U.S. court denies Apple’s bid to delay e-books damages trial

“A U.S. appeals court on Thursday rejected Apple Inc’s bid to delay a July trial to determine damages after the company was found to have colluded to fix the prices of e-books,” Joseph Ax reports for Reuters. “In a brief order, the 2nd U.S. Circuit Court of Appeals in New York said the July 14 trial should proceed as scheduled, while Apple separately pursues its appeal of U.S. District Judge Denise Cote’s ruling that it conspired with five publishers to raise e-book prices.”

Ax reports, “Cote ruled last year after a non-jury trial that the conduct of the iPad maker impeded e-book competitors such as Amazon.com Inc.”

MacDailyNews Take: Only because she’s an idiotic puppet of an incompetent and delusional DOJ.

Lady Elaine Fairchilde (left), Judge Denise Cote (right),or vice versa
Lady Elaine Fairchilde (left), Judge Denise Cote (right), or vice versa

Ax reports, “More than two dozen state attorneys general joined the Department of Justice in suing Apple over e-books price fixing. Those states, as well as a group of consumers, are seeking up to $840 million in damages. The exact amount of damages will be litigated before Cote at a trial scheduled for July 14.

Read more in the full article here.

MacDailyNews Take: The farce continues.

To paraphrase Scott Turow, the president of The Author’s Guild: The irony of this bites hard: our government has killed real competition in order to save the appearance of competition.

Related articles:
Apple’s Star Chamber: An abusive judge and her prosecutor friend besiege the tech maker – December 5, 2013
In pretrial view, judge says leaning toward U.S. DOJ over Apple in e-books case – May 24, 2013
Lawyers have complained for years that Judge Denise Cote pre-judges cases before she enters the courtroom – August 14, 2013

Amazon’s Bezos has gone too far: The e-book monopolist may finally face a court of law – May 25, 2014
U.S. Federal Puppet Denise Cote: ‘Apple’s reaction to the existence of a monitorship underscores the wisdom of its imposition’ – January 16, 2014
Judge Denise Cote denies Apple request block her friend as ‘antitrust compliance monitor’ – January 13, 2014
Antitrust monitor Bromwich rebuts Apple accusations of ‘unconstitutional’ investigation – December 31, 2013
Apple seeks to freeze its U.S. e-books ‘antitrust monitor’ – December 15, 2013
The persecution of Apple: Is the U.S. government’s ebook investigation out of control? – December 10, 2013
Apple’s Star Chamber: An abusive judge and her prosecutor friend besiege the tech maker – December 5, 2013
Apple takes aim not just at court-ordered e-books monitor, but also at U.S. District Judge Denise Cote herself – December 2, 2013
U.S.A. v. Apple: Judge Denise Cote assigns DOJ monitor in Apple ebook price-fixing case – October 17, 2013
U.S.A. v. Apple: Judge issues injunction against Apple in ebooks antitrust case; largely in line with what DOJ wanted – September 6, 2013
U.S.A. v. Apple: Judge Denise Cote says Apple needs third-party supervision after ‘blatant’ ebook price fixing – August 28, 2013

33 Comments

  1. If Apple had screwed the publishers like Amazon has the courts would be cheering. But if the publishers can’t get paid and Amazon raises prices what business will be able to compete?

    If the publishers can’t get pair and Amazon KEEPS prices low we’ll be left with crap content and only Amazon to buy from.

    1. Unlikely, unless you feel the average consumer does not care about the format of the ebook, the lock-in or any added features a particular format may have.

  2. Who can we write or pressure as a group to bring Cote back in line with reality?!

    We could do one of those Change.com petitions, a White House petition or some such, no?! Amazon’s recent (and past) anticompetitive behavior is outrageous. It changes the game, doesn’t it?! Someone has to be listening…

    1. Thank you for linking to the most coherent explanation of the case I have seen yet! The comments are unusually helpful as well.

