U.S. DOJ bites Apple: The 30% revenue-share model is Apple’s standard practice, not a conspiracy

“‘I don’t think you understand. We can’t treat newspapers or magazines any differently than we treat FarmVille,'” L. Gordon Crovitz writes for The Wall Street Journal. “With those words, senior Apple executive Eddy Cue stuck to his take-it-or-leave-it business model of a 30% revenue share payable for transactions through the iTunes service.”

“Despite my arguments to Mr. Cue in Apple’s Cupertino, Calif., offices last year on behalf of news publishers seeking different terms, to him there was no difference between a newspaper and an online game,” Crovitz writes. “It was a sobering reminder that traditional media brands have no preferred place in the new digital world.”

Crovitz writes, “It also should be the defense’s Exhibit A in the Justice Department’s antitrust case against Apple and book publishers: The 30% revenue-share model is Apple’s standard practice, not, as alleged by the government, the product of a conspiracy. Whether it’s news, games, apps or books, Apple’s position is the same. The market determines the price, and Apple gets 30%. The Justice Department fails to acknowledge anywhere in its 36-page complaint against Apple and book publishers that this is the standard approach. (Indeed, the government complaint inaccurately refers to ‘30% margins’ for Apple. Operating margins are very different from sales commissions.) The government says this ‘agency model’ is inherently wrong (‘per se’ wrong, in legalese) and ‘would not have occurred without the conspiracy among the defendants.'”

Crovitz writes, “The problem for the government is that there’s nothing wrong with the agency model, which has been upheld by federal courts and is common across many industries… A more humble, more technology-savvy Justice Department would have exercised restraint by letting the e-book market evolve instead of ordering it to freeze into a single model with a single provider at a single price point for consumers.”

Read more in the full article here.

MacDailyNews Take: As we stated on April 11th: “The U.S. DOJ is plainly inept.”

Related articles:
Apple, publishers face class action lawsuit alleging eBook price-fixing in Canada – April 20, 2012
Apple desires federal trial vs. U.S. DOJ over eBook price-fixing – April 18, 2012
Apple vs. Amazon: Who’s really fixing eBook prices? – April 17, 2012
Apple: U.S. DOJ’s accusation of collusion against iBookstore is simply not true – April 12, 2012
Apple not likely to be a loser in legal fight over eBooks – April 12, 2012
16 U.S. states join DOJ’s eBook antitrust action against Apple, publishers – April 12, 2012
Australian gov’t considers suing Apple, five major publishers over eBook pricing – April 12, 2012
DOJ’s panties in a bunch over Apple and eBooks, but what about Amazon? – April 12, 2012
Antitrust experts: Apple likely to beat U.S. DOJ, win its eBook lawsuit – April 12, 2012
Why the market shrugged off the Apple antitrust suit – April 11, 2012
What’s wrong with the U.S. DOJ? – April 11, 2012
Macmillan CEO blasts U.S. DOJ; gov’t on verge of killing real competition for appearance of competition – April 11, 2012
U.S. DOJ hits Apple,major publishers with antitrust lawsuit, alleges collusion on eBook prices – April 11, 2012
U.S. DOJ may sue Apple over ebook price-fixing as early as today, sources say – April 11, 2012


    1. The problem is the fact that the publishers and apple worked together (collusion) to force other retailers (amazon) to raise their price. This is a fundamental voilation of laws that are governed by the FTC. It doesnt matter at all that apple calls it a commission as purported by an “agency” model.

      1. So when Southwest and JetBlue discount air carriers decide NOT to raise the fares $20.00 when Delta, United, American do, thus causing them to nix the price increase, I take it that is collusion on the discount carriers to force other carriers to keep their air fares low? DoJ needs to jump all over that!

  1. Yea. I’ve pointed this out several times: Apple took their business model for everything from apps to in-app purchases and applied it took books. Apple didn’t give a shit what publishers charged. They don’t make money from the iOS ecosystem. They make money selling hardware. For the DoJ to be that oblivious to Apple’s model for transactions it facilitates is simply laughable.

    1. Exactly. Then the DOJ can get back to their important work of ignoring REAL white collar crime, serving as accessories after the fact for trillion dollar robberies by banksters.

      1. Amen. Republican or Democrat, rich or poor, deficit hawk or spendthrift; There’s one thing for certain- The real evil people in this world love when the government or its citizens go after targets of no concern to the real thievery that goes on in America.

      2. Or their business of running illegal guns across the border to the Mexican drug cartels (search “fast and furious” Mexico) so that the administration can then point out the need for tougher gun laws. They are not only clueless, they’re dishonest, a recipe for disaster.

  2. More taxpayer dollars wasted fighting some imaginary wrong.

    And then the DOJ doesn’t prosecute the New Black Panthers for intimidating voters at polling stations. I think that’s a little more important than whether The Hunger Games eBook is price fixed or not.

