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Books The Courts Apple

DoJ Files Suit Against Apple, Ebook Publishers 235

Posted by Unknown Lamer
from the project-gutenberg-accused-of-price-fixing dept.
forkfail writes "The Department of Justice has filed suit against Apple and a number of book publishers, including Hachette SA, HarperCollins, Macmillan, Penguin and Simon & Schuster, claiming that they worked in collusion to artificially rig prices on eBooks."
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DoJ Files Suit Against Apple, Ebook Publishers

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  • by Golgafrinchan (777313) on Wednesday April 11, 2012 @11:08AM (#39645095)
    This was such a blatant price-fixing scheme among the publishers that it's surprising to me that it took the DOJ this long to take action. That said, based on what I've read I'm not completely convinced of the extent to which Apple was involved in this. Yes, they agreed to the new agency pricing model, but it seems to me that they could try to argue, "Hey -- the publishers came to us with this idea. We didn't know they wanted to go that route to reduce competition and put pressure on Amazon! Honest!" But if there's a paper trail mentioning Amazon, I think Apple is toast.

    And regardless, I hope the publishers get crushed on this one. While I won't go so far as to suggest that they don't serve any useful purpose anymore (as some people do), they _are_ dinosaurs and need to be dragged into 21st century competition. This should do it.

    • Re: (Score:2, Interesting)

      by Anonymous Coward

      wasn't it in steve jobs biography him stating that ebooks couldn't be cheaper than in the itunes store or he wouldn't allow them to be in the store at all? That seems that Apple would have actually been the driving force.

    • by Richard_at_work (517087) <richardprice.gmail@com> on Wednesday April 11, 2012 @11:16AM (#39645223)

      One of the things that might bury Apple is the "you cant have your ebook priced cheaper anywhere else" requirement - with the price including Apples cut.

      • Actually, I doubt that this will be a problem. Such language is fairly common, it is known as the most favored nations clause [esourcingforum.com]
        • by makomk (752139)

          A "most favoured nation" clause restricts the price that company A can charge company B for something. Apple's restriction is different - they limit the price that company A can allow company B to resell its products to consumers for, which is price fixing.

        • The link you provides state the following:

          How do you enforce this? The amount of work that would be necessary to track down these competitive bids is prohibitive and might not be legal, in some cases. For that matter, why not just run a reverse auction if you suspect better pricing is available?

      • One of the things that might bury Apple is the "you cant have your ebook priced cheaper anywhere else" requirement - with the price including Apples cut.

        The above clause doesn't seem to hurt consumers, we all get cheaper prices so why would the DoJ have an issue with it? The issue is whether the agency model of selling books is causing prices to be artificially inflated over the wholesale model.

    • Re: (Score:2, Insightful)

      by DurendalMac (736637)
      The thing is....why didn't this happen YEARS ago with physical books? Those have been price gouged for a long, long time, especially when they have 12 editions with maybe a handful of pages' worth of difference between the first and the last.
      • by Golgafrinchan (777313) on Wednesday April 11, 2012 @11:39AM (#39645579)
        It's an interesting point. But the reason is that to my knowledge, there _wasn't_ any price fixing prior to ebooks. I believe that publishers have always sold physical books to retailers using the wholesale model, and then leave it up to the retailers to set the price paid by customers. As long as the publishers didn't conspire to set those wholesale prices collectively, then there's no price fixing. There may have been some 'tacit' collusion (in that they don't formally agree upon prices, but that they follow each other like airlines), but that's generally not illegal in the US.

        The issue in this case is that there _is_ evidence that the publishers collectively decided to adhere to the same pricing scheme. That is illegal.

    • by k4hg (443029) on Wednesday April 11, 2012 @11:42AM (#39645631) Homepage

      Apple will not be toast.

      Worst case they pay a small (for them) fine without admitting wrongdoing, and promise never to do it again. What happens then?

      Well, Apple can sell their books at cost or below because their profit comes from hardware. The iTunes store is a tiny blip in Apple's revenue, and ebooks a small part of that tiny bit. The publishers can raise the price Apple, Amazon, and others pay for ebooks, and will to preserve their income. Amazon gives away their hardware at cost, so somewhere they need to start making profit on media. It is widely believed that Amazon is selling many books below publisher's cost in order to drive others out of the business. Once it is clear that Apple can (and will because they have lost the agency model) match Amazon's prices and is in the ebook business to stay, Amazon won't be so anxious to lose money. Then prices will come back to where they have been, maybe even higher.

      Apple still breaks records every quarter, Amazon chugs along on its slow growth curve, the publishers keep making some money, and 99% of authors still starve. Nothing's going to change.

    • by ColdWetDog (752185) on Wednesday April 11, 2012 @11:51AM (#39645791) Homepage

      Nobody is getting 'crushed' on this. At worst, a couple of publishers and Apple will pay a fine. Most likely they will sign something that said 'we didn't really do anything, but we agree not to do it again'. Some lawyers will make money. The DOJ lawyers will carve another notch in their desks.