      I still think the decision was wrong, but this explains why it came out as it did. Essentially, Apple was so focused on breaking Amazon’s 90% stranglehold on eBooks that it didn’t consider that its own efforts to work with the major publishers could be construed as an illegal combination to fix prices. It could have done what it wanted to do safely, but it took the dangerous path because it didn’t see the danger. Apple’s lawyers screwed up by not warning Steve Jobs that he was venturing into a minefield. Amazon is a monopolist, but two wrongs don’t make a right.

      Again, I think the judgment was wrong, but it looks like the 2d Circuit is leaning towards affirming it.

  3. Apple has lost this case. Amazon continues to control the market. The DOJ/US GOV approves Amazon business practices and now focused on Apple Jugular veins. Don’t be surprised when the DOJ/GOV punishes Apple even more when this is all done.

  4. I’m not surprised, they screwed up the Microsoft trial years ago when the judge rightly concluded MS was a monopoly and abused it’s position.

    1. You realize Apple’s practice of forcing 3rd party browser apps in iOS to use the Apple webkit rather than their own on the backend can be construed in the same way with Apple as monopolist.

  5. I had a thought about this recently… think about the nightmare scenario… newsflash: based on U.S. government biased rulings, Apple announced that their corporate operations and facilities now based in the U.S. will cease and will relocate to (pick another country)……….

    Wont happen but……

  6. Xennex1170 above linked to an article that perfectly, clearly and reasonably succinctly explained the legal arguments behind the verdict. Rabid fanboyism of this site (mine sometimes included) doesn’t help understand this.

    This trial wasn’t about Amazon’s abuse of monopoly position (in e-book retail market) by preventing competitors to enter (or price-fixing). It was about Apple colluding with publishers, who collectively control majority of book industry (i.e. have the monopoly in publishing of books). The court has decided that this collusion abused the monopoly position in order to artificially control prices for e-books and prevent any further competition among e-book retailers (by using MFN clause with all major publishers). The most critical element in the case is the MFN clause: you cannot have your book sold cheaper anywhere else; if you do, I can sell your book at the same cheap price. In other words, what regular retailers sometimes do to drum up business is advertise “we will match any competitor’s price!”. However, they do this by absorbing the cost of such move (i.e. the maker of the product still gets paid the same), and in Apple’s case, they had built this into the contract (“we get to match any of our competitors’ prices for your product”).

    So, this is how Apple got convicted.

    Regardless of the final outcome of this case, someone should go after Amazon for monopoly abuse and predatory pricing. It is an entirely different case, and it has to start quickly — Amazon is crushing everyone and the book business will soon disappear if something is not done with Amazon.

    1. You are correct. Amazon raised the issue with the DOJ, and the DOJ brought the anti-trust suit against Apple and publishers for “colluding” to raise prices.

      Amazon beat the publishers to the punch. But the publishers _should have_ raised the issue of Amazon’s abusive trade practices with the DOJ, but they did not. Furthermore, the fact that the publishers realized they were being screwed by Amazon undercutting prices for the only books they were really making any money on (ie, new and best-selling titles) and wished to switch from selling digital books to Amazon on the wholesaler basis — which, incidentally, makes sense for physical books — to the agency basis (which, incidentally, is how Amazon sells most of its stuff) was easily able to be construed as evidence of collusion. Steve Jobs simply said: Apple will sell your iBooks, but only if we get the best price you give anyone for e-book distribution and, incidentally, if you put Amazon on the agency basis, you get what you want (ie, you get what is in your own best interests). Nothing really illegal about it, in my view. Yes, prices of e-books look like they go up, but that is because Amazon was selling them below their purchase price, which makes no economic sense at all, if you think about it.

      This is what makes the situation a “Catch 22”. Apple and the publishers were found guilty in the eyes of the law created nearly 100 years ago to deal with the monopoly of Standard Oil. But if you look at the bigger picture (and longer time frame) Amazon is the party that is truly involved in restraint of trade.

  7. FYI here are the low life states listed as plaintiffs…how and why they all jump in the boat while others do not is beyond me.

