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Apple Fires Back At DoJ Over eBook Price Fixing 311

Posted by Soulskill
from the best-defense-is-a-good-offense dept.
An anonymous reader writes "CNN takes a look at Apple's response to the Department of Justice's investigation into eBook price fixing. The filing 'cuts the government's case to shreds' while at the same time not bothering to defend the five publishers also under investigation. Apple said, 'The Government starts from the false premise (PDF) that an eBooks "market" was characterized by "robust price competition" prior to Apple's entry. This ignores a simple and incontrovertible fact: before 2010, there was no real competition, there was only Amazon. At the time Apple entered the market, Amazon sold nearly nine out of every ten eBooks, and its power over price and product selection was nearly absolute.'"
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Apple Fires Back At DoJ Over eBook Price Fixing

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  • A lot of words (Score:5, Informative)

    by Anonymous Coward on Sunday May 27, 2012 @02:15PM (#40129447)

    That's a lot of words that don't change the fact that virtually every eBook you could ever want to buy costs more now than it did before Apple entered the market, which is the actual problem that the DOJ case intended to address.

    • Re:A lot of words (Score:5, Interesting)

      by sribe (304414) on Sunday May 27, 2012 @02:20PM (#40129475)

      That's a lot of words that don't change the fact that virtually every eBook you could ever want to buy costs more now than it did before Apple entered the market, which is the actual problem that the DOJ case intended to address.

      Except that if you actually read the words, they claim the exact opposite. I have no data to offer about their claims, but you haven't offered any either. In fact, you seem to be offering what the DOJ offered, anecdotes involving the prices of a tiny number of books, with no analysis at all of the overall market.

      And remember, Apple exerts almost zero (the exception being the so-called "most favored nation" clause) control over book prices.

      • Re:A lot of words (Score:5, Insightful)

        by PhrostyMcByte (589271) <phrosty@gmail.com> on Sunday May 27, 2012 @02:56PM (#40129691) Homepage

        And remember, Apple exerts almost zero (the exception being the so-called "most favored nation" clause) control over book prices.

        Though the result is that consumers got screwed because of it, this is my understanding of it as well.

        What I remember is that Amazon basically had the publishers by the balls, dictating somewhat more reasonable prices for ebooks. When Apple came to the market, they specifically worked with the publishers saying "hey, we'll let YOU set the price, so long as you always offer us the best one". The end result is that prices skyrocketed overnight, and today are still far higher than they once were.

        • Re:A lot of words (Score:5, Interesting)

          by teg (97890) on Sunday May 27, 2012 @03:55PM (#40130023) Homepage

          Amazon wasn't as much dictating more reasonable prices (for your definition of "reasonable") as "selling at below cost" [salon.com] to build a dominant market position.

          Besides, one vendor being able to dictate prices in the market is hardly seen as a healthy market.

        • Re:A lot of words (Score:5, Insightful)

          by Dixie_Flatline (5077) <vincent...jan...goh@@@gmail...com> on Sunday May 27, 2012 @06:31PM (#40130827) Homepage

          Why is that bad?

          I mean, other than the fact that you personally are paying more, higher prices are not actually in and of themselves a bad thing.

          The prices were artificially depressed before. YOU were paying less, but that also means someone on the other end was necessarily earning less. That might seem great to you, but I'm sure the writer wasn't super hyped about it. Neither was the publisher.

          You don't have a RIGHT to low prices, though you have a right to only pay what you think is fair. If the prices are too high, stop buying. If everyone thinks the prices are too high, they'll stop buying too. If these 'new' higher prices are what the market will bear, then THAT'S the price that we should have been paying all along.

          Don't be fooled into thinking your personal desire to pay as little as possible is actually the fair or correct price to pay. It's just one of a nearly infinite number of options.

          • by chrismcb (983081)

            The prices were artificially depressed before. YOU were paying less, but that also means someone on the other end was necessarily earning less. That might seem great to you, but I'm sure the writer wasn't super hyped about it. Neither was the publisher.