      Consumer prices won't go down. (But they will go up).

    • by Mashiki (184564) <mashiki@NOspAM.gmail.com> on Wednesday April 11, 2012 @02:31PM (#39648295) Homepage

      Damn right there's blatant price-fixing. Most people I know who own ebook readers pirate the things just out of spite because of the prices. Nothing quite like seeing prices like this:

      $9.35 kindle
      $7.99 kobo
      $3.99-4.99 paperback

      Yeah fuck and you guys. If I already own a copy, I'd be pirating it at that price too.

  • Last time the DOJ sued a cartel (CD companies), I and several family members got $25 each for refunds. It was the punishment for overcharging and price-fixing.

  • While the oil companies continue to make record profits as they keep the price of gas jacked up... cause that isn't collusion.
    • by neochubbz (937091) on Wednesday April 11, 2012 @11:17AM (#39645243) Homepage
      You do realize that the price of crude oil (and therefore gasoline) is determined by the spot market, and therefore the oil companies have (almost) nothing to do with the price of gasoline you pay at the pump?
      • Not to mention that taxes account for a sizeable portion of what you pay at the pump - one of the big reasons states like NY and CA are so much more expensive than their neighbors.

      • by swillden (191260)

        You do realize that the price of crude oil (and therefore gasoline) is determined by the spot market, and therefore the oil companies have (almost) nothing to do with the price of gasoline you pay at the pump?

        Come on, man, don't you know that high prices are rock solid evidence of anti-competitive collusion? You must be a one-percenter.

    • For example, Exxon's profit on a gallon of US retail gasoline is about seven cents. They have big numbers in profit because of the large amount of product they sell.

      In fact, of all industries, oil and gas has one of the lower profit margins, far outpaced by the likes of soft drinks, electronics and chemicals.

      Your state and the federal government takes many times more than that in taxes. So if you want to demonize someone for gouging you at the pump, look at your politicians, especially the "green" ones.

      • Exxon's profit not only comes from the shear volume of sales but they make a margin throughout the petroleum delivery chain. They spread their revenue across drilling, transportation, refining, pipeline traversal, wholesale, and finally retail.
    • by cpu6502 (1960974)

      The oil cartel OPEC does not fall within EU or US juris diction. I thought that was bleedin' obvious.

  • by etresoft (698962) on Wednesday April 11, 2012 @11:12AM (#39645159)
    I have a book in the iBookstore. I set the price on it. Apple sells it for that price and gives me 70%. I have the same book in the other bookstores. I have no control over the price. They give me what they want, which is half of what Apple gives me. I have no choice or say in the matter. And the Department of Justice sues Apple? That's just wrong.
    • by gstrickler (920733) on Wednesday April 11, 2012 @11:16AM (#39645227)

      I have the same book in the other bookstores. I have no control over the price. They give me what they want, which is half of what Apple gives me.

      If you have control over whether it's in those other bookstores, then, yes, you do have control over the price. You don't like their terms, don't publish it there. That's how you control it.

      • Re: (Score:2, Interesting)

        by Anonymous Coward

        If you have control over whether it's in those other bookstores, then, yes, you do have control over the price. You don't like their terms, don't publish it there. That's how you control it.

        The problem being, what if there is only one option that dominates the industry by luring people in by selling Hunger Games below the price they paid for it? Everyone buys that reader, uses the built in store, and you can either pay them what they ask or go away and not do business. That is why establishing dominance through dumping is against antitrust law, which is what Amazon was doing. Why is the DOJ not going after Amazon again?

      • If you have control over whether it's in those other bookstores, then, yes, you do have control over the price. You don't like their terms, don't publish it there. That's how you control it.

        That's not control over price, that's control over availability.

        • It is control over the price he receives for his work, which is what he was complaining about.

    • My understanding of the issue is that the speaking point isn't that they're setting the price, but rather that they require you to sell your book for at least that price if you put your book in another book store. Basically it ensures that iBooks is on-par with the lowest price available. Is my understanding incorrect? I'm not a publisher or a writer, but stacking it so that iBooks has the lowest price available seems to be kind of shifty.
      • What is shifty about wanting the best price? If Store A sees that Store B is getting a better price from the manufacturer of course Store A wants the manufacturer to match that price.
        • But REQUIRING it? I don't think Apple should be able to affect your pricing model on somebody else's store. What if Amazon (for example's sake) wants to feature a book put it book on sale to generate more purchases? If that sale price falls below Apple's pricing, the author suddenly finds himself between a rock and a hard place. I don't think it's fair to require the author to choose between taking Amazon's offer or keeping their book on iBooks.
        • What is (alleged) to be happening is that Store A (Apple) sees that Store B (Amazon) is getting a better price, so they pressure the publisher to raise the price they sell to Store B (Amazon). The publishers are happy to follow Apple’s lead and crank up the price for everybody.

