Where’s the proof that Apple conspired with publishers on ebook pricing?

“Was Apple the mastermind of a conspiracy among the biggest U.S. book publishers to drive up book prices, or was it just the instrument? It was the former, according to U.S. District Court judge Denise Cote, who has found against the technology giant, the lone remaining defendant in a massive antitrust prosecution by the Justice Department,” Jeff Bercovici reports for Forbes.

“The case centers on an across-the-board hike in e-book prices that took place in early 2010, when Apple introduced its first iPad and, with it, the iBooks virtual marketplace. In lockstep, five of the six largest publishers… raised prices on their e-books and required Amazon to adopt the so-called ‘agency model’ of bookselling rather than the standard wholesale model it had been using,” Bercovici reports. “The publishers have all settled, but Apple has insisted from the start that it was innocent of wrongdoing. In a 160-page ruling, however, Judge Cote says it ‘played a central role in facilitating and executing that conspiracy…It provided the Publisher Defendants with the vision, the format, the timetable, and the coordination that they needed to raise e-book prices.'”

Bercovici reports, “Says Ankur Kapoor, a partner at the law firm Constantine Cannon who specializes in antitrust cases… ‘I think the decision is completely wrong. I didn’t see anything that tied Apple to the conspiracy among the publishers.’ While there’s abundant documentation showing that the publishers coordinated with one another on pricing and other strategic decisions, there’s no proof that Apple acted as their go-between, says Kapoor… In fact, he says, the government’s case contradicts itself: While the publishers were allegedly in a conspiracy to boost prices, Apple successfully sought to limit them by imposing price caps.”

Read more in the full article here.

[Thanks to MacDailyNews Reader “eN” for the heads up.]

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41 Comments

  1. Facts.

    1. Apple got the world’s largest publishers in a room.
    2. Apple assured each one that none would undercut anyone else.
    3. Apple had a contract that set new releases and best sellers at $12.99 and $14.99, with a term to sell at these prices.
    4. Had clauses that made it virtually impossible for these publishers to sell anywhere else for less.
    5. Caught with their pants down saying they want to create a $12.99 and $14.99 eBook market, specifically these lock in prices. That they thought the cheaper prices would “cheapen” their products (iPad).

    The net result of this was to be fixed eBook prices that stymied competition and was thus anti-competitive. Now others/new entrants are free to sell for less without Apple being in the way. That is, publishers aren’t bound to illegal contracting terms that limit what they can do with other retailers. They’re free to sign contracts with other retailers with price flexibility along with many other terms.

    This is a way for the publishing industry and consumers.

        1. Hey Tom:

          Read it and suck it:

          “The agreements also included a price parity provision, or Most-Favored_nation clause, which not only protected Apple by guaranteeing it could match the lowest retail price listed on any competitor’s e-bookstore, but also imposed a SEVERE FINANCIAL PENALTY upon the Publisher Defendants if they did not FORCE Amazon and other retailers similarly to change their business models and cede control over e-book pricing to the Publishers. As Apple made clear to the Publishers, “There is no one outside of us that can do this for you. If we miss this opportunity, it will likely never come again.”

          This and much more in the report. Read it and finally shut the fuck up. The evidence for collusion is overwhelming. Apple is a greedy pig.

      1. #1 is wrong. All seven players NEVER got into one room at one time. There has never been any documentation showing — and even no claim by the prosecutors that this happened.

        #2 is wrong. The deal was, and is, that each publisher would individually allow Apple’s iBook store pricing to match any price the publisher allowed any other retailer to sell books to the public. There was never any proof or any claim by anyone that Apple said to any publisher, “You can’t sell me books for less than any other publisher sells them to me.” Never happened and not even the prosecutors claim it did.

        #3 is wrong. The contracts set the MAXIMUM selling price (the price to the public) are those values. Per the contracts the publishers could have set the prices as low as 10 cents for each of those books for which the MAXIMUM value applies.

        #4 is wrong. The publishers could set a wholesale price to any retailer at any value they wanted. There was, and is, NOTHING in the current contracts that forces an agency model on anyone but Apple. The clause you seem to be wrongly pointing to covers the retail price that Apple sells to the general public. It has absolutely nothing to do with the price that publishers sets for sales to Apple or any other retailer.

        #5 is wrong. Apple — even the often quoted and misquoted statement by the late Steve Jobs — says that Apple recognized that the PUBLISHERS want to create an ebook market with higher retail prices than what was happening previously. This was, and is, just Apple recognizing that their supplier wants to make more money than they had been doing. This is just reality. What company does NOT want to make more money?

        Every one — literally every one — of your premises here are wrong.

        The reality here is that there really was a conspiracy here… The judge had made up her mind before the trial and even publicly announced this AND Apple’s legal team was, ans is, too stupid to properly portray the facts. A perfect storm that got Apple wrongly labeled as a ringleader in this mess.

