U.S. DOJ takes Apple to trial alleging e-book price-fixing

“Apple Inc goes to trial Monday over allegations by federal and state authorities that it conspired with publishers to raise the price of e-books,” Nate Raymond reports for Reuters.

“The trial pits the maker of the popular iPad and iPhone against the U.S. Justice Department in a case that tests how Internet retailers interact with content providers,” Raymond reports. “‘This case will effectively set the rules for Internet commerce,’ said David Balto, a former policy director for the U.S. Federal Trade Commission.”

Raymond reports, “Apple is going to trial alone after the five publishers agreed to eliminate prohibitions on wholesale discounts and to pay a collective $164 million to benefit consumers… Apple says that it was unaware of efforts by the publishers to conspire before it entered the marketplace, and said when it did, it act independently. It also contends that in the wake of its introduction of the iBookstore, prices have fallen rather than risen from $7.97 on average to $7.34.”

Read more in the full article here.

MacDailyNews Take: Killing real competition for the appearance of competition is just plain stupid.

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37 Comments

  1. The DOJ shook down five publishers with extortion and now they expect to do the same to Apple. I hope Apple is big enough to fight this bully that has gone rogue on us and not be forced to give up its lunch money on the school yard.

    Any judge worth their salt would have thrown this out of court long before it got there. This is predatory action from Amazon to impede competition. The wrong company is in court on this particular issue.

    How can we have any respect for the 3rd arm of government when they pull this kind of stuff?

    Maybe it is time for another revolution.

    1. Maybe it is time for another revolution.

      Oh yes. It’s time. But the question is, will the new boss be the same as the old boss? I’d settle for a revolution that simply ripped out our Corporate Oligarchy and forced the country back in line with our US Constitution, as intended. Oh, and force SHORT term limits in the spirit of how our country’s forefathers INTENDED our government to be run. No life timers, no money puppeted scum allowed. There’s a revolution!

  2. Where’s the smoking gun?

    I hope this is a jury trial. As consumers how are they going to react when they’re told that before Apple entered the space there was one ebook retailer that controlled 90% of the market, that fewer titles were available, and average book price was 9% higher.

  3. Once again, I’m here to bust your delusional fanboy asses.

    Apple is plain, flat out LYING by saying this:

    “Apple says that it was unaware of efforts by the publishers to conspire before it entered the marketplace, and said when it did, it act independently”

    Steve Jobs and Apple rallied all of these publishers to agree to fix prices and lock them in by forcing them to sell higher where they wouldn’t be allowed to sell for any less than the inflated iBooks contract price elsewhere.

    Parts of the smoking gun are below. It shows Steve Jobs and others at Apple negotiating, in writing, this exact stuff and the publishers discussing their trepidation with being locked in to Apple’s price fixing scheme.

    Here are some snippets:

    From HarperCollins (not buying Steve’s bullshit):

    “we are worried about setting prices to[o] high…”

    “If we can’t agree on the fair price of a book, your team’s proposal restricts us from making that book available elsewhere, even at a higher price. This is just a bridge too far for us.”

    “…we, and our partners who produce, write, edit, and otherwise, make all this with us, have views on fair pricing, and care a lot about our future flexibility.”

    “I think the crux of this is our flexiblity to offer product elsewhere at price-points you don’t like.”

    “I think we are worried more about the absolute holdback of product elsewhere, and our ceding of pricing to Apple, than we are about the actual haggle over what the price will be.”

    //Signed// JRM

    ——————

    In his biography, Jobs said that he told publishers: “We’ll go to the agency model, where you set the price, and we get our 30 per cent, and yes, the customer pays a little more, but that’s what you want anyway”.

    And the real kicker:

    “Throw in with Apple and see if we can all make a go of this to create a real mainstream ebooks market at $12.99 and $14.99.” = We’re fixing eBook prices at $12.99 and $14.99 and you’ll be locked into this. You won’t be allowed to sell anywhere else any higher than these prices as you list with us.

