Apple dismisses DOJ's proposed e-book penalties as 'a draconian and punitive intrusion'

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Comments

  • Reply 101 of 128
    gatorguygatorguy Posts: 23,302member
    crowley wrote: »
    So... they need to be seen to be willing to negotiate an appropriate penalty for being found guilty even while they are appealing?

    If they don't then they'll be treated as hostile and antagonistic and will get stiffed.  And if they they lose their appeal, which seems at the very least plausible if not likely, then they look like morons.

    Explain to me where my misunderstanding of the legal system "out there" lays. 

    FWIW Apple is negotiating the penalties. They've made their own offer which includes independent monitoring for compliance, restrictions on what they can share with partners and dropping the "most-favored nation" clause from contracts. The AI article may have (intentionally) left the impression that Apple was being arrogantly dismissive of the DoJ settlement suggestions but that's not the case. This article just didn't bother spelling out Apple's counter proposal. They aren't being the "antagonistic" or "hostile" party you're suggesting IMHO.

    It's not unusual for some authors to leave out parts of a story to make them more dramatic. This is one of them.
  • Reply 102 of 128
    crowleycrowley Posts: 9,114member

    Quote:

    Originally Posted by GTR View Post


     


    Or maybe he just had better things to do than make up for your lack of education.


     


    How's that for a choice?


     


    image



     


    11,000 posts on this forum.  He doesn't have anything better to do.

  • Reply 103 of 128
    crowleycrowley Posts: 9,114member

    Quote:

    Originally Posted by Gatorguy View Post





    FWIW Apple is negotiating the penalties. They've made their own offer which includes independent monitoring for compliance, restrictions on what they can share with partners and dropping the "most-favored nation" clause from contracts. The AI article may have (intentionally) left the impression that Apple was being arrogantly dismissive of the DoJ settlement suggestions but that's not the case. This article just didn't bother spelling out Apple's counter proposal. They aren't being the "antagonistic" or "hostile" party you're suggesting IMHO.


     


    Ok, well if that's true then that's fair enough.  I think the AI article portrayed their response as being very antagonistic and hostile, but if that was a misrepresentation on AI's part, then no matter.

  • Reply 104 of 128
    gtrgtr Posts: 3,231member
    The End.
  • Reply 105 of 128
    froodfrood Posts: 771member

    Quote:

    Originally Posted by jungmark View Post



    Hey Frood,



    A better analogy is Amazon sells a 50000 ford for 35000, undercutting every ford dealership thus obtaining a 90% market share. Apple said "hey Ford, we'll let you sell ford at 50000 as long as we get 30%. We also want to be able to match a competitor's price if you let them sell for less. " more dealerships begin to appear as now they can compete and make money.


     


    A good argument- but it is backwards.  The DOJ is not responsible for ensuring profits in an industry are so high that many people choose to enter it.  I do not make PC's for a living, because prices are too low and I don't believe I could make a lot of money doing it.  Is it the DOJ's job to go after PC manufacturers and ensure they drive prices way up so that I can start making them?  No.


     


    PC's have open standards that have driven prices way down and many people who used to make PC's no longer do.  They could not compete.


     


    Amazon makes money selling ebooks.  They do sell some titles below cost.  That is allowed.  Amazons prices are low and many people are finding they do not want to or simply can not compete.  That is fine.  They hypothetically proposed danger often used is that Amazon would eliminate all competition and then jack book prices sky high with their monopoly.  The problem with that argument is that


    1) it did not happen and 2) it could not happen.  That scenario only can occur in industries with high barriers to entry-like Steel or semiconductor manufacturing. 


     


    If Amazon did mysteriously jack prices up overnight:


     


    1)  It would likely be much much less than 30%- so even if they did it would be more beneficial to consumers than the market under Apples scheme.


    2)  If they did raise their prices the DOJ and consumers would be all over them immediately


    3)  With no barriers to entry, if prices were higher, anyone with server infrastructure could immediately get back in the business


     


    Apple's scheme was implemented- and prices jumped 30% overnight for the exact same product.