        1. The judge is an embarrassment for the US legal system. How will Apple overcome this setback wit an appeal when it seems as though the entire legal system is out to get Apple no matter what amount of proof Apple can provide.

        2. Shadowidiot:

          You have never read the report, that is clear, because what you’re saying is complete bullshit and WRONG.

          Read the report, and the contract (if you can get it) and respectfully shut up.

          1. First, you have no idea whether I’ve read the ruling. (It’s not a report.) I have. The first 103 pages are pretty much boiler plate. They are just retelling the story the way the prosecutor filed things. The much of the remaining pages are the judge’s opinion (which, per the rules, is what the ruling is supposed to be). Unfortunately her opinion is not backed up by the facts.

            Second, you have no idea whether I’ve read any Apple contract or not. I have, many of them — hell, some of them directly relating to this specific case! I doubt you have read any of them. Likely what you’ve been reading are snippets from other sites that either quote things improperly out of context or “quote” them (to use the term very loosely) inaccurately.

            Third, many of the people on this site know I have specific references and information dating back to the early 80s about specifically what went on inside Apple and specifically its dealings with competitors, suppliers and customers. I doubt you’ve had over 30 years of such access.

            Hell, I’ve even been asked, point blank, on this site to tell people who I am. I’m the shadow on the wall. That’s all I’ll ever say.

            The real tragedy here is that people like you post about the web things that are not based upon the real facts and instead post “facts” that are not based upon reality. Way too many people believe these inaccuracies.

            You need to go no further into the ruling than page 47 to realize that even the judge believed there was an MFN clause. In reality it was a “Best Customer” clause (legally a radically different concept). Why did the judge buy into this error? Because people like you — and the press in general — and the prosecutor (because it supported his case) — all improperly called it a MFN clause. They all got it wrong, and Apple’s legal team was either too stupid or too lazy to correct this error.

            Just because the vast majority of people believe your position does not make it based upon the facts nor does it make it right.

            1. Shadow:

              Aren’t you the same guy who says that Amazon LOSES money on the sale of eBooks? That they engage in this predatory pricing?

              Well, wrong again.

              AMAZON DOES NOT LOSE MONEY ON EBOOKS.

              Let’s dispel this myth by saying it again:

              AMAZON DOES NOT LOSE MONEY ON EBOOKS.

              From Greg Sandoval, The Verge’s senior reporter,”This came out in the trial. Amazon was NOT LOSING money on ebooks. Even the publishers acknowledged this in their emails presented as evidence in the case. And even if they were, it isn’t a violation to sell goods at lower prices than competitors.”

            2. No one in their right mind would claim that Amazon, overall, loses money on all their ebook sales. I’ve never claimed that, and no one should.

              Has Amazon priced certain books at less than it costs them to sell them (when all direct and indirect costs are included)? Yes. In those specific, limited circumstances Amazon clearly does lose money on those specific sales. I assume you’ve heard of the concept of a “loss leader” product?

              However, no one should extrapolate from a limited set of specific cases to Amazon’s entire pricing and profit structure. I have never done so, and you shouldn’t try to claim that I do.

              Why are you changing the topic? The topic I was attempting to discuss with you was that all of your original premises were wrong. Do you concede that and are thus moving to making incorrect claims about my position on Amazon?

            3. I think that Amazon now DOES make money on their e-book sales but only because they were forced onto an agency model which ended the predatory pricing and ergo the losses on the most potentially profitable segment: best-sellers and new releases.

              In 2010 and 2011, there was no evidence at all they could make anything at all losing 50% or more on each sale in that segment. No way could they make that loss up in sales of miscellaneous book titles. It ain’t possible. The vast majority of sales in any book store are the popular books of the day: the best sellers and the new releases.

          2. Slimon, there is not just “one” contract but six… And yes, I’ve read the report. I also, as an educated economist, KNOW what I’m talking about. YOU don’t. Nor does the idiot judge. Your posts positive SCREAM ignorance and your recitation of the “facts” as you called them bore absolutely NO RELATIONSHIP to the testimony, or the actual facts in either the government’s case, or the testimony as recounted in court.

            I don’t pussyfoot around like some of the other posters on MDN, and I am going to name you what you are to your face. You are entitled to your own stupid opininion, but you ARE NOT ENTITLED TO CREATE YOUR OWN SET OF “FACTS” TO SUPPORT THAT OPINION AND POST THEM AS TRUE! That makes you more than wrong, it makes you a LIAR.

    1. slim e on….
      Hmmmm, guess its time to go back to trolling for sanding again. The case and its points are pretty much on line without the bias. Even Foss (patent lawyer who covered case) says he expected Apple to walk away based upon the evidence.

      Like the ITC who finds against Apple when 3 other US govt. agencies say not to and most of Europe says Samsung is faking its FRAND requirements, yeah, just really dumb US agencies.