    There it is in writing and there’s lots more. Apple’s lying. Steve’s leading the price fixing charge. And some publishers never bought into his bullshit.

    After several years, Amazon remains the absolute king of the eBook market with strong publisher relations and Apple has about 12% US eBook marketshare.

    1. Don’t underestimate Apple. You don’t address the fact that Amazon will create a monopoly on eBooks (unfairly & ruthlessly selling them also low as loss leaders) as a result of this DOJ action and ride roughshod on publishers.

      1. Look, I’m all for Apple and others… I’m in the industry and in fact just met with the iBookstore crew a few days back.

        I know the ins and outs of this business because it is my business. I agree that Amazon has a huge foothold on the eBook market… but that foothold is limited to basically the US and a few other regions. They’re shit in other areas of the world where eBooks are growing fast because they’re not in those markets and don’t have any brand awareness there.

        Kobo is aggressively expanding and taking the international scene away from Amazon. Amazon simply is too big to scale as fast as a smaller company like Kobo.

        Apple is small potatoes in the eBook market. What Jobs tried to do was interesting and that’s cool how he wanted to increase prices of eBooks which would mean more money for publishers and the industry as a whole.

        But what Jobs and Apple did was shoot themselves in the foot because they barred publishers from selling for cheaper elsewhere, effectively killing their ability to sell on Amazon… which forced people away from Amazon and locked into Apple’s fixed prices.

        This isn’t good for anyone either because it is also monopolistic but at the least it fixes prices and that screws consumers. And how Apple specifically screwed themselves was that Amazon was a market leader and there was no way people would buy into Jobs’ price fixing bullshit. Nobody wanted to pull off Amazon and Apple lost out because they lacked content. And nobody will pull out of Amazon today either.

        And now it’s a self-publishing market. 27 of the top 100 best selling Kindle books were at one point self-published. Larger publishers have gotten stamped out of the eBook market entirely and Apple still doesn’t even really know what the fuck to do about this.

        I’d say, if anything, eBooks are a hobby for Apple because they don’t know what the fuck they’re doing.

        Overall, what Apple did fixing eBook prices is inexcusable and they do deserve to get fined.

        You can hate Amazon all you want but they have done nothing wrong. They sell SOME things at below cost and this is an acceptable, lauded practice in the retail industry at large to hook people into your store in hopes they’ll buy something else. Even Groupon is a loss leader aggregator for all kinds of businesses.

        1. It hasn’t worked out well for Apple. Seems that Steve Jobs was going after Amazon through book sales. I believe that was indeed his objective. His choice. But it backfired. As I have said many times before, Apple builds the best hardware and software but it just can’t do services well. Another shining example. And you’re beating your head against the wall trying to convince fanboys of anything. That’s why they’re called fanboys. Rational intelligent objective adults may or may not agree with you. But they will make an objective decision. Fanboys, they just bite,kick and scream no matter what.

        2. Sfgh, if Apple don’t know what the fuck they’re doing with ebooks, and Amazon are so fucking brilliant, how come, then, that I regularly buy my ebooks from Apple rather than Amazon because they’re cheaper, or the same price?
          You don’t work for Amazon, by any chance? You seem damned keen to promote their predatory selling tactics in preference to Apple’s.

          1. Because you buy eBooks from Apple that means Apple knows what they’re doing? Or that they have the lions share of the market? You’re one person.

            Shut up idiot. And besides, the data is there, and Apple has about 12% US marketshare, Amazon has about 65%.

            As for pricing, the prices have come down on Apple’s marketplace, you fucking moron, partly because the government put a stop to Apple’s price inflation/fixing. Which is why what the government has done here did is GOOD for you, not bad for you. It’s bad for Apple.

            Get it you fucking idiot?

    2. You are incredibly misinformed. Amazon has used its monopoly power to set e-book prices. Apple e-books have better functionality and copy protection than Amazon e-books. Why should e-tailer Apple, not be able to set its selling prices, just like any retailer. You’ve certainly in your life bought a book at a store, pulled off the sticker and noticed a lower publisher set price underneath? Did you cry to the DOJ that the bookstore price-fixed you?

