it? Can you cite that please?

     

    Quote:


    Just as easily Amazon could simply give away their entire inventory. Doesn't mean it's a smart business strategy.


    Neither is breaking antitrust law. The fact of the matter though is that Apple had the capability of entering this market, but they did not like the terms.

     

    Quote:


    The plain fact is more competitors entered the market after the shift to agency and the number of ebook titles being published exploded. You could look it up in the trial evidence. 


    I could, if you cited what exactly you're talking about.

     

    Quote:


    It might help you to understand that price is not the only factor by which competitors compete.


    That doesn't mean that eliminating price competition is not illegal. It is, for good reason. In fact trial evidence showed that the volume of sales went down after the change:

    Quote:


     Amazon concluded that “[c]ompared to the 3 agency
    publishers -- Harper, Hachette and Penguin, who had overall


    kindle book units decline in Q2 compared to Q1, Random House had

    an increase of 41%.”


    (Page 98 of the trial order)

  • Reply 106 of 132
    thttht Posts: 3,037member

    I think the primary problem with the ebooks lawsuit is that the DOJ and Judge Cote was thinking of them like they were physical books. Apple and the publishers were also prosecuted for quite narrow price fixing (new best selling books) to boot as the average selling price across all books declined. I'd be more apt to back the DOJ if it was over physical books sold in retail shops.

     

    Obviously they are not physical books. They are a digital good, not only that, they are currently a digital good with DRM that seems very dependent on a certain kind of hardware (tablet) to be successful.

     

     

    The ebook market today doesn't really exist without the players that can display the ebook. ebooks basically failed to become viable until tablets (Kindles) became a reality. So, the addressable market appears to be sized to the number of tablets in the market, not to the number of desktop or laptop computers out there. With Apple's iPad, it increased the addressable market for ebooks, what, 10 times? How many Kindles were sold in 2009? 1m, 5m?

     

    Apple sold 15m iPads in 2010, 40m in 2011 and 66m 2012. Not only that, Apple made the prototypical tablet for all other OEMs to design from, and those tablets sold in as significant numbers and for much cheaper than the iPad. Amazon responded to Apple's design by taking Blackberry's Playbook and rebadging it as a Kindle Fire 18 months after iPad 1 went for sale. The Kindle Fire [HD/HDX], an iPad form factor device not a Kindle eInk device, is the flagship Kindle today. Is that not the very definition of pro-competitive?

     

    With lots of tablets in the market, there was a large market to sell digital goods to, a large market for ebooks. This means more competition. New retailers can arise. Publishers can become retailers. The retailer can be the publisher. Self-publishing becomes viable. Mass market ebook and niche ebook retailers can co-exist. That's a gigantic boon. A huge economic benefit for consumers and sellers a like. The very definition of pro-competitive. If Judge Cote and the DOJ wanted the ebook market to return to what it was like in late 2009, well, wasn't the proper solution for that to have Apple remove ebook functionality from the iPad. It was after all basically an afterthought for the device they developed in about 3 months just prior to launch. How about ebooks should only be sold on eInk tablets like the Kindle or the Nook or the Kobo readers? That was the state of the ebook market in 2009.

     

    Secondly, yes, Apple enabled publishers to raise popular books (generally of the novel and hardcover style book, not text books, not books with color, etc), but these ebooks were still subject to price-demand curves. An ebook has "infinite" supply. Demand was low and will be continue to be low for ebooks relative to apps, music, videos, web browsing and games. People don't have to buy an ebook at the publisher's price, and they have a lot of other options, especially in the LCD tablet market. The price was going to go down.

  • Reply 107 of 132

    Quote:
     Quote:


    Originally Posted by ruddy View Post

     

    In most cases loss leading is not illegal. However, loss leading by a monopoly player most certainly is illegal.


    Is it? Can you cite that please?


    Here ya go.

     



    Quote:

     The fact of the matter though is that Apple had the capability of entering this market, but they did not like the terms.


    Neither did anyone else, that's why no one entered the ebook market once Amazon cornered it, they weren't brain dead. They were priced out of the market by Amazon's predatory pricing.