          What you really want to do is study the structure of the market. The buyer, seller, and the middle man gains in a transaction – If they didn’t then there would be no transaction. However, the next question is how the

        • What is shifty about wanting the best price? If Store A sees that Store B is getting a better price from the manufacturer of course Store A wants the manufacturer to match that price.

          The issue is not about the manufacturer's price to stores A and B, but the sale price.

          Store B can't discount it below Store A's sale price(which has 30% profit margin built into it). So if Store B is okay with just 20% margin, they can''t sell it for that, because that would violate the manufacturer's contract with store A not to have it on sale anywhere for less. Note that the manufacturer's price is the same to both stores in this example.

    • The point is that price-fixing is anti-consumer. Of course it works out great for you; you're not the consumer.
    • I have a book in the iBookstore.

      You wield no market power, so you can do whatever you want with your book price. The publishers targeted by the lawsuit exert a combined market power so great as to be able to control the market when in collusion. This is why they are being sued, and rightfully so.

    • by PaulMorel (962396)
      What he's referring to is the fact that Amazon retains the right to cut the price of the books in their Kindle Store without compensating the author. So even if your book costs $20 normally, Amazon can put your book on sale for $1 and give you the same percentage - NOT THE SAME AMOUNT.
      • by Ferzerp (83619)

        We're talkign about big publishers here.

        Historically Amazon said "Ok, we want 1,000 of ebook X. What do you want for it" and then bought 1,000 of ebook X at wholesale. Apple came along and said "Hmm, tell you what, we'll let you set the price and we'll sell the books for you and keep 30%" Suddenly, the publisher can go to amazon and say "Well, sorry, we will only sell like this now, and if you don't like it too bad, we'll still be able to sell through Apple".

        Your bizarro scenario doesn't come in to play

    • I have a book in the iBookstore. I set the price on it. Apple sells it for that price and gives me 70%.

      I have the same book in the other bookstores. I have no control over the price. They give me what they want, which is half of what Apple gives me. I have no choice or say in the matter.

      And the Department of Justice sues Apple? That's just wrong.

      Eh what? The problem is that Apple is forcing the 30% margin on all sellers.

      Lets take your example and you set your price at $10 at iBookstore. Apple takes $3 and gives you $7.

      You want to sell it at Amazon so you sell the book to Amazon at the same $7. But Amazon HAS to sell it at $10. They cannot take only $2 and sell it at $9 because of your contract with Apple to not have it on sale anywhere else for less than $10. This is price fixing and artificially raises the cost of the books to the consumer for Ap

      • Imagine if Walmart put this rule saying that no store can sell any products that they sell at a lower cost.

        I think Radio-Flyer doesn't need to imagine this. There are plenty of documented cases of Walmart using their dominant retail position to strong arm companies into lowering their product's pricing by a set percentage each year and offering Walmart the best discount possible.

        Hell it made news when Snapper lawn mowers refused to bow down to pressure from Walmart.

    • They are not claiming that independent authors are conspiring together to set prices. Clearly there is no price fixing going on among indepedents. Books from independents are cheap and sold at several price points. They are saying the publishers conspired together not to compete on price. They are saying Apple assisted them.

      They are asking why prices went up from $9.99 to $14.99 uniformly for ebooks sold by publishers after Apple entered the market. New competition is supposed to drive prices down not up. C

      • They are asking why prices went up from $9.99 to $14.99 uniformly for ebooks sold by publishers after Apple entered the market.

        Nothing wrong with asking. I wouldn't be surprised to find that the reason the prices went up was due to Apple not taking a loss in order to sale a dedicated eReader like Amazon does and publishers preferring to do business that gave them more favorable terms. Nobody is forcing consumers into purchasing an iPad nor are iPad users forced to purchase their books from Apple. You can st

  • I'd like to think that the DoJ is actually interested in keeping the future of published works out of proprietary formats but I know better.

  • by gelfling (6534) on Wednesday April 11, 2012 @11:18AM (#39645253) Homepage Journal

    The paperback was $38 shipped and the downloadable version was $97. Excuse me but that's insane.

    • eBooks take the "convenience fee" to the extreme, but it's really no difference than TicketMaster charging me $10 to buy the ticket online or my water providr charging $2 to pay online (on top of the 3% credit card fee). Reserving a campsite online was also $9 extra.

    • by cpu6502 (1960974)

      It doesn't happen often but sometimes the e-edition is cheaper. One of my magazines, Fantasy & Science Fiction, is 1/3rd the cost through the electronic edition versus the paper edition. i.e. I save ~$24 per year.