    The DoJ stepped in.


    What happened to the ebook market? Is it collapsing?  No, competition is actually growing and prices have actually come down to below the starting point.  Google books is becoming a player.  Apple books is a player and even making money selling titles for $7.99  Are all these companies competing to see who can lose the most money?  Nope.  They are making money.  Obviously Apple would be much happier to game the system and charge consumers nearly double that, but they got caught and thwarted.


     


    I do think the DOJ's proposed terms are overreaching.  They need to determine damages (and it is substantial- driving prices up 30% for the entire book market for a substantial period is not a small thing).  The DOJ could opt to triple damages because the intent was willful- but I think even that would be borderline.  The other option would be to allow the doors to swing open and let states and consumers sue individual or via class action similar to what they did with tobacco companies. 


     


    Telling Apple how to run their business is overreaching.  Telling them they can't engage in certain behaviors is fair game.


     


    If the headline is a reflection of Apple's attitude... "Apple dismisses DOJ's proposed penalty...."   then I think Apple is in serious trouble and this is only going to get worse for them

  • Reply 106 of 128
    jungmarkjungmark Posts: 6,883member
    Frood, where was this competition before Apple entered the market? The fact is Apple leveled the playing field when they entered. Amazon couldn't undercut anyone anymore. The DOJ should not be focused on profits but they should be focused on competition. Amazon's low prices was a barrier to entry.
  • Reply 107 of 128
    froodfrood Posts: 771member

    Quote:

    Originally Posted by jungmark View Post



    Frood, where was this competition before Apple entered the market? The fact is Apple leveled the playing field when they entered. Amazon couldn't undercut anyone anymore. The DOJ should not be focused on profits but they should be focused on competition. Amazon's low prices was a barrier to entry.


     


     


    I will agree that Apple did promote a level playing field.  Setting up a system where much higher prices are charged to consumers across the board is certainly 'level'


     


    What is the goal of competition?  To drive efficiency.  If one company achieves such a lead in efficiency that it can make profits where others can't, stepping in and artificially raising prices so that the less efficient companies can make a profit and 'compete' is exactly backwards.  And in Apples case its even worse because they are efficient enough that they could have made a profit at $9.99- they just had the clout to say, no we want to make 30% more- and made it happen.


     


     


    It's much better for me, the consumer, to be able to buy books for $9.99 from one source than to have my choice of 500 'competitors' all selling me the exact same book at an artificially fixed price of $12.99.  That is not competing, that is rigging.

  • Reply 108 of 128

    Quote:

    Originally Posted by Crowley View Post




    Quote:

    Originally Posted by GTR View Post


     


    Or maybe he just had better things to do than make up for your lack of education.


     


    How's that for a choice?


     


    image



     


    11,000 posts on this forum.  He doesn't have anything better to do.



    If the choices are:


    1) Post on AI since I have nothing better to do;


    2) Do nothing since I have nothing better to do;


    3) Educate people like you....


     


    ...it's fairly obvious that my life is better off with: [YOU CHOOSE]


     


    image

  • Reply 109 of 128
    thttht Posts: 4,130member

    Quote:

    Originally Posted by Frood View Post


     


    A good argument- but it is backwards.  The DOJ is not responsible for ensuring profits in an industry are so high that many people choose to enter it. 



     


    The DOJ is also not responsible for determining what prices should be either. With this court action, they are saying the market price for ebooks is $9.99, or lower. Prices rise and fall depending on market conditions, like a new entrant and different business model for the industry. 


     


    Quote:

    Originally Posted by Frood View Post


    Amazon makes money selling ebooks. 



     


    People say this like it is fact. Maybe it is true. I'd like Amazon to report it as such. There's a bit of doubt in my mind as Amazon rarely reports a profit. As such, it's easy for me to see them recouping losses in the "ebooks" division with profits from another division. The DOJ says that ebooks "division" is profitable. But how about showing me instead of telling me.