            Here is my issue:
            A Mass market paper back is $7.99. With a Barnes and Noble discount I can get 10% off the book.
            Along come ereaders. No paper to waste, no gas to drive the book to the store. No cost to pay someone to stock it, or print it
            But the price is $7.99 FIRM.
            So what do I do? Pay $7.19 or $7.99? Why should I pay the higher price? NOTE that both of these prices are set by the publisher (except for the 10% discount, which is eaten by B&N, not the publisher) I am guessing the publisher wants me

      • Re:A lot of words (Score:5, Interesting)

        by Richard_at_work (517087) <richardprice.gmail@com> on Sunday May 27, 2012 @03:20PM (#40129823)

        Before iBooks, I bought a lot of stuff from Ereader.com, and here are some of my comparisons (in GBP)

        Revelation [Mass Effect Series Book 1] £2.99 - iTunes price £4.99
        Ascension [Mass Effect Series Book 2] £2.99 - iTunes price £4.99
        Pandoras Star £4.99 - iTunes price £8.99
        Judas Unchained £4.99 - iTunes price £8.99

        Those examples were purchased in 2008, the iTunes prices are right now. I could go rough the other 50 or so books I purchased if you wish?

        None of the purchases I made on Ereader are currently available for new purchase - I can still download my purchased copies under my account, but you couldn't buy them now.

        I think the DOJ have a fairly decent case here.

        • by jo_ham (604554)

          Ignore that AC, the Peter F Hamilton books alone are outstanding. For those who have not read Pandora's Star and Judas Unchained (they are 1,2 in a saga) they are well worth picking up.

          FWIW I paid about £9 for each physical book from a brick and mortar store, so iTunes is cheaper even if it's not as cheap as earlier ebook prices.

      • Re: (Score:3, Interesting)

        by Anonymous Coward

        I don't intend to waste my time pulling up research to prove what is already obvious to me. I've been buying ebooks for years. Before the agency model, books were cheap. After it, they were not. Every single book on my 100+ book wishlist on Amazon that has the prices set by the publisher (agency model) is $10+; every single book on my 100+ book wishlist on Amazon that has the prices set by Amazon (pre-agency model) is $7 or less. These are all full length books, and most either literary classics or science

      • by teg (97890)

        That's a lot of words that don't change the fact that virtually every eBook you could ever want to buy costs more now than it did before Apple entered the market, which is the actual problem that the DOJ case intended to address.

        Except that if you actually read the words, they claim the exact opposite. I have no data to offer about their claims, but you haven't offered any either. In fact, you seem to be offering what the DOJ offered, anecdotes involving the prices of a tiny number of books, with no analysis at all of the overall market.

        And remember, Apple exerts almost zero (the exception being the so-called "most favored nation" clause) control over book prices.

        The details of the MFN would be interesting... if it is "you can't sell it cheaper to anyone than to us", it can be defended. That's the publisher's problem if they want to agree to such clauses. However, if they let Apple set the resulting pricing - "noone can sell it cheaper than in the iBook store" - that would be problem; it should certainly be possible for other retailers to demand less than Apple's 30% cut.

      • They are not trying the case in the public. When it come time for the trial Amazon will hand over its records and they will clearly show what occurred. They can also go and get B&N and Sony's sales records. Apple is the least likely company to have data on ebook sales prior to the switch to the Agency model. They didn't enter the market till 2010 and they were never a big player in the market afterwords.
        • They are not trying the case in the public. When it come time for the trial Amazon will hand over its records and they will clearly show what occurred. They can also go and get B&N and Sony's sales records. Apple is the least likely company to have data on ebook sales prior to the switch to the Agency model. They didn't enter the market till 2010 and they were never a big player in the market afterwords.

          I'm sure Apple did their due diligence before jumping into the marketplace. If they were never a big player in the market afterwards how is it they are charged with fixing prices?