      1. You’re twisting the facts and you’re full of shit.

        Show. Demonstrate how Amazon price fixes. I’ll save you time and tell you that you don’t fix prices but go ahead and try.

        Apple on the other hand fixed prices and they tried to do it across the entire industry. Stop being so fucking delusional and wake up.

  4. US DOJ- Gov going all out to screw the most valuable successful homegrown USA company. Who broke no laws, paid their taxes and changed how we work and play to our enjoyment. Wow, how patriotic is that.

        1. Shut up fanboy.

          sfgh: “Hi Jubei, you idiot fanboy. Here’s a fact that you didn’t know: Water is wet.”
          Jubei: “Whatever! No it’s not! Apple said it’s dry so screw you jerk!”
          sfgh: “Water is in fact wet.”
          Jubei: “Blah blah, no it’s not moron!”
          sfgh: “Yes, water is certainly wet. It’s wet because wet is a property of water. The logic is also derivative within the framework of science and language overall.”
          Jubei: “I’m delusional and a fanboy and will believe anything Apple tells me. Because of this, I’ll deny facts and act irrationally.”
          sfgh: “Ok Jubei, I hope this way of being helps you in your life”.
          Jubei: “Screw you you Apple hater!!!”
          sfgh: “I actually like Apple.”
          Jubei: “No you don’t, you paid Samsung schill!”

          And on and on it goes until the time comes (never) when idiots like you realize what being rational and balanced is about.

        1. Hey Derek Currie:

          Doctor: “I’m sorry to inform you Derek but you have terminal cancer.”
          Derek Currie: “Fuck you idiot! You’re full of it!”
          Doctor: “I really am sorry Derek. In this package are treatment options and advice.”
          Derek Currie: “Ha! You’re a paid Microsoft schill you idiot!”
          Doctor: “I understand your emotions over this Derek. I wish there was more that I could do.”
          Derek Currie: “Wait! You’re actually from Samdung aren’t you! Screw you idiot! Apple is going to squash you!”
          Doctor: “The admin outside can take care of you from this point. She’ll schedule a follow up… Derek! Are you ok?”, as a large book falls and bounces off of Derek’s head.
          Derek Currie: “Uh… what’s happening?”, Derek says groggily.
          Doctor: “Derek, tell me where you are.”
          Derek Currie: “I don’t know…”
          Doctor: “I’m your doctor Derek, you’re in my office.”
          Derek Currie: “What am I doing here?” Derek glances at the wall and sees a sign that says “Cancer Clinic of Westhaven”.
          Doctor: “Derek”.
          Derek Currie: “Why am I here.”
          Doctor: “Because you have cancer.”
          Derek: In shock, Derek drops to the floor, the Doctor consoles him. “Things are starting to come back. I have cancer. Ya. Terminal. I can’t believe I wasted my life worshipping a company. It’s made me so spiteful and delusional. Why did I do that? What a waste of life.”
          Doctor: “I know this isn’t easy.”

          Derek walks out of the Doctor’s office, heads toward a cliff and looks down. It’s far down. It’s a bit chilly out but the sun is shining with blue skies. Slight wind crackles the trees. Derek peers out into the distance, thinking of his entire life. He then jumps… falling, falling. Like a dream. Floating. Falling. Down… down… everything goes quiet.

          And that’s fanboy idiot Derek Currie. A delusional fuck up who denies reality because he worships a brand that manipulates him.

          Wake the fuck up Derek. I want you to have a better life.

  5. If consumers don’t like buying iBooks they can shop for books on Amazon or Nook. Had Apple colluded with Amazon and former B&N (nook) to set e-book prices, then the DOJ would have a case. The DOJ is not going after the couture fashion houses and high prices at fashion retailer Bergdorf Goodman so why in the hell would they go after Apple, an e-tailer, for trying to dictate its retail prices. This must be another Bush holdover at the DOJ trying to wreck the nation. When will we purge the government of the Nixon/Bush cabal?