     

    Quote:
     I could, if you cited what exactly you're talking about

    I am talking about the procompetitive effects for the agency model which Apple presented as evidence at the trial, and which Judge Cote chose to ignore.

    Quote:
     That doesn't mean that eliminating price competition is not illegal. It is, for good reason. 

    It is in some cases. However, since the Supreme Court's landmark decision of Leegin in 2008 (which I already linked to above and which you obviously didn't bother to read), price fixing is not illegal in many instances now where the price-fixing comes from vertical agreements. Cote can call Apple a horizontal conspirator all she wants, it doesn't change the fact that Apple's agreements (the contacts that were signed) with the publishers were vertical—between supplier and retailer—and not horizontal (between publishers alone). This glaring error will not be lost upon the appellate court judges.

  • Reply 108 of 132
    Quote:

    Originally Posted by THT View Post

     

    Apple sold 15m iPads in 2010, 40m in 2011 and 66m 2012. Not only that, Apple made the prototypical tablet for all other OEMs to design from, and those tablets sold in as significant numbers and for much cheaper than the iPad. Amazon responded to Apple's design by taking Blackberry's Playbook and rebadging it as a Kindle Fire 18 months after iPad 1 went for sale. The Kindle Fire [HD/HDX], an iPad form factor device not a Kindle eInk device, is the flagship Kindle today. Is that not the very definition of pro-competitive?


    Apple were not punished for selling the iPad. The iPad did not require a price fixing conspiracy in order to sell well. It was an additional feature that was prized but non essential.

     

     

    Quote:


    With lots of tablets in the market, there was a large market to sell digital goods to, a large market for ebooks. This means more competition. New retailers can arise. Publishers can become retailers. The retailer can be the publisher. Self-publishing becomes viable. Mass market ebook and niche ebook retailers can co-exist. That's a gigantic boon. A huge economic benefit for consumers and sellers a like. The very definition of pro-competitive. If Judge Cote and the DOJ wanted the ebook market to return to what it was like in late 2009, well, wasn't the proper solution for that to have Apple remove ebook functionality from the iPad.


     

    Right, they don't want to do that, that's why they have not banned the iPad or similar. They took action over a completely different factor.



     

    Quote:


    Secondly, yes, Apple enabled publishers to raise popular books (generally of the novel and hardcover style book, not text books, not books with color, etc), but these ebooks were still subject to price-demand curves. An ebook has "infinite" supply. Demand was low and will be continue to be low for ebooks relative to apps, music, videos, web browsing and games. People don't have to buy an ebook at the publisher's price, and they have a lot of other options, especially in the LCD tablet market. The price was going to go down.

     



    The point of this agreement was to eliminate those options. That is what Apple is being punished with. The publishers collaborated with Apple exactly to stop the price going down. They were willing to accept lower sales if they could restrict trade under $12.99 or so.

  • Reply 109 of 132
    ruddyruddy Posts: 94member
    Quote:



    Quote:
    Originally Posted by ruddy View Post

     

    In most cases loss leading is not illegal. However, loss leading by a monopoly player most certainly is illegal.


    Is it? Can you cite that please?

     


    Here you go

    Quote:

    Neither is breaking antitrust law. The fact of the matter though is that Apple had the capability of entering this market, but they did not like the terms. 


    They had the same capability of everyone else who chose not to act in a brain dead fashion.

     

    Quote:

     I could, if you cited what exactly you're talking about

    I was talking about the evidence and testimony Apple presented during the trial and summed up in this slide which Judge Cote summarily dismissed or ignored in her decision.

     

    Quote:


     That doesn't mean that eliminating price competition is not illegal. It is, for good reason.


    You really need to get with the program.  Price fixing is no longer always illegal, for good reason. Read the Leegin decision and if Justice Kennedy's language is too difficult, there are plenty of discussions elsewhere why Leegin means price-fixing in many cases is now perfectly legal. 

  • Reply 110 of 132
    dasanman69dasanman69 Posts: 12,972member
    ruddy wrote: »
    Here you go
    They had the same capability of everyone else who chose not to act in a brain dead fashion.

    I was talking about the evidence and testimony Apple presented during the trial and summed up in this slide which Judge Cote summarily dismissed or ignored in her decision.