      1. This is nothing but a shakedown, apple does not funnel large amounts of cash to politicians or lobbyist, if they did this lawsuit would never have been filed.

    2. #1. Apple got the world’s biggest publishers in a room.
      Nope. Never happened. You lie. No testimony from ANY ONE, at ANY TIME claimed that. EVER.
      #2. Apple assured each one that none would undercut anyone else.
      nope. never happened. You lie. No testimony from ANY ONE, at ANY TIME claimed that. EVER. In fact, it is not even possible because the publishers DO NOT SELL THE SAME PRODUCTS! Publisher A sells books by Stephen King, publisher B sells books by Stephen Hawking, publisher C sells books by Stieg Larson, etc., but NONE of the directly competes with each other to sell books by the same author so, they cannot “undercut” each other. Apple merely requested, and got the right to MATCH the lowest price their respective books were being sold at by any competitor they sold books THROUGH under an agency or wholesale agreement. Apple did establish a MAXIMUM price that e-books could be priced for on the iBooks store based on the retail price of the hardback ($14.99 or less) or trade paperback first release hard copy ($12.99 or less) of the particular title. That is all Apple did. There was no “undercutting” prevention language and the publishers were free to set their own book prices within those guidelines, so long as they did not go over the maximums. As a matter of fact, there are many e-books on iBooks that sell for far less than those prices, some as low as 99¢, a price set by the publisher, not Apple.
      3. Apple had a contract that set new releases and best sellers at $12.99 and $14.99, with a term to sell at these prices.
      Nope. Never happened. You lie. Apple’s contract allowed the OWNERS of the books to set the prices of new releases and best sellers at a price of THEIR CHOICE not to exceed either $12.99 or $14.99 based on certain criteria. Apple did NOT SET THE PRICE.
      4. Had clauses that made it virtually impossible for these publishers to sell anywhere else for less.
      Nope. Never Happened. You lie. The clauses allowed them to sell elsewhere for less, but the clauses allowed Apple to match those lower retail prices for its customers.
      5. Caught with their pants down saying they want to create a $12.99 and $14.99 eBook market, specifically these lock in prices. That they thought the cheaper prices would “cheapen” their products (iPad).
      Nope. Never happened. Again you lie. Apple’s point was that NO ONE can sell below cost and make a profit and that it is ultimately unhealthy for the market and for the cunsumers. . . and for any company trying to sell e-books going head-to-head against a predator, anti-competitive monopsonist.

      Your list of mis-representations of the facts of the case are a tissue of LIES. Ergo, anything you have to say, your opinions and conclusions are meaningless FUD. NOT based in reality. Who pays you to post these lies?

  2. From here on out, partisans will choose sides according to their careful reading of the evidence presented and stipulations made during the hearing, guided by their moral philosophy, understanding of the law, innate sense of fairness skewed by their distaste for some of the litigating parties or the judge, and issue a highly coloured opinion on the matter which they will insist is only common sense to a thinking person like themselves.

    How human, how fallible, how sad.

        1. Why assume corruption when simple incompetence will do? Just look at all the “experts” quoted in the news who don’t know their ass from a hole in the ground.

  3. I gladly pay the extra cost for the convenience of having all my reading material on the IPad. I can share all with my family.

    Also where would the bookstores who are having problems of their own have been without the Apple agreement.

    It’s hard to understand how the laws and courts of the United States would allow Amazon to create a monopoly and destroy a creative industry.

    Look what ITunes did for the music industry.

    Shame on our entire court system.

  4. Of course here on MDN, you will never see Apple referred to as “convicted” as they do Samsung for their *civil* court loss. Hypocritical is a term that comes to mind.

    1. Samsung is run by a convicted felon. What was your point again?

      Apple was “convicted” by a crooked judge that made her mind up before the case even began. This is a farce, not just a miscarriage of justice but rather no justice was present at all. The judge could have saved Apple a lot of time and expense presenting their defense if she had just presented her already formed opinion before the trial and had summary judgement. That’s all this was, a show trial run by a crooked Judge and a completely dishonest, corrupt and vile “Justice department” one of the very worst in American History.

    2. I do agree… “Hypocritical is a term that comes to mind. ”

      Yep, the anti-Apple trolls just want Apple to die cause its so bad and companies like Samdung are so good.

      I say, buy Samsung if you like them but its really dumb to come to an Apple site to bitch about how bad Apple is. Maybe you are just confused and think that Steve Ballmer runs Apple????

  5. What would happen if Apple chose to deal with Authors directly?

    They could publish books, setting up their own company and deal with the Amazons of the world directly.

    There are probably many authors who would be happy to share with Apple and its distribution system.

  6. The government jailed the dude for stealing 100,000 iphone user information from the AT&T database a couple years ago. However, after Snowden spoke the truth, it blackmailed other nations to apprehend Snowden. When the government wants to fine Apple, it’ll find way to say Apple is guilty.

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