    • by getNewNickName (980625) on Wednesday April 11, 2012 @11:57AM (#39645913)

      The paperback was $38 shipped and the downloadable version was $97. Excuse me but that's insane.

      This is probably an extreme example of the difference between the wholesale vs the agency model pricing. The retailer sets the price under the wholesale model, while the publisher set the price for the agency model. In this case the publisher wanted to sell at $97 while the retailer, with its deep wholesale discount, chose to sell it at $38.

  • Wow, the U.S. government helping people who are not rich, who do not run corporations? Are the Republicans on sabbatical?

  • by Anonymous Coward

    It is worth mentioning that it is widely believed that price fixing by Apple et al is a response to perceived dumping (selling at a loss) by Amazon.
    In other words, it may be a case of using one form of anti-competitive behaviour (price fixing) to battle a different form of anti-competitive behaviour (dumping).
    http://www.theglobeandmail.com/news/technology/tech-news/us-sues-apple-publishers-on-e-book-agency-model-price-fixing/article2398161/

    Since launching the Kindle in 2007, Amazon has made a point of offering best-sellers for $9.99. The discount is so deep from list prices of $20 and more that it's widely believed Amazon is selling the e-books at a loss as a way of attracting more customers and forcing competitors to lower their prices. Amazon also has been demanding higher discounts from publishers, and stopped offering e-books from the Independent Publishers Group, a Chicago-based distributor, after they couldn't agree to terms.

    When Apple launched the iPad two years ago, publishers saw two ways to balance Amazon.com's power: Enough readers would prefer Apple's shiny tablet over the Kindle to cut into Amazon's sales and the agency model would stabilize prices. Apple's iBookstore has yet to become a major force, but publishers believes the new price model has reduced Amazon's market share from around 90 per cent to around 60 per cent, with Barnes & Noble's Nook in second at 25 per cent. The iBookstore is believed to have 10 to 15 per cent.

    • by gmuslera (3436) *
      Why is a loss selling a digital version of a book at the same or similar enough price as the paper version, that have a physical space, a bunch of intermediaries, have to be transported (sometimes overseas) and must be stocked by libraries while covering in the price not selling all, or being stolen or whatever? The price of ebooks should be 99% author profit, and still would make a huge profit for amazon/apple/b&n/etc.
      • by cdrguru (88047)

        First off, the publisher doesn't have any of the issues that you are talking about - printing and shipping books is really cheap. Maybe $2 for most soft-cover books and maybe $0.25 to ship it (with others in a box) anywhere in the US. After it gets there, it is the book store's problem which does not affect the price the publisher is charging. Same thing with getting stolen - not the publisher's problem.

        Most of the book's cost is the editing and promotion. No editing has been tried and it sucks. You ca

    • by cpu6502 (1960974)

      Contrary to popular belief, there is nothing illegal about selling at a loss. Microsoft does it with Windows. Apple does it with OS X. Sony and Nintendo and Sega do/did it with their consoles. Shaver and razer makers do it with with their shavers/razers (and make money off the replacement parts like blades). Stores do it with "loss leaders" like $50 bluray players that cost $150, in order to attract customers to the building.

      None of that is illegal, and neither is what amazon is doing with its low-pric

    • by dgatwood (11270)

      Repeat after me. Loss leaders are not dumping.

      Dumping would be Amazon selling all of their books below cost for a year, taking huge losses to force Barnes & Noble out of business, then raising prices on everything. As long as Amazon is making a profit on nearly everything they sell, it is not dumping. Selling a $20 book for $10 is merely the use of loss leaders to draw customers in, nearly all of whom will then add another $15 worth of profitable merchandise to their carts in order to get free shipp

  • by PaulMorel (962396) on Wednesday April 11, 2012 @11:33AM (#39645461)
    I'm glad they finally got around to this, but what about audio books? The same scheme appears to be in place. It's absolutely ridiculous that I can buy a hollywood (or indie) movie download for $5-$10, but it costs me $10-$30 for an audio book.
    • The market for audio books is small compared to printed books or movies. Hiring good talent to make decent audio books is higher than you expect (And this is something that you want – I listened to some pretty bad audio books in my life.) So you have higher fixed costs per unit sold – have to make up the difference someway.

      It’s one of the reasons why I get most of my audio books via the library.

    • by Firethorn (177587)

      audio books lack the extreme profitability of an initial movie release to recover the majority of the costs, plus there's not as large of a market for them.

      Of course, the larger price tag does tend to reduce the audience even more.

  • by bryan1945 (301828) on Wednesday April 11, 2012 @12:06PM (#39646069) Journal

    1) Collusion- OK, that bad.
    2) Publisher/seller model. Why couldn't the publishers sell the e-books (individual ID per copy) to the end sellers at a price, just like they do now for physical books. Then the end seller could decide on the end price. I admit I don't have any e-books, so I'm not conversant in this area.

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