Apple says differences in publisher deals disprove U.S. DOJ’s e-book conspiracy allegation

“Central to the U.S. Department of Justice’s e-book price fixing case against Apple are the Most Favored Nation (MFN) agreements the company struck with publishers that ensured it would always be able to sell e-books at least as cheaply as rival retailers,” John Paczkowski reports for AllThingsD.

“The government contends that Apple’s MFN agreements were a crucial part of the company’s conspiracy to raise e-book prices and reap the benefits. But in vetting that argument, it failed to answer a key question about those arrangements prior to trial. Specifically, were they the same for each publisher or were they different? If, as the DOJ argues, Apple was facilitating collusion among a cabal of publishers, you’d think that MFN agreement terms would be identical across the cabal with all participants guaranteed the same terms,” Paczkowski reports. “But they weren’t. Turns out, Apple negotiated different MFNs with each publisher. And in court Tuesday, Apple’s lead counsel, Orin Snyder, repeatedly pointed that out.”

Paczkowski reports, “‘It does make the government’s case harder,’ Stanford law school professor Mark Lemley told AllThingsD. ‘But it doesn’t mean there was no conspiracy.'”

Read more in the full article here.

Related articles:
U.S. v. Apple iBookstore case could go to the Supreme Court – June 5, 2013
Apple accuses DOJ of unfairly twisting Steve Jobs’ words in e-book case – June 4, 2013
U.S. DOJ prosecutors accuse Apple of driving up e-book prices – June 3, 2013
U.S. v. Apple goes to trial; DOJ claims e-book price-fixing conspiracy with Apple as ringmaster – June 3, 2013
U.S. DOJ takes Apple to trial alleging e-book price-fixing – June 2, 2013
In pretrial view, judge says leaning toward U.S. DOJ over Apple in e-books case – May 24, 2013

45 Comments

  1. The second paragraph in the article is mostly these two sentences: “These contracts required publishers to match in Apple’s iBookstore any lower prices they offered elsewhere. And the DOJ has been hammering Apple over them, arguing that they spiked the average price of e-books in the U.S.”

    Frankly, I don’t understand how forcing publishers to match lower prices elsewhere would make their prices go UP in Apple’s store. How does matching a lower price make the price go up?

    Impossible, except maybe for the DOJ.

    1. I suppose the argument would be that other retailers of e-books would have no incentive to lower their prices if Apple’s prices would just drop automatically to meet their lower prices, therefore they would simply keep higher prices. But that’s not collusion – that’s Apple and the publishers agreeing that if the publisher offers a lower price to another retailer, it must also offer that price to Apple.

      I think the DOJ is off the deep end on this one. It just doesn’t add up.

      1. Steve Jobs:

        Paraphrasing, “Let’s see if we can make a go at a $12.99 and $14.99 eBook market.” Walt Mossberg asked Steve Jobs in an interview why someone would want to spend $14.99 for an eBook when it’s $9.99 on Amazon. Jobs replied that Amazon’s would be the same.

        You fucking people just don’t stop eating Apple’s bullshit.

        1. When Jobs said that Amazon would have the same price, he meant that if Amazon was selling that book a $9.99 then Apple would be selling that book at $9.99 as well. It was in Apple’s agreement with the publisher that there be the same price for every vendor.

            1. I like my crotch

              it’s a good crotch and meditating on it does not detract from my contention that apple tried to fix eballs , I mean ebooks…

        2. Why don’t you look at all the facts dumbshit? You cherry pick quotes and facts out of context to tailor your argument just like the DOJ is doing. Apple may very well lose this trial but it won’t be on the merits, it’s because the court has its head up its ass like the DOJ and you have.

            1. Ah, now it becomes totally clear; sfgh, finding that he can’t raise a coherent argument without other, smarter people ripping them to shreds, resorts to the usual tactics of the snotty eight year old: he starts being as crude as possible, throwing around obscenity and profanity, kinda like an ape throwing his own excrement at bystanders.
              Sfgh, here’s a suggestion; go lick a dog’s ass till it bleeds.