    1. It’s because Apple tried to fix eBook prices for the big six publishers. The way they tried to do that was to lock them into set price points that were higher, much higher, than the most common price of $9.99. By signing with Apple, none would be allowed to sell for cheaper anywhere else which would force eBook prices to be raised across the entire industry.

      That’s why it’s price fixing. And no, Apple doesn’t get all the blame, so do the publishers. That’s why they’ve already paid millions in fines over this. Apple decided to fight this and I’m not sure that was the best idea.

    2. ddddd: This is far too complicated a subject to get caught blaming it ONLY on the ‘Nixon/Bush cabal’, whatever that is.

      I can point out that Nixon’s ‘conservatives’ were NOT what are now called ‘conservatives’, aka ‘neo-conservatives’, for which my personal lingo is Neo-Con-jobs. Reagan labeled the neo-cons ‘The Crazies’ and I heartily agree with him.

      Then toss in the brain dead, parasitic puppeting of the US government by our Corporate Oligarchy where their lobbyists WRITE bills that are enacted into law, on and on.

      Then notice how President Obama is deliberately putting Corporate Oligarchs into his cabinet. Example: The new appointee to the FCC. Bought and sold.

      Blahblahblah. Both ‘parties’ are worthless corruptions. I trust neither. I watch BOTH ruin my wonderful country. We The People are shot by both sides.

  6. Amazon’s basic business model is to charge sellers a commission, which they call a Referral Fee. Sellers set product prices. Amazon earns a fee by matching buyers and sellers. Amazon also earns some fees for optional warehousing and pick/pack/ship services.

    Go to ‘Amazon.com’, click ‘Sell’ at the top, then click ‘Pricing’ on the left. Under the Media Category for ‘Books’, see that Amazon charges professional book sellers a Referral Fee of 15%.

    Why is Amazon unwilling to extend to publishers — ie, sellers of e-books — the same terms of commerce offered to other sellers, particularly when earning a 30% commission that is twice Amazon’s usual Referral Fee ?

    It seems Amazon seeks to gain control of the emerging market for e-publishing. For Amazon, this includes selling e-books from third-parties (ie, publishers), selling Kindle e-book readers, and most importantly, developing a proprietary “publishing” business (ie, the Amazon publishing company). Essentially, Amazon wishe to disintermediate the publishers in the emerging field of new e-book titles. This would explain why Amazon is unhappy with a 30% commision on publishers e-book sales.

    Amazon wishes to argue that publishers are engaged in price-fixing, except that Amazon has no problem when any of its other sellers routinely determine their own product prices. The price-fixing lawsuit is to be a clever, technical ruse whose ultimate goal is to thwart publishers from future e-publishing business, while bolstering Amazon so it can gain dominant control of the potentially lucrative new e-publishing business market.

    1. I agree with your point about 15 vs 30% commission. Would be nice if Amazon would lower eBook commission rates.

      But I wouldn’t go as far as you have. Amazon lets you determine the retail price and takes 30% of it up to $9.99 retail. If you charge more than $9.99 they take 70%.

      This latter sucks and we could also say that Amazon has engaged in a sort of price fixing scheme here too because it discourages anyone from selling over $9.99 and most people will try to get the upper limit hence $9.99 average.

      BUT. Amazon doesn’t limit you from selling cheaper anywhere else and doesn’t limit you from selling your stuff for more than $9.99 either. Apple did this both ways: they locked you into not selling for cheaper anywhere else and they also locked you into not selling above $14.99 (for the most part).

      So you can see how Apple went too far and Amazon, although still a bit shifty, is not price fixing or anti-competitive… Apple is because it affects the entire industry (all publishers and book sellers).

      1. You are missing the point. It suits Amazon to sell publisher-brand books low, even below what they pay. Amazon wants higher prices elsewhere. It enhances the appeal of “Amazon Publishing Empire”. They will make it up elsewhere and/or later.

        However, publishers do not want Amazon to sell their e-books low, for the same reasons other Big Brand companies don’t want their premium-priced products sold by discounters.