    You really need to get with the program.  Price fixing is no longer always illegal, for good reason. Read the Leegin decision and if Justice Kennedy's language is too difficult, there are plenty of discussions elsewhere why Leegin means price-fixing in many cases is now perfectly legal. 

    Your proof is contradictory. On one hand you claim 'predatory pricing' kept competitors out, but then you show that prices went down after competition increased. I don't know about your math but in mine both can't exist.
  • Reply 111 of 132
    gatorguygatorguy Posts: 19,805member
    ruddy wrote: »
    In most cases loss leading is not illegal. However, loss leading by a monopoly player most certainly is illegal.

    Is it? Can you cite that please?

    Ruddy, the wiki link you cited doesn't say predatory pricing is always illegal, even if that company holds a monopoly position. There's a number of qualifications.

    A word of advice. AI members are a tough audience. It's rare for someone to sneak a questionable statement by without challenge. If you're going to link something as objective proof for what you've said make sure it really support you. I believe members here are smarter than the average blogger. And nope, no cite for it. ;)
  • Reply 112 of 132
    Quote:

    Originally Posted by ruddy View Post

     

    Here you go.


    This is not a citation of any law, you're quoting Wikipedia rather than any particular decision. Please provide a real citation if you want to discuss this.

     

    Quote:


    I was talking about the evidence and testimony Apple presented during the trial and summed up in this slide which Judge Cote summarily dismissed or ignored in her decision.

     



    This is a slide from Apple's opening argument. They abandoned this line of argument because horizontal conspiracies are not judged by the "rule of reason" as I understand it, but are per-se illegal. Do you have any actual link to their arguments? Or just a screenshot from a blog?

     

    Quote:


    You really need to get with the program.  Price fixing is no longer always illegal, for good reason. Read the Leegin decision and if Justice Kennedy's language is too difficult, there are plenty of discussions elsewhere why Leegin means price-fixing in many cases is now perfectly legal. 


    None of these are relevant to a horizontal conspiracy between a majority of a market. That's exactly what happened here.

  • Reply 113 of 132
    ruddyruddy Posts: 94member
    Quote:

    Originally Posted by dasanman69 View Post





    Your proof is contradictory. On one hand you claim 'predatory pricing' kept competitors out, but then you show that prices went down after competition increased. I don't know about your math but in mine both can't exist.

    It may help you to understand one thing happened before the Agency model, the other happened after. So of course both can exist. 

  • Reply 114 of 132
    dasanman69dasanman69 Posts: 12,972member
    ruddy wrote: »
    It may help you to understand one thing happened before the Agency model, the other happened after. So of course both can exist. 

    It certainly looks like something bad happened, not good.
  • Reply 115 of 132
    thttht Posts: 3,037member
    Quote:
    Originally Posted by ItsTheInternet View Post

     

    Apple were not punished for selling the iPad. The iPad did not require a price fixing conspiracy in order to sell well. It was an additional feature that was prized but non essential.

    ...

    The point of this agreement was to eliminate those options. That is what Apple is being punished with. The publishers collaborated with Apple exactly to stop the price going down. They were willing to accept lower sales if they could restrict trade under $12.99 or so.


     

    Who the heck was talking about being punished for selling the iPad? My comment was regarding the pro-competitive effects of the iPad on the ebook market. The pro-competitive arguments that Judge Cote ignored or didn't believe. The iPad and its form factor clones increased the size of the ebook market ~10x over what Amazon, Kobo, or BN did with their readers. With a larger market, more competitors, more boutiques & niches can arise.

     

    The agreement between Apple and the publishers shifted price control from retailers to publishers. It didn't do anything to fix prices as the publishers are subject to the same demand v price curve as anyone else. If they wanted to sell more ebooks, the publishers would have to reduce the prices. And they were. And they would have been more accepting to do it since they would be doing it themselves.

     

    Self-publishing or indie-publishing would eventually eat their lunch as the barriers involved with selling a book virtually disappears in the digital world. An self-published book from some unheard of author can go from zero sales to 100k sales in couple of months, and all the friction of going through a publisher, printing the book, distributing the book, dealing with inventories of the book disappear. A physical book basically has zero chance of that. And prices went down they did. Prices are definitely, and emotionally, still elastic at $10 levels.