            2. The Chimpanzee will engage in that sort of behaviour more frequently than the Orangutan. As for the remainder of the primates, I think we know where we stand amongst them: decidedly in favour of the former; not for nothing have we raised generations of mud-slingers.

            3. Either way, every post from sfgh is either childish, crude, or completely ignorant, so it does not matter. That is from the beginning.

              seems whoever the original sfgh is, they brought this “defamation” upon themselves

    2. This is the core issue — and it is exemplified by the idiotic fact that what you describe (and is the fact of the contracts) is a “Best Customer” deal, not a “Most Favored Nation” deal.

      A Best Customer deal is as you described. You must be treated as good as any other customer. You cannot directly be put at a disadvantage. Nowhere in a Best Customer deal does it say that you can get a better deal than anyone else — just that you won’t get the worst deal.

      This is different from the concept of a Most Favored Nation clause. In a MFN situation you can get a better deal than anyone else. You get the best deal that is handed out even if it is better than anyone else can get.

      The critical point is a MFN customer is getting the best deal no matter what and BC is never being put at a disadvantage. In the first the party of interest actively gets the best deal. In the second the party of interest ONLY gets a better deal if someone else gets a better deal first. The second situation is improved if, and only if, the deal is first bettered for a third party. Saying it even more plainly, only Amazon and the publishers, or B&N and the publishers, or other retailer and the publishers could control the minimum price at which Apple could sell the e-books.

      The agreements between Apple and the publishers do not set an arbitrary minimum price. So if the DOJ wants to point to anyone causing price inflation they need to point to Amazon/B&N/etc. and the Publishers, not Apple.

      I find it absolutely ridiculous that none of these lawyers or even the judge understands this difference between MFN and BC. Thus the stigma associated with a “MFN Clause” is attached to Apple even though no “MFN Clause” exists in any of the agreements.

      1. “We’re going to create a $12.99 and $14.99 eBook market”. Paraphrasing Steve Jobs.

        You bet Apple worked to inflate eBook prices. And to fix them in place. All new releases and bestsellers from the world’s largest publishers would be exactly $12.99 and $14.99 under Apple’s bullshit.

        Keep being delusional.

        1. ‘Paraphrasing’ is telling the story in your own terms, not those of Steve Jobs or Apple.  That does not pass for reliable information in the adult world, or in court.  It’s just a rumor from an ill-mannered kid.

          Amazon was and is the #1 customer of the book publishers.  So the DOJ’s story is that Apple, a new entrant with 0% market share, developed and operated a cartel, while setting different terms with each publisher. 

          The only evidence the cartel was effective was Amazon subsequent price increase for its e-books from $9.99 to $12.99. But Amazon and other book sellers didn’t alter the price of its hardback and paperback books following Apple’s deal with the publishers. So if not for Amazon’s e-book price increase, then no cartel would have been alleged.  Apple would have simply been the high-price seller.

          Yet Amazon isn’t cited as a monopolist by the DOJ, despite the fact that it matched its price to Apple’s and generated greater profits from raising price from $9.99 to $12.99 than Apple.

          This case is just bad economics. 

      2. Wake up.

        Apple got together with the world’s largest publishers, and colluded with them to fix eBook prices at $12.99 and $14.99. Under this blanket cooperation between them all, all of us… every single one of us… would right now be paying $12.99 and $14.99 exactly… precisely… not a dollar more or less… for new releases and best sellers as in eBooks from the largest publishers in the world.

        That’s what this fucking case is about.

      1. Apple worked with industry to inflate and fix prices by getting the world’s largest publishers to agree to a $12.99 and $14.99 new release and bestseller fixed price and then locking them in so they couldn’t sell for less anywhere else.

        This is the difference. This isn’t matching lower prices. It’s collusion.