        It is common for large buyers to require “best available prices” that are offered to any other customer. This is entirely legal.

        Publishers were stupid to cede e-book pricie control to Amazon, which differs from Amazon’s established business model. But stupidity is not illegal.

        Amazon is engaged in a strategic game to dominate e-publishing. Selling publishers’ products at low prices suits their agenda, and allows them to assert price fixing by sellers who are now trying to regain control over their product prices. Never should have happened in the first place.

        If publishers cared so much about controlling the sales of their e-books, they should just develop their own online sales function. Or create an industry consortium to do same. Or support an e-distributor that does not want their cheese…

        1. You’re full of shit and delusional.

          Amazon does not price fix. Period.

          You’re also confusing a wholesale model with an agency model and also eBooks with print books. We’re talking eBooks here.

          Amazon does not set the retail price, you do. In addition, self-publishing has exploded, and larger publishers have become much more irrelevant. And Amazon doesn’t care if you sell for cheaper somewhere else. Apple did.

          YOU SET THE FUCKING RETAIL PRICE AT AMAZON, NOT AMAZON. AMAZON TAKES 30% OF THE SALE WHEN IT’S UNDER $9.99 AND THEY HAVE THE RIGHT TO SELL FOR LESS, OR LOSE MONEY. BUT, BUT, BUT, YOU STILL GET 30% OF $9.99 WHETHER AMAZON SELLS IT FOR $9.99 OR $5. DO YOU FUCKING UNDERSTAND THIS YOU IDIOT? AMAZON LOSES MONEY, NOBODY ELSE. THERE IS NO PRICE FIXING. YOU ARE IN CONTROL OF THE RETAIL PRICE COMPLETELY. IT’S CALLED COMPETITIVE PRICING AND COMPETITION.

          Amazon:

          “Please note, we reserve the right to set the retail price we charge for the books you provide to us. If you chose the 35% royalty option, you will be paid off of the original list price you chose.”

          Apple (my translation of their approach):

          “We want to inflate prices to about $3-$5 higher than the average for current eBook prices. This will result in consumers paying about 30% more for eBooks. And we are so competitive and greedy and insane and manipulative that we want these prices to propagate across the entire industry, not just our store. So we’ll collude with the big six publishers and lock them in to these inflated prices by forcing them to not be able to sell ANYWHERE ELSE for less.”

          HarperCollins and Random never bought into Apple’s bullshit.

          1. You are WRONG. Amazon was setting the price of e-books and the publishers have been complaining about it for sometime now. Amazon will even exhorbitantly increase their commission on self publishers if you set a price on your own e-book above their established prices. This is a fact. Amazon pays NOTHING to market e-book copies best selling books yet insisted on charging the same price for those as for junk e-books regardless of the amounts the publishers were expending in marketing. . . and also charged the same regardless of the size of the book, setting the price for a 100 page e-book the same as a 1500 page opus that sells for four times the price in hard copy, undercutting the publishers’ sales. The publishers wanted a three tier e-book pricing structure at least. . . with a reasonable structure recognizing best-seller status and size strictures. Amazon, more interested in pushing its below cost Kindle readers, said “No!” And being the only game in town, won. Apple offered a market place in which the publishers did not sell their wares in advance to Apple. Apple acted merely as an AGENT through which they sold an intellectual property license for the use of a licensee, the reader. For providing this agency service, handling the transaction, providing the bandwidth, Apple received an agency fee of 30% of the licensing fee. No physical property changed hands as in the wholesale/retail model that Amazon claims occurs. The PUBLISHERS sell their licenses. Apple never owns the product. This model has been used for 10 years in music sales on iTunes. It’s not price fixing there. . . and never has been, nor is it here. The clause that is being pointed to about no lower sales is a standard clause that protects Apple by stating they must give Apple customers the same prices they give other customers, and not give others preferential status pricing over Apple customers. They are free to charge others more, if they choose. That is NOT price fixing. It just assures that Apple customers are assured the best prices available FROM the publisher. It does NOT control what a wholesale buyer prices his property at. It cannot.

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