    States and Commonwealths of Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Delaware, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Michigan, Missouri, Nebraska, New Mexico, New York, North Dakota, Ohio, Pennsylvania, Puerto Rico, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia, and Wisconsin and the District of Columbia.

  8. The e-books ruling favoring Amazon is a “Catch-22” screw-up of epic proportion in the spirit of _One Flew Over The Cuckoo’s Nest_. The court got it exactly wrong.

    The outcome is akin to the hypotheticdal scenario in which Standard Oil asked the DOJ to investigate independent gas stations who had met to discuss how they might counter the threat of Standard Oil’s anti-trust behavior in the late 1800s …with the DOJ finding the independent gas stations guilty of collusion!

    Established anti-trust precedent is over 100 years old and is ripe for revision in the light of advances in economic thinking, data analysis and analytical methods, competitive strategy, and game theory.

    I stumbled across an interesting link to a presentation by Michael Porter entitled: Competition and Antitrust. (He is a professor at Harvard Business School, and wrote the classic book, _Competitive Strategy_ first published in 1980.) On page 8 he talks about assessing the extent of competition using a broader coneption of competition, a richer conception of rivalry, and allowing analysis of both near-term and long-term effects.

    1. The problem with your analogy is that Amazon does NOT have complete control over a region like the gas stations did which forced consumers in that area to a fixed price no matter the gas station. And should Amazon stop selling books/ebooks altogether it will not affect consumer’s access to books/ebooks from other online/physical stores. If Standard Oil decided to not sell to those gas stations, the areas served by them would not have any gas to sell hurting the consumer. Anti-trust law is created to protect the CONSUMER not the retailer or supplier.

      1. Amazon is selling publishers’ new and best-selling e-book titles — the only books the publishers make any real money on — at prices that undercut the publishers. And, incidentally, at prices below Amazon’s cost. (Why do you think they do that? Do you think Amazon is looking to generate business for its Kindle or build upon its aspirations to develop its own publishing business?) The region is: Amazon’s online marketplace. That is fairly complete control over a region, if you ask me.

        1. Yes, they price the “Best Sellers” at a low price for a couple weeks then raise to a ‘normal’ level after to promote sales of ebooks and their Kindle devices. Amazon as far as I know has no aspirations to be a publisher, but does have aspirations for being an enabler for Authors to sell their work by providing services and platform to that effect. For example Amazon may provide an editing service, if they do not already, which the author will pay to have his work polished which may or may not improve sales.

          As for the region, perhaps I should have been more clear. I was making a point of holding the CONSUMER hostage from purchasing a particular title from the convenience of an online connection. So even if Amazon stops all sales of books/ebooks the consumer can still purchase said book from other online sources. The gas stations in the analogy you gave prevented customers from purchasing ANY gas from the convenience of their local region/town. As such it is a weak analogy to be used to find Amazon at fault for any type of legal case. The Standard Oil case was important because it prevented the Supplier from reaching the Consumer by ANY means for the affected regions short of building gas stations themselves. This is not true for the Publshers and Amazon

          1. Then why do you suppose the authors’ union and publishers believe the Amazon e-book ruling is a travesty, as it replaces true competition with the _appearance_ of competition?

            My intention was to point out the similar predatory pricing behavior in the Standard Oil and Amazon cases — reducing prices (unfairly) to drive out competition. Yes, we all know Standard Oil was selling their own gas (and driving out gas stations that sold _their_ own gas) whereas Amazon was undercutting their very own e-book suppliers, so the details of the cases are certainly different. But the efforts by publishers to regain control of their e-book business does not constitute anti-trust behavior in my opinion. They were simply trying to shut down a predatory pricer that was ruining their business. Amazon never should have been allowed to underprice the publishers’ e-books in the first place. And if the publishers had been savvy, they would never have given Amazon the opportunity to do so in the first place. But this does not mean the publishers are not entitled to correct their mistake and put Amazon on the agency basis of sales. This is pretty much how Amazon sells most of its stuff, anyway.