    Guess what DOJ? If I think it’s too expensive, I won’t buy it. BTW, the hard cover Steve Jobs biography book costs about $30, while the eBook is around $16. So is that monopoly and unfair pricing by the publishers?

  3. Nine months. Nine more months and we’ll have a government that’s friendly to American enterprise rather than its foe.

    If Steve were alive, he would’ve found himself voting for a Republican president for the first time in his life.

    1. And I’ll lay you odds that the DoJ will be exactly the same under a different administration. Career civil servants always stay the same regardless of whatever flavour of government; that’s how it is here in the UK, and I’m damn sure it’s the same in the US.

      1. Wrong. The civil servants do not establish policy. They carry it out. This has Obama appointees written all over it.

        The sloppiness of the suit demonstrates the utter lack of understanding of private enterprise. This is but one more effort to exert government control, for the sake of government control. Period.

        1. F10T12, even if those statistics were true, overall, they are not an indicator of the status of any single GOP-leaning person. Neither is the converse necessarily true.

          Clearly you are the exception to the Pew rule.

  4. “A more humble, more technology-savvy Justice Department would have exercised restraint by letting the e-book market evolve instead of ordering it to freeze into a single model with a single provider at a single price point for consumers.”

    Most lawyers in the Justice Department have no understanding about how business works. Their people have not created or run businesses. (The same could be said for the President and most senior people in his Administration.)

    My late father ran a retail store, and the wholesale cost – do many DoJ lawyers even know what wholesale means? – was typically 60% of the retail price. From that 40% gross margin he’d have to pay the store’s rent, electricity, insurance, employees, business license, etc.

    The marginal cost to the supplier of each additional digital game, movie, song, book or magazine is minimal. They’re lucky to get 70% of the retail cost. After expenses, Apple’s net profit on each sale is miniscule. The DoJ has no case. But what do you expect from a bunch of ignorant lawyers?

    1. Have some respect for the president. No matter who is in office, that kind of talk is very disrespectful of a job you are not your self even close to qualified for. I’m not taking about criticizing policy or political position on something; I’m talking about the actual office of president. You have no place being so disrespectful to the office it’s self, you should be ashamed. What do they teach you young people these days (and if you’re not a young person, you should be doubly ashamed)? It sure isn’t respect.

      1. I guess it was ok to call Bush Hitler, but not ok to call this president a fraud.

        The fake birth certificate can be viewed by anyone who cares.

        But the American people have become so brainwashed by 24/7 Kardahsians, Jersey Shore and CNN, that they have sunk to the level of sheep.

        1. I said that was disrespectful regardless of who is in office. I found all the jabs at Bush morally distastful. The office of president deserve some respect. It is an immensely hard job with tough desisions I don’t think most of us would be prepared to make.

          You are of course free to disrespect the man, the job or anything else you like if you live in America. That’s your right. I feel it’s morally wrong so I called him out on it, as is my right.

          As to exactly what he said. It was more then just accusing the president of fraud. He said he was “clueless dumbass Kenyan”. You have two words obviously used prejoratively, the third, Kenyan which when you look at it deeper comes off as a racist prejorative. My ancestors were of Irish decent. If some one were to call me that dumbass Irishman, even though I’m American, I would think they intended Irishman as a slur of some kind.

        2. Ubermac, the only mention of “Hitler” in this forum is *yours*. I think that speaks for itself. You and xx and F10T12 and all of the other anonymous polititrolls can blow smoke up each other’s bungholes all you want. Many of the rest of us choose to reason on our own – we don’t need your talking points and we don’t care about your labels and your pathetic talking points.

          Belief is not sufficient to generate truth. You and your ilk are so locked into one particular thread of thought that you refuse to acknowledge that any deviation is possible. Have fun in your own little fantasy world – the real world doesn’t give a rat’s ass about what you think.

          1. LiberTards do not reason. They do not listen. The only spout Commie propaganda!!!!!!!! And try to take away our private property, rights, and freedom, every chance they get!!!!!!!

        3. If Obama’s birth certificate were fake, as many right wing fanatics swear that it is, then it would have been exposed with hard evidence as a fake given all of the effort by the right to discredit the President. However, after years of campaigning and over three years as President, there has been no credible challenge to the validity of his birth certificate. There are people who *believe* that it is a forgery, but belief is not equal to truth.

          The fact that you still cling to that story line discredits anything that you post.

          1. Oh It’s fake commie boy. No one has had the balls to do anything about it until Sheriff Joe. Once proven, everything he did during his Commie Rein of Terror will be reversed.

            1. Screw YOU, Suarp. You obviously cannot comprehend anything more complex than that.

              Bush has a lot for which to answer. So anti-Bush rhetoric is justified. The fact that the memory of it stings (even when praus made no mention of it) shows that the truth hurts.

              Obama has made quite a few mistakes, too. But he did not throw us into a decade-long war with Iraq costing hundreds of billions over phantom WMDs, now did he?