  2. “Apple conducted separate negotiations with each publisher and, ultimately each publisher decided it own course of action.”

    Yeah, some “conspiracy”. Mark Lemley is a Law Professor and is guilty by association in trying to besmirch Apple. He doesn’t make hay, if he can’t cause doubt.

    1. Besides, DOJ did not even address the issue that Apple did not force publishers signing contracts with them. Apple did not do any business with publishers, there was no leverage upon them.

      So I am not sure how DOJ could seriously assert that Apple was conspirator if publishers making decisions for themselves, and they signed contracts with Apple willing and freely.

        1. Apple could care less on whether prices between major publishers are equial/fixed or not; it is not their business. Not they had power over publishers to “force” them to do sign contracts with Apple even if Apple would all of sudden (why?) wanted to fix the prices.

          1. Apple colluded with industry to inflate and fix eBook prices. Apple doesn’t want to participate in low margin stuff, which is why they have a motive to have higher prices. And the fixed pricing comes from Apple’s anti-competitive practices of colluding with publishers but have them all agree to not sell lower anywhere else. All of them.

  3. although I’ve criticized apple a lot for this ebook price fixing scheme I AM an apple fan at heart . I have a lot of apple devices including a Playbook.

    I’ve also criticized apple’s rivals.

    For example I’ve posted elsewhere at my disgust at Samsung trying to corner the Ramen Noodle market (please note that Samsung is vast conglomerated that besides tech also owns apartment buildings, heavy industry, chemical plants and hair dressing saloons). Many including prominent epicures have condemned Samsungs attempt. They tried to corner the market by not attacking Ramen industry directly but by cornering the worldwide market in Wheat and Rice (which is used to make ramen type noodles). After spending 50 billion dollars in wheat and rice futures on the trading exchange samsung captured the 150 million ramen market. Disgusting. The Korean DOJ should look into it.

      1. And I will give anybody head on this site that doesn’t believe me. And I will keep repeating like a broken record that because Apple charged more for its gorgeous ebooks on its iBookstore than Amazon did for its pathetic Kindle readers that there must have been collusion because you know that’s all that matters right? That’s the only evidence I can provide for price fixing. Or could it be that the publishers were tired of making ZERO money with the publishers that they were willing to risk their relationship with Amazon to push for fair prices. Free trade doesn’t just apply to the demand side. It also applies to the supply side. Suppliers should also get a fair shake. The suppliers in this case, publishers, finally had another viable market in the iBookstore and were finally given an opportunity to make a profit. That more than anything is damning towards Amazon because it says they were pricing the ebooks so low that the publishers were willing to give up that business to make what at the time was an unknown profit with a nascent market on the iBookstore. As you can tell from my previous posts that I don’t know shit about the agency model of pricing and the MFN status does not necessarily imply collusion. But because of uniform pricing after Apple entered the market, I’m gonna yell collusion from the rooftops because there are no other factors to take into consideration right? It’s black and white in my world. Btw, I like to give head.

        1. Fact: KDP ushered in the agency model, not Apple.

          Fact: if you charge $9.99 or less for your eBook on Amazon, you will be paid your cut regardless of what Amazon has it on sale for. Therefore, saying you can’t make money on Amazon because of their sale prices is bullshit.

          Fact: people have made a lot of money on Amazon.

          Fact: Steve Jobs was caught saying Apple was creating a $12.99 and $14.99 eBook market.

          Fact: Apple colluded with the world’s largest publishers to do this.

          I will not stop. I will relentlessly pursue all of your delusional thinking. Keep posting the same bullshit. I’m not going away. I will not stop busting your fanboy asses at every turn.

  4. It’s interesting the Justice Dept. is going after Apple for supposed E-Book prices, but they have never looked into the current costs of High School & College Text Book Prices, which cost hundreds of dollars and students are forced to purchase these seriously overpriced Text Books. When will the government look into the extremely high priced School & College Text Books?

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