            1. I’m sure if the agency pricing had come to each of the big publishers separately and they had attempted it without all that communication between them they could have sidestepped the collaboration claim. I suppose Amazon could then turn around and say “Ok, we’ll move the physical books of yours we sell also to Agency pricing, only ordering them when we need to sell them.” Part of the difficulty the publishers face is already having such a deep relationship with Amazon with physical books. When you think about it this is what seems to happening with Hachette.

            2. Given the differences in the distribution of physical books and e-books, there is no sound rationale for the two book formats to be sold on the same basis, either “wholesaler” or “agency”. It makes sense for publishers to sell e-books to Amazon on the agency basis so they can maintain control of these products’ prices, since e-books have no inventory, stocking, or distribution costs. The middleman of e-books is really not taking on any business risk, so there is no need for the middleman to obtain legal title to the goods.

              This is dissimilar to physical books, which are costly to stock, inventory, distribute, and sell. The middleman buying physical books accepts business risk when they buy these products. So the traditional “wholesaler” basis of sales is suited to these transactions.

              Anyway, wholesalers are typically given time before payment is due on purchases, which allows them to sell the product before having to pay the publishers for them.

            3. I agree that the physical space for ebooks is negligible in comparison to physical books. So on that basis perhaps you have a point. However the rational for having wholesale vs agency in terms of how much gets paid at once remains the same. The middleman of ebooks does not take risk in filling up inventory physically but DOES take on risk in terms of having to pay an agreed upon sum for a specified large quantity of licenses which may or may not end up being sold. You may also be correct that payment might not need to be submitted on delivery but does not change the fact that the middleman will have to make the payment in 30/60/90 days of receipt if not agreed on a longer term. As risk is taken on by the middleman by paying for license inventory, would you not agree that this is a basis for obtaining legal title to the goods (ebooks)?

              Yes, you are right that some of the cost factors involved in the handling and sales of physical books include stocking, inventory, distribution, selling. But it would be mistaken to say those same factors do not exist for ebooks at some degree. Stocking and inventory are related and for ebooks will correspond to keeping records of the licenses purchased and sold which also manages the DRMs necessary to discourage piracy. Distribution for ebooks consists of the costs to not only make sure the right purchases are in the right hands but unlike physical books have to be maintained on the company’s servers for the life of the account the ebook was sold to (or the life of the ebook service offered by the company). It could be argued in the long run unlike physical books ebooks can cost a middleman more for maintaining such data. Finally sales, in the case of records kept and method of payment I really don’t think there is much difference from the system point of view for selling either. There is however one more part of the physical chain that I do not know exists for ebooks and that would be ‘returns’.. Since ebooks do not get ‘damaged’ and get returned to the publisher, I wonder if the publisher would buy back ‘unsold’ licenses. If not this would be another risk the middleman takes on.

              As for giving time before payment is due on purchases, the Agency model does not require a vendor to submit payment immediately on sale. It would be very messy if so.. I suspect that the actual mode of payment may be a single payment for sales in a given period (week/month/quarter).

  9. Are the other “conspirators” in this suit? If not, why not. Who profited. The book sellers, more than Apple. Apple was only taking its commission The booksellers were setting the price. This whole thing is BS and only the lawyers win.

  10. That seems a bit odd to me, most people publishing ebooks will normally set the price the same wherever they place the book for distribution. Plus with eBooks I am pretty sure that Amazon reserve the right to adjust the price of a book on their site if they find it being sold cheaper anywhere else. It’s not like there are any manufacturing costs to take into account with an ebook either, where someone can get a cheaper deal from a different supplier, it is all about whether someone is prepared to pay the asking price, whatever it is set at.

    Seems to me that, with eBooks, there is always going to be some form of price fixing. Because that’s how it works, the only thing that really changes is the amount of commission the distributor takes.