     


    I've got no problems with Amazon selling loss leaders. Highly approve of it.


     


    Quote:

    Originally Posted by Frood View Post


     


    1)  It would likely be much much less than 30%- so even if they did it would be more beneficial to consumers than the market under Apples scheme.


    2)  If they did raise their prices the DOJ and consumers would be all over them immediately


    3)  With no barriers to entry, if prices were higher, anyone with server infrastructure could immediately get back in the business



     


    1) This is baseless speculation. We just don't know. The converse is also unknown. We don't know if Amazon will raise prices either.


     


    2) This is baseless speculation. We just don't know. The converse is also unknown. The DOJ could leave them alone.


     


    3) This we already see evidence of like with Overstock.com, and Amazon knows how to respond. They'll jack the prices down. As the market leader with a dominant position in one or more markets providing all the revenue, they can absorb losses in other markets and prevent a new market entrant from being successful or entering. In the end, does the gov't want a book market with many players, or a book market dominated by one player?


     


    Quote:

    Originally Posted by Frood View Post


    Apple's scheme was implemented- and prices jumped 30% overnight for the exact same product.



     


    1) They were not the same products. Apple sells iBooks files and Amazon sells Kindle files. The content may be the same, but they are not the same product. As long as they aren't interoperable, they are not the same product. As long as they have different features, they are not the same product.


     


    2) The prices jumped overnight, but since consumers still had a choice to buy or not buy, the prices of the ebooks moved to something the market would bear; and, as can be seen by the poorly plotted charts, they were moving down, and probably would continued to move down considering all the competition for our time.


     


    Quote:


    Originally Posted by Frood View Post


    What happened to the ebook market? Is it collapsing?  No, competition is actually growing and prices have actually come down to below the starting point.  Google books is becoming a player. 


     



     


    Apple made the argument that the result of their market entrance, competition grew with new and better ebook readers, giving people better experiences. The prices were coming down from their initial starting point too. Really, there's no apparent difference in the market behavior between 2010 to 2012 and 2012 and 2013, when the publisher's agency contracts with Apple ended.


     


    They only real difference is that tablets have gotten better and cheaper, enabling a wider market for ebooks. This however had zero to do with ebooks.

  • Reply 110 of 128

    Quote:

    Originally Posted by THT View Post


     


    1) They were not the same products. Apple sells iBooks files and Amazon sells Kindle files.



    And you might add, Apple allows Amazon to sell Kindle files on iOS.


     


    (Excellent post, btw).

  • Reply 111 of 128
    thttht Posts: 4,130member

    Quote:

    Originally Posted by Frood View Post


     


    What is the goal of competition?  To drive efficiency.  



     


    Quote:


    Originally Posted by Frood View Post


     


    It's much better for me, the consumer, to be able to buy books for $9.99 from one source than to have my choice of 500 'competitors' all selling me the exact same book at an artificially fixed price of $12.99.  That is not competing, that is rigging.



     


    The two quoted statements are not congruent.


     


    As for rigging or price fixing, if the price is indeed fixed by the industry at one price, yup that's price fixing, but ebook prices from 2010 to 2012 were not fixed. They were going doing from their starting point, and probably would have continued to go down. Maybe not, I don't know, but the plots provided by the DOJ showed they were going down basically the whole time of the price fixing scheme.

  • Reply 112 of 128
    jungmarkjungmark Posts: 6,883member
    frood wrote: »
    I will agree that Apple did promote a level playing field.  Setting up a system where much higher prices are charged to consumers across the board is certainly 'level'

    What is the goal of competition?  To drive efficiency.  If one company achieves such a lead in efficiency that it can make profits where others can't, stepping in and artificially raising prices so that the less efficient companies can make a profit and 'compete' is exactly backwards.  And in Apples case its even worse because they are efficient enough that they could have made a profit at $9.99- they just had the clout to say, no we want to make 30% more- and made it happen.


    It's much better for me, the consumer, to be able to buy books for $9.99 from one source than to have my choice of 500 'competitors' all selling me the exact same book at an artificially fixed price of $12.99.  That is not competing, that is rigging.