     

    For a retailer who has books sitting in warehouse, yes, they do indeed need to have price control. It enables them to better manage their inventory, and can use loss leading techniques to get people into stores. They are taking a lot of risks taking a physical good into their inventory. Why the heck do they need price control for a digital good? There's no inventory to clear. Then, since these are platform specific DRMed files, what the hell are these ebook retailers competing over? If I had a Nook, how does the price of a Kindle book affect me? What about vice versa? How would I read Nook books on a Kindle? If I wanted to take advantage of cheap ebooks that retailers have price competition over, I would need to buy 3 or 4 ereaders? 

     

    Hmm, think about the digital music or MP3 stores. A little perusal of Amazon's MP3 store has singles at 0.69, 0.99 and 1.29. The same for Apples iTunes stores. Holy cow! I don't see any songs for 0.49 or 0.29 or 0.19? And all the new and best sellers are at 1.29! The two major emusic retailers aren't competing. They aren't competing on price! This is Amazon right, they should be able to sell these singles for whatever they want, right? Looks like someone is price fixing there!

  • Reply 116 of 132
    ruddyruddy Posts: 94member
    Quote:

     Ruddy, the wiki link you cited doesn't say predatory pricing is always illegal, even if that company holds a monopoly position. There's a number of qualifications


    First of all I never said predatory pricing is _always_ illegal. I said it is illegal for those with monopoly power. I concede that predatory pricing is difficult to prove, and I agree Wikipedia isn't perfect, so here's an example of Wal-Mart being found liable of it, as well as direct you to the language from the US Code that makes it unlawful, see 15 USC § 13 (a), especially where it says:

    Quote:

    where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them


    Of course each state in the US also has similar antitrust statutes and case law which makes predatory pricing illegal for competitors with monopoly power in the relevant market.

  • Reply 117 of 132
    Quote:

    Originally Posted by THT View Post

     

     

    Who the heck was talking about being punished for selling the iPad? My comment was regarding the pro-competitive effects of the iPad on the ebook market. The pro-competitive arguments that Judge Cote ignored or didn't believe. The iPad and its form factor clones increased the size of the ebook market ~10x over what Amazon, Kobo, or BN did with their readers. With a larger market, more competitors, more boutiques & niches can arise.


    You are confused. You are extolling the virtues of the iPad for the ebook market, but the iPad does not require Apple to be involved in price fixing. If they had released it with support for epub/mobi it would have had the exact same effect even without an iBookStore. You cannot tie the introduction of the iPad intrinsically to a price fixing conspiracy.

     

     

    Quote:


    The agreement between Apple and the publishers shifted price control from retailers to publishers. It didn't do anything to fix prices as the publishers are subject to the same demand v price curve as anyone else. If they wanted to sell more ebooks, the publishers would have to reduce the prices. And they were. And they would have been more accepting to do it since they would be doing it themselves.


    The agreement between Apple and the publishers facilitated the publishers strongarming Amazon and Google etc into this new agreement. This did indeed fix prices at specific brackets: http://www.justice.gov/atr/cases/apple/exhibits/px-0034.pdf

     

    Quote:


    Self-publishing or indie-publishing would eventually eat their lunch as the barriers involved with selling a book virtually disappears in the digital world. An self-published book from some unheard of author can go from zero sales to 100k sales in couple of months, and all the friction of going through a publisher, printing the book, distributing the book, dealing with inventories of the book disappear.


    This has absolutely nothing to do with a price fixing conspiracy case.

     

    Quote:


    Hmm, think about the digital music or MP3 stores. A little perusal of Amazon's MP3 store has singles at 0.69, 0.99 and 1.29. The same for Apples iTunes stores. Holy cow! I don't see any songs for 0.49 or 0.29 or 0.19? And all the new and best sellers are at 1.29! The two major emusic retailers aren't competing. They aren't competing on price! This is Amazon right, they should be able to sell these singles for whatever they want, right? Looks like someone is price fixing there!