    1. I can see your point. And it may be valid for authors selling directly or very small publishers which have small volume. The rules may be different when you want to sell in volume however.

  11. You do not understand the fundamental issue. Amazon can sell the publishers e-books at any price it chooses, even below the price Amazon pays to the publishers, because the publishers sell outright to Amazon on “the wholesaler basis”. On this basis, the legal title for the “product” is held by Amazon and Amazon can do anything it wants with it. This is how publishers sold physical books to other distributors, and it makes sense for physical books. But e-books are not physical books. The marginal cost of selling one more e-book is virtually zero. So there is no sense for publishers to have sold e-books to Amazon on anything but the agency basis, in which Amazon is simply a middleman, with publishers determining the selling prices of their e-books and Amazon receiving an appropriate commission as the middleman. On the agency basis, the legal title to the publishers’ e-books remains with the publishers, who can determine the prices at which they can be sold. For its trouble, the selling agent receives a commission.

    1. How about you think about it like this. With the Wholesale model the Publishers got paid upfront for a large number of copies of each book/ebook (physical book for HC/PB and licenses for ebooks). Under the Agency model both the Publisher and Storefront get paid if and only when a book/ebook sells. The wholesale model will allow the Publisher to then quickly make money back, whereas the Agency model will take a longer time depending on pricing and the potential audience.

      1. If what you describe were true, then everything would be hunky-dory and the publishers would have no reason to complain. But this does not agree with reality. The publishers were and are unhappy about Amazon’s selling publishers’ valuable titles in e-book format below the price at which the publishers sold them to Amazon. (The publishers wanted to sell e-books as incremental business, not as a substitute for their primary business of physical books. But Amazon wanted to peddle their e-book and Kindle businesses.)

        Amazon has no interest in the publishers and has no qualms to ruin them. Amazon is happy to dis-intermediated the publishers in favor of Amazon’s authoring/editing/online publishing tools. And/or whatever Amazon pays to subsidize these loss sales, they expect to make the money back on Kindle sales or their own online publishing ventures. It is called killing a market.

        There are only a few good reasons to sell products below cost, like selling excess inventory or slow-moving items (liquidation), luring customers in to a store to buy other stuff (loss leader sales), or putting the hurt on competitors (predatory pricing).

        The dynamics of digital book publishing argue that the appropriate basis for publishers to sell e-books to any distributor is the agency basis. This allows the publishers to maintain control over the retail prices of their e-books so that they can best manage their total book publishing business, which includes physical books and e-books. There are many companies that sell products on the agency basis. It is not illegal. And it makes a lot of business sense in a lot of situations.

        1. Well, I would figure it is true otherwise the publishers would not have the funds to pay advances to authors. It may be true Amazon wants to force publishers to change their business model or go out of business.. But Amazon’s power here is all due to how much business Publishers WANT to give Amazon for their own profit. From what I understand the book/ebook portion of Amazon’s sales are now well into the single digits. When you wholesale something you are trading off long term revenue for short term. This may be necessary to keep a business running especially for ‘goods’ that may lose potency/popularity over time.

  12. Repeat: the publishers do not like the deal they made with Amazon: they have realized it is a mistake. And they probably did not realize it was a mistake until they saw Amazon discount the publishers’ new and best-selling books — the only ones they made any real money on, which funds their future business. But the DOJ has prohibited them from changing their minds. The DOJ is calling it “collusion”.

    The author’s union also does not like the Amazon e-books case outcome.

    Think about it.

    Over and out.

    1. If you have understood the final ruling, the publishers have been punished for collusion because that is exactly what happened. The ruling also goes into allowing the various publisher in the suit to once more pursue Agency pricing in the future but has staggered that time period amongst them so that the same situation of collusion would be difficult to execute once more. So the Agency model can still be pursued, just not in the way that made it illegal like it has with this case. So no, the DOJ did not prohibit using the Agency model, they prohibited the manner in which it was undertaken.

      Please submit a link for the author’s union opinion on this collusion case outcome.

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