    It's also better if I get ebooks for free. Who says 9.99 is a fair price? How did Apple with 0% market share in ebooks/books have that much power?
  • Reply 113 of 128
    How much and who did Amazon pay for Justice Dept to take their side?
  • Reply 114 of 128
    jragostajragosta Posts: 10,473member
    If the choices are:
    1) Post on AI since I have nothing better to do;
    2) Do nothing since I have nothing better to do;
    3) Educate people like you....

    ...it's fairly obvious that my life is better off with: [YOU CHOOSE]

    :lol:

    Sorry, but #3 is an impossibility. Some people are just undeducable and Crowley appears to be one of them.
  • Reply 115 of 128
    hill60hill60 Posts: 6,992member

    Quote:

    Originally Posted by QAMF View Post


    The average price of ebooks rose 19%.



    http://tidbits.com/article/13912



    -QAMF



     


    SOME eBooks, not ALL eBooks.


     


    The AVERAGE price of ALL eBooks actually fell.

  • Reply 116 of 128
    qamfqamf Posts: 87member

    Quote:

    Originally Posted by hill60 View Post


     


    SOME eBooks, not ALL eBooks.


     


    The AVERAGE price of ALL eBooks actually fell.



    ... Did you read the story?  I believe a few months ago the prices finally returned to the pre-agency model, if that means anything to you.



    In addition, the price of "popular" books rose drastically.



    As well as hardcover prices and older books.


     


    Quote: TidBITS


    Once the agency model was in place, ebook prices from those publishers rose immediately. Roughly two weeks after the move, prices at Amazon rose 14.2 percent for new releases, 42.7 percent for New York Times bestsellers, and 18.6 percent overall. Publishers raised prices for their hardcovers as well, to bump them into higher price tiers, and increased prices for their backlist books, older titles that sell relatively few copies each, but which form the long tail of book sales.


    Simultaneously, and in a win for the basic economic rule that higher prices result in lower sales, the number of sales dropped by 12 to 17 percent per publisher. In short, customers bought fewer books and paid more per book.




     


    Quote: TidBITS


    Do publishers and authors earn more money because of these higher prices?


    That’s one of the counterintuitive aspects of this situation. Yes, customers paid more — as noted, prices rose nearly 19 percent per book overall after the agency model went into effect.


    But publishers earned less per book, with some predicting the overall drop in earnings would be as much as 17 percent. Here’s why. Consider a $29.99 hardcover that Apple would sell for $14.99. The publisher would earn 70 percent of that, or roughly $10.50. But under the wholesale model, the publisher might have sold that book to Amazon for as much as $15. Plus, because publishers were earning less, they also allowed fewer promotions that would have reduced prices for customers.


    Since author royalties generally track with publisher earnings, most authors presumably earned less as well, though the specifics undoubtedly varied by contract.


    Ironically, the agency model probably caused Amazon to earn more than it was earning under the wholesale model, since it could no longer sell ebooks as loss leaders. But just as the publishers didn’t agree to the agency model in order to earn more money, Amazon wasn’t utilizing the wholesale model because it wanted to earn less. In both cases, the issue was control over pricing.




    -QAMF



    note: I dislike that Amazon undercuts biz's to try to make them fail.

  • Reply 117 of 128
    froodfrood Posts: 771member

    Quote:

    Originally Posted by THT View Post


     


    The DOJ is also not responsible for determining what prices should be either. With this court action, they are saying the market price for ebooks is $9.99, or lower. Prices rise and fall depending on market conditions, like a new entrant and different business model for the industry. 


     


     



     


    This is just false.  The DOJ just asserted a system to fix high prices would not work.   Anyone is free to undercut Amazons prices.  Similarly Apple is absolutely free to charge $12.99 for an eBook in the differentiated 'Apple format'   Consumers can then choose if they want to buy the Apple formatted book for $12.99, or the Kindle formatted same book for $9.99.   If Apple is able to sell a lot of books that way they will do stunningly well.