    What does this have to do with anything? It seems to me you're simply typing as much as you can in an attempt to muddy the waters. The facts are really very clear though.

  • Reply 118 of 132
    Quote:

    Originally Posted by ruddy View Post

     

    First of all I never said predatory pricing is _always_ illegal. I said it is illegal for those with monopoly power. I concede that predatory pricing is difficult to prove, and I agree Wikipedia isn't perfect, so here's an example of Wal-Mart being found liable of it, as well as direct you to the language from the US Code that makes it unlawful, see 15 USC § 13 (a), especially where it says:

    Of course each state in the US also has similar antitrust statutes and case law which makes predatory pricing illegal for competitors with monopoly power in the relevant market.


     

    Lets assume for the moment that Amazon's pricing is illegal. Can you show me how participating / falicitating an illegal price fixing conspiracy is a lawful remedy? Of course you can't, because even if Amazon's conduct is illegal, Apple's response should have been to file a complaint, not to break the law themselves. Do you deny that?

  • Reply 119 of 132
    thttht Posts: 3,037member
    Quote:

    Originally Posted by ItsTheInternet View Post

     

    What does this have to do with anything? It seems to me you're simply typing as much as you can in an attempt to muddy the waters. The facts are really very clear though.


     

    My argument would be that the DOJ has no business bringing up this case. The interpretation of the laws by which they prosecuted this case doesn't apply and shouldn't apply. Ie, a retailer selling a physical good is not the same thing as a retailer selling a digital good, a paper book is not the same thing as an ebook.

     

     

    In other words, yes, prices did rise. But it's all part of the markets going through transition and the gov't should not mess around with it. The iPad was instrumental for this transition. It's had pro-competitive effect. It would have turned out fine. Now, it's just fubar-ed.

     

    If the gov't wanted to do something, it would be to mandate a common DRM system so that it levels the field for the players. But the gov't has already answered this and are fine with closed formats, so they are not going to do it.

  • Reply 120 of 132
    ruddyruddy Posts: 94member
    Quote:


    They abandoned this line of argument because horizontal conspiracies are not judged by the "rule of reason" as I understand it, but are per-se illegal. Do you have any actual link to their arguments? Or just a screenshot from a blog? 


    You understand wrong. In fact it appears that now you are simply making up your own information to suit your preconceived conclusion, something that doesn't win you any credibility points. Apple never abandoned its defense, but presented the pro-competitive effects of the shift to agency to the court with exhibits, witnesses, expert testimony, and they closed their arguments with no change or backpedaling. Judge Cote did not rule on the per se vs rule of reason standard until after the trial was over. The first anyone knew of it was when her decision was published.

     

    Per se illegality is by far the weakest link in her ruling, and since she used the wrong standard, an Appellate or the Supreme Court can easily toss _all_ her findings of fact and _all_ her findings of law right out the window, to review the trial de novo. She's ignored all the Supreme Court's many cautions not to use the per se standard in situations like this (for one thing they prohibit it outright in cases involving new markets the courts have no experience with) and she deliberately ignores the language in Leegin that explictly directs her to use the rule of reason standard in any case with any verticality. 

     

    Apple's agreements with the publisher are _not_ as if Apple were another publisher. That would be a horizontal agreement. They are vertical agreements between publisher and retailer, between two levels of competition in the ebook market. Even if the effect of those agreements is that Apple facilitated a horizontal conspiracy, the agreements themselves are still vertical price restraints, and Leegin explicitly requires the rule of reason be used for those. This excuse to make an exception to use per se, instead of the default rule of reason, allows Cote to pretend that competition among the retailers, B&N, Amazon, Sony, etc. need not be considered and was not affected, which is baloney considering how much change there was in competition on that level. It isn't a sustainable argument. 

     

    I'm confident per se illegality will be tossed on appeal, and someone is going to have to review the trial de novo. That sounds like a big deal, and it is, but it's not at all unusual for antitrust law. Either the Appeals Court will reverse the trial court's decision and review it themselves under the rule of reason, or they will remand it back to Cote for her to review under the rule of reason. 

     

    Getting judged by the right standard doesn't guarantee Apple can win, but it gives them a chance.

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