            2. I am very opposed to censorship. I’m not interested in forcing anyone to not say something. We have freedom of speech but with that freedom comes people, like my self, exercising their freedom to tell you that what you said was offensive or wrong. I don’t think there should be a law to force people to respect the president or anything; I’m saying it’s morally wrong, there’s a difference.

            3. But Queen Smell, I thought Afghanistan was supposed to be Maobamanidagene’s war?????? What about Libya and Egypt. What next? Stuff it King Hell!

      2. The problem here is not disrespect to the office of the presidency per se. It is the man who is the incumbent that is a danger to the office. Like Nixon bringing disrespect to the office by lying. Obama is bringing disrespect to the office by being clueless and flip-flopping and not understanding the sanctity of his position. Obama is being led by the nose by a committee of self-interested entities in the White House. That’s why he couldn’t act on his election promises. That’s the real danger.

        1. I feel there is a way to do that and a way not to do that. Saying I don’t think the president should have done that or I think he’s doing this wrong is not the same as calling him a dumbass, or using racial slurs or comparing him to Hitlar.

          Calling the president names is not at all respectful and it’s not even useful. There’s nothing wrong with disagreeing with the president or his desisions. It’s our responsibility as The People to speak out when we disagree with what the president is doing. I’m talking about denigrating him and/or his office. There’s no call for that; it’s disrespectful.

  5. Pew Research data: GOP voters better informed, open-minded

    Yet another new survey shows that Republican supporters know more about politics and political history than Democrats.

    On eight of 13 questions about politics, Republicans outscored Democrats by an average of 18 percentage points, according to a new Pew survey titled “Partisan Differences in Knowledge.”

    The Pew survey adds to a wave of surveys and studies showing that GOP-sympathizers are better informed, more intellectually consistent, more open-minded, more empathetic and more receptive to criticism than their fellow Americans who support the Democratic Party.

    “Republicans fare substantially better than Democrats on several questions in the survey, as is typically the case in surveys about political knowledge,” said the study, which noted that Democrats outscored Republicans on five questions by an average of 4.6 percent.

    A March 12 Pew study showed that Democrats are far more likely that conservatives to disconnect from people who disagree with them.

    “In all, 28% of liberals have blocked, unfriended, or hidden someone on SNS [social networking sites] because of one of these reasons, compared with 16% of conservatives and 14% of moderates,” said the report, tiled “Social networking sites and politics.”

    The report also noted that 11 percent of liberals, but only 4 percent of conservatives, deleted friends from their social networks after disagreeing with their politics.

    A March Washington Post poll showed that Democrats were more willing to change their views about a subject to make their team look good. For example, in 2006, 73 percent of Democrats said the GOP-controlled White House could lower gas prices, but that number fell by more than half to 33 percent in 2012 once a Democrat was in the White House.

    In contrast, the opinions of GOP supporters were more consistent. Their collective opinion shifted by only a third, according to the data. In 2006, 47 percent in believed the White House could influence gas prices. By 2012, that number had risen to 65 percent up 17 points compared to the Democrats’ 40 point shift.

  6. The DOJ is not showing ineptitude. Holder knows exactly what he is doing.

    Start with understanding that the DOJ does not care if they win this antitrust case. Then, embrace the idea that the sole intent here is to further the statist ideology of the Obama administration.

    This case is yet another, in a long list of efforts, to persuade the masses that the Obama administration is the great protector from the evil perpetrated by the free enterprise system.

    Don’t fall for the theory that a loss here leaves the DOJ with egg on their face. Win, loose or draw, the DOJ and the Obama administration will have another talking point that expresses how they have done more than any other to protect the little guy. They will subtly spin a loss as another example of how the laws of this country favor the owners of unbridled competition and hurt the average Joe. And, for that reason, such laws can be rightfully circumvented, ignored or abandoned altogether.

    The antitrust suit brought by the U.S. against Apple was never intended to be an intellectual pursuit of the law. It is a public relations event that exploits the vast attention Apple has garnered by doing exactly what America desperately needs more of.

  7. Wrong. This is not the focus of the DOJ investigation. The agency model isn’t the problem, it is the alleged collusion between Apple and the book labels that lend to a conspiracy against Amazon to fix electronic book prices.

    1. You are right and that is exactly why the DOJ has a weak case. Dating back to the 80’s the courts have held that an individual companies can collectively establish a method/model of doing business so long as it does not include price fixing. To date there is no evidence to indicate price fixing. Apple offered the same take it or leave it deal to all publishers. Each could freely choose to play or not. The simple fact that some publishers met to discuss, even collectively agree to participate in a particular model does not violate antitrust law. Only if the publishers agreed to fix a price.

      Holder has a tendency to take on cases in which he philosophically disagrees with past case law in the hope he can overturn or alter it. This is an example of a broader ideology that the entire Obama administration has embraced.

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