     


     


    Quote:

    Originally Posted by THT View Post


     


     


    1) This is baseless speculation. We just don't know. The converse is also unknown. We don't know if Amazon will raise prices either.


     


    2) This is baseless speculation. We just don't know. The converse is also unknown. The DOJ could leave them alone.


     


     



     


    You are absolutely right, we do not know in either case.  However, we do know the argument people are making against Amazon and we do know the current reality......  'Amazon is selling at a loss so they can eliminate competition and then use their monopoly power to jack prices way up!'   There is absolutely no rule or violation in lowering prices to eliminate competition.  And I'd even agree wholeheartedly-  yep, Amazon prices are so low they eliminated a lot of people that would like to charge more for books.  There *IS* a big problem with using monopoly power to jack prices up.  And we *DO* know that Amazon has not actually done this.  You can not convict them of a future hypothetical crime.   And until they do actually do that, they haven't done anything wrong, so there is nothing for the DOJ to currently go after them for.  You are absolutely right though, we will actually never know if they would or would not have committed the future crime until the future gets here.  And if the day did come when they said "Woohoo" and jacked their prices up overnight, I know I'd be the first to say 'Wow!  Amazon just had the arrogance and gall to think they could get away with jacking prices up across an entire industry.  Sick' em DOJ.  And I'm fairly sure a good number of people on this site would be all for the DOJ going after them too. (But that is pure speculation on my part)

  • Reply 118 of 128
    techboytechboy Posts: 183member
    I like how everyone argues without including publisher and authors...publishing like every complex business, where everyone in the process gets a small cut of profit. Cheaper ebooks will only drive the current publishers into an eventual meltdown, less money into the pockets of those that creats content. Maybe not now or two year or five year...but if and when everything becomes digital consumption then it will happen. The question is can anyone look back and undo what damages DOJ created here?
  • Reply 119 of 128
    thttht Posts: 4,130member

    Quote:

    Originally Posted by Techboy View Post



    I like how everyone argues without including publisher and authors...publishing like every complex business, where everyone in the process gets a small cut of profit. Cheaper ebooks will only drive the current publishers into an eventual meltdown, less money into the pockets of those that creats content. Maybe not now or two year or five year...but if and when everything becomes digital consumption then it will happen. The question is can anyone look back and undo what damages DOJ created here?


     


    Yes, the traditional big publishers are pretty much toast. They did it to themselves.


     


    1. They saw the music industry get blindsided by digitization. It was inevitable for books to be in the same boat. This was over 10 years ago, and they had a long time to do something.


     


    2. They knew Amazon was going to eat them alive, yet they became dependent on them, and didn't have the guts to break free. Amazon is notorious for getting the steepest discounts for wholesale book prices anywhere, and probably had a MFN on those discounted prices to boot. On top of that, they operated under a 4% to 9% no-sales tax advantage, and continue to this day in same states.


     


    3. They couldn't transform themselves from a paper-based business to a digital one. They were not willing to cannibalize their paper-based business model, and continue to this day to hold onto them. eBooks could have been the vector for them to get out from under Amazon's yoke. It still could be, but it's not looking good that they are willing.


     


    4. The text book makers are even in deeper doodoo. 


     


    As for the authors, I think they'll be ok. Like with software developers and app stores vs boxed software, there's going to be a period of adjustment, but I think they'll be ok. It is going to be this way regardless of the DOJ action.

  • Reply 120 of 128
    thttht Posts: 4,130member

    Quote:

    Originally Posted by Frood View Post


     


    This is just false.  The DOJ just asserted a system to fix high prices would not work.


     



     


    I'm asserting the DOJ doesn't understand the market forces involved, and are doing a disservice to consumers by choosing to go through this particular action. 


     


    1. Prices were not fixed. Prices were reset to a higher initial value yes, but they were subject to market forces and they came down. Didn't you see the graph by the DOJ? The one where there is a spike in the book prices? Sure, that is "price fixing" for all of about 1 month. The prices dropped immediately afterward, and continued to drop through time. If prices were fixed, why did they drop? 