          • You argument doesn't stand up to history. The switch to the Agency model occurred. It occurred like Steve Jobs promised it would on camera. All the publishers except one changed their pricing with the launch of the IPad. Prices on best sellers went up. The Department of Justice has witnesses and emails showing Apple organized this. The contracts the publishers signed with Apple clearly made it impossible for Amazon to lower prices. Saying Amazon had large market-share isn't a defense for price fixing.
    • Re:A lot of words (Score:5, Interesting)

      by DesertJazz (656328) on Sunday May 27, 2012 @02:24PM (#40129503) Homepage

      Unfortunately I think the argument that Apple itself isn't responsible will probably be considered true in the end. The book publishers on the other hand can, and should, still get nailed to the wall. Charging as much for an ebook as a physical book is completely off-base. You still have to make the money back on editors, artwork, advertisement, etc., but the physical print, transportation, and storage costs should cause those books to be discounted a good amount. As it is, much of the time you can buy a print edition cheaper than an eBook version on new releases...

      Apple certainly deserves some of the blame, but I just can't see the DOJ managing to make it stick against them in this case.

      • Re:A lot of words (Score:5, Insightful)

        by jbolden (176878) on Sunday May 27, 2012 @02:49PM (#40129635) Homepage

        Book publishers can't afford to get nailed to the wall. A few more pushes and we lose the industry. They are shrinking rapidly and having a tough time staying afloat. They need either:

        a) Very high margins on books selling 2k-50k copies
        b) Lots of inexpensive books selling 100k copies

        instead the market is moving towards a few books selling millions and many books selling hundreds of copies.

        • Book publishers can't afford to get nailed to the wall. A few more pushes and we lose the industry. They are shrinking rapidly and having a tough time staying afloat

          Is this actually surprising? This is sort of how it works. Publishers fail to adapt to a new market, they fall under the bus and get pulled apart. Adapt or die.

          This doesn't mean there won't be publishers in the future. It means there will be new publishers who understand the new market.

          That being said, I haven't seen a lot of proof of publishers having any trouble, beyond a lot of them saying "We need more money! Give us your money!". Even the smaller publishers have been hanging around just fine a

          • by jbolden (176878)

            This doesn't mean there won't be publishers in the future. It means there will be new publishers who understand the new market.

            Or it might mean that won't be publishers in large numbers in the future. Sometimes there isn't some great adaption the market just closes up and gets much smaller. We've seen this already with newspapers (http://www.viralblog.com/wp-content/uploads/2012/02/newspaper-1024x705.jpg) over the last 45 years, we've been seeing it with books. We could very easily be returning to a w

        • Re:A lot of words (Score:5, Insightful)

          by ColdWetDog (752185) on Sunday May 27, 2012 @03:04PM (#40129737) Homepage

          There has grown up in the minds of certain groups in this country the notion that because a man or corporation has made a profit out of the public for a number of years, the government and the courts are charged with the duty of guaranteeing such profit in the future, even in the face of changing circumstances and contrary to public interest. This strange doctrine is not supported by statute or common law. Neither individuals nor corporations have any right to come into court and ask that the clock of history be stopped, or turned back.

          R.A. Heinlein

          • You realise that this quotation cuts both ways, right?

            It's not the government's job to make sure that prices stay low, either. They're just around to make sure the playing field is level. Before Apple came along in the book business, there's reason to believe that the playing field WASN'T level, and that Amazon was using their clout to get themselves a better deal at the expense of writers and publishers.

            The price is what everyone is focussed on, but that's just a number. It doesn't necessarily accurately r

            • Re:A lot of words (Score:5, Insightful)

              by sgtrock (191182) on Sunday May 27, 2012 @08:07PM (#40131231)

              And yet, Baen Publishing has proven for more than a decade that they can sell MORE ebooks and MORE dead tree books if they keep ebook prices cheap and don't use DRM. Smashwords is letting authors set their own prices and seeing the average price for an e-book drop to around $3.00 the last time I checked. O'Reilly has been selling a librar subscription model for e-books online through their Safari Books Online outlet for at least as long as Baen has been working their model. Lulu has moved into editorial services for e-books as well as print on demand.

              The fact is that the Big Six still haven't figured out how to sell ebooks successfully while the smaller, more nimble players are eating their lunch. Here's a couple of clues, fellas. Drop DRM and drop your prices. You'll make MORE money. :-)

        • by cpu6502 (1960974)

          >>>instead the market is moving towards a few books selling millions and many books selling hundreds of copies.