     


    The prices spiked up because their was a new "powerful" entrant in the ebook market - which in the ebook world finally become viable with a tablet, a reader application and the content the reader application displays in 2007, which is totally unlike a paper based book - and different business model for selling things. This is the market at work on a nascent business.


     


    2. That business model, agency model, moved the pricing power from the retailer to the publisher and content providers. App developers control the pricing of their apps, their digital good, and the "retailer" (app store) charges a fee for providing a user and performing a money transaction for 5 years now. In this model, the retailer is nothing but a fancy billboard and a cash register. This is the digital world, and I question if the DOJ understands it as they refer reverently to the centuries old business of wholesaling of physical goods. In a digital world, supply is basically infinite. In a digital world, customers have market powers heretofore unseen in the physical goods markets. (There's an obvious conclusion when there is infinite supply with low demand, and why those fixed prices started dropping so quickly). Why exactly is the DOJ messing around with this, especially using a system of laws based on centuries physical goods markets?


     


    In the court case, and the remedies already enacted and proposed, the DOJ is buttressing wholesaling as the right business model, and therefore preserving "price" competition. That's insane imo. Go to point 3.


     


    3. The DOJ seems to think the ebook market is centuries old. It's not. It's only about 6 years old, and the digital goods market is maybe 15 years old, maybe 20. What's the last real innovation in the physical book market? The mass market paperback book? About a century old if not older. The DOJ is applying laws based on physical goods onto a digital market. That's just lunacy. Tablet zero, the first real ebook reader, appear in 2007 for $400. Over the span of 5 years, the price of that tablet reader went down by nearly an order of magnitude. Competitors arrived. An incidental competitor arrived that offered color, motion, etc ebooks as a "feature" of their device, not even its primary purpose. Over that time span, computational power of these devices basically increased 32-fold, prices dropped at the same time, and units went from 1m to 100m, basically all them capable of storing most of the contents of the library of Congress in them or having access to almost every single book in digital form. This happened in 5 years! There's no way normalcy has occurred yet.


     


    Redundancy alert, an ebook is digital. The digital world nukes the idea of author->publisher->retailer->customers and wholesale. What risk is a wholesaler retailer taking with wholesaling an ebook? Especially a computing power like an Apple, Amazon, Google, etc? Virtually nothing, so why is it they the ones that need to control prices? The idea of a wholesale digital good is crazy, and the eventuality of the market is going to be agency. Content provider provides content. They control the price. "Price competition" is not an entity to be controlled. Prices will rise or fall in accordance with demand and quality, only difference is that the "retailer" isn't the one controlling prices, but content providers. 


     


    Yet, the DOJ is saying the business model of choice is wholesale for ebooks? That's nuts. They have no business doing anything in this market until it matures. They have no business saying a certain model is good or not. They have no business saying who controls prices in such a young market.


     


    Quote:

    Originally Posted by Frood View Post


     


    You are absolutely right, we do not know in either case.  However, we do know the argument people are making against Amazon and we do know the current reality......  'Amazon is selling at a loss so they can eliminate competition and then use their monopoly power to jack prices way up!' 



     


    Buck up mean. I agree with you that this line of thought is crazy. Too many people are using this as an argument, and right now, it's seem obvious that Amazon will continue to offer, low discounted prices for the foreseeable future. My problem is stagnation. Anytime there is a dominant, monopolist player controlling the market, it results in stagnation. The gov't is defacto supporting Amazon, the dominant player. The proposed remedy from the DOJ on Apple basically fails the appearance of impropriety test, but I digress.


     


    You want conflict. You want infinite diversity in infinite combination (stole that from Star Trek!). As you say, you want competition. The "ebook" market was in, is in intense competition. By all appearances, the gov't is supporting Amazon, the dominant player, using a set of rules developed from a centuries old market to change a totally different market which operates under different conditions, and one in rapid transition boot.

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