          False.
            ebook market leads to more equal distribution across many, many books.

          • by teg (97890)

            False. ebook market leads to more equal distribution across many, many books.

            [citation needed].

        • by tacet (1142479)

          The question is - what industry exactly we will lose?
          I still find this article insightful - http://jakonrath.blogspot.com/2010/01/selling-paper.html [blogspot.com]

        • by Asic Eng (193332)

          What exactly does a publisher do when a book is sold in electronic format? If what they do is still valuable, then someone will pay them for doing that. If not, what's the point of publishers?

          • What exactly does a publisher do when a book is sold in electronic format? If what they do is still valuable, then someone will pay them for doing that. If not, what's the point of publishers?

            Just guessing here, but editors, proof readers, marketing, etc. And let's not forget that some authors get advances. Publishers don't supply all the same services for electronic books as they do for printed books, but a book isn't finished just because the author is done writing it.

      • Re: (Score:3, Informative)

        by Telvin_3d (855514)

        You still have to make the money back on editors, artwork, advertisement, etc., but the physical print, transportation, and storage costs should cause those books to be discounted a good amount.

        How much do you think it costs to print a book? Let's look at it this way. You can go out and buy a laser printer that will do 5c/page for double sided text. Each double sided paper equals four pages in a hard cover book. 400 pages in a typical book, or printing costs of about $5. Done at home on consumer equipment. Yes, you still need binding and shipping and such but I have to figure that a professional print house can do the actual printing for cheaper than I can do it at my computer desk so it would all

        • by cob666 (656740)
          Forget about comparing the price of hard cover books to ebooks, try comparing the cost of paperback books to ebooks. In almost EVERY case the ebook will cost more than the paperback book, that is just absurd.
          • by donny77 (891484)

            Why do hardbacks cost more than paperback? The extra cost of the "cover" is probably less than a dollar, yet you've had no problem paying it before and never complained. Why? Maybe because the hardcover book will last LONGER than the paperback and is easier to take care of. Just like the ebook. You are paying more for a better product. Production costs are largely irrelevant.

            The question is, are they charging more than a fair price? I think the answer to that is they are not. So what is the problem?

            • It remains to be proven that eBooks will last longer.
              If your eReader breaks and the seller has gone out of business or just decided to not let you download the books anymore, you loose the books completely.

        • by chispito (1870390)

          So the total cost savings for a publisher by going digital is likely more than $5 but certainly less than $10. And most digital copies tend to be about $5-$10 cheaper than the hardcover. Yes, there are exceptions but on the whole I'd say it tracks pretty well.

          You must not be buying the same ebooks I'm buying.

      • Yeah sure, the 30% cut being exactly the same as Apple wants on everything else sold through them is a complete coincidence ... the fact that items sold through other venues can't be offered cheaper exactly like their policy for apps in their appstore with in app purchasing ... all a complete coincidence.

        The agency model has DESIGNED BY APPLE all over it ...

      • Charging as much for an ebook as a physical book is completely off-base. You still have to make the money back on editors, artwork, advertisement, etc., but the physical print, transportation, and storage costs should cause those books to be discounted a good amount.

        On the other hand, a hardcopy book is an asset on which the publishers and booksellers can be charged an inventory tax. Thus it is often to their financial advantage to actually destroy them rather than hold them in the hope of future sales. H

    • Big words - can you back that up with data? Apple has, or will, in court.

    • Re:A lot of words (Score:5, Interesting)

      by cpu6502 (1960974) on Sunday May 27, 2012 @02:38PM (#40129579)

      The DOJ will demolish Apple's filing by saying, "That means 1 in 10 ebooks were not sold in Amazon, but on other magazine and book websites. So there was a healthy market of multiple e-stores competing with one another to lower the prices of this product, until Apple arrived on the scene and colluded with the publishers to engage in price-fixing" --- When the record companies tried this with CD sales, the case found Walmart was part of the collusion, and just as guilty of the crime. Same applies to Apple mart.

    • by Znork (31774)

      That's entirely possible, but in that case it's because Apple brought a higher end market with them. Revenue with monopoly pricing is maximized by setting prices in relation to what the market can bear. Copyright is not a free market and filing antitrust suits over pricing or price collusion is specious; there is no free market pricing, there is no competition and that is by design.

      If the DOJ was at all interested in competition they'd work to abolish copyright and let the Pirate Bay put some competetive pr

      • by cpu6502 (1960974)

        >>>Copyright is not a free market and filing antitrust suits over pricing or price collusion is specious

        It worked well when they sued the record companies for violating Sherman Antitrsut law on price-fixed *copyrighted* CDs. The record companies were punished. So the lawsuit is not "specious"

      • Re:A lot of words (Score:5, Interesting)

        by poemofatic (322501) on Sunday May 27, 2012 @04:38PM (#40130251)

        Copyright is not a free market and filing antitrust suits over pricing or price collusion is specious

        This misunderstanding is at the heart of the matter. Copyrights grant a monopoly (and therefore the right to engage in monopoly pricing) to the copyright holder for that specific work. The fact that a work is copyrighted does not grant monopoly rights to everyone else in the production chain, nor does it allow monopoly pricing for all books. I.e. you can say "this work which I own, I only make available to bookstores and re-sellers for $20". But the publishers cannot collude together and say "All books that *we* collectively own are only available for $20", nor can the bookstores and re-sellers collude to charge a fixed premium over what they pay publishers. The bookstore does not hold any copyrights, and no individual publisher holds all copyrights. So a general increase in the price of *all* books without any corresponding increase in marginal costs, prices paid to authors, or input prices is pretty good evidence of illegal collusion, irrespective of whether any individual book is copyrighted.

        So what you have here are two illegal practices:

        * publishers colluding with each other to charge high prices. They should be competing with each other, setting only the prices for the works that they (individually) hold copyrights over. Then if they charge too much for sci-fi author A, you can go to publisher B who holds sci-fi author B's copyrights. If B is substitutable for A, and B will be, to some extent, then a low enough price will force the publisher of A to also lower their price. When they all get together, they can set prices for all books, and this is illegal.

        * Collusion on the part of the re-sellers (e.g. apple, Amazon), who hold no copyrights. Whenever anyone says, "I will charge a fixed markup", they run the risk of being undercut by someone else who is willing to take a smaller margin. Unless the first person colludes with the (monopoly) supplier, so that whenever the competing re-seller tries to lower their markup, the supplier jacks up the price to the re-seller or refuses to supply the re-seller until the re-seller gets the message that he must charge the same fixed markup. Incidentally, this is why there were multiple lawsuits over "MSRP" -- suppliers aren't supposed to have the power to set retail prices, and retail stores need to have the right to try to undercut each other by lowering prices to the end user. But when the original good has a sole supplier, there is always the possibility of producer forcing retailers to sell for a certain price by withholding supply or charging more to those retailers that offer discounts.

        Whether or not the DoJ can *prove* collusion is one thing, but looking at the behavior or prices its pretty clear that illegal collusion is occurring, this despite the fact that that books are copyrighted.

    • Re:A lot of words (Score:5, Insightful)

      by k4hg (443029) on Sunday May 27, 2012 @02:54PM (#40129671) Homepage

      The books were cheap because Amazon was selling them at a loss to prevent the entry of competition. Amazon has a long-term strategy to work on razor-thin margins driving out all competition. In the last quarter they made about 1% of gross- they made a penny out of every dollar people spent. No small or medium business in their right mind would enter a market like that. So overall Amazon does not turn a lot of profit, but their stock is valuable (much more than their profit would justify) because investors expect that once they have completed driving all their competitors out of business they will raise their margin (meaning the prices you pay go up). So you are going to pay more, a little bit now because of the agency model and most favored nation status thanks to Apple, or a lot more later when no one but Amazon has physical or electronic books to sell you.

  • by utkonos (2104836) on Sunday May 27, 2012 @02:33PM (#40129549)
    We need some independent publishing houses, and we need them fast. The content distribution should not be that difficult, as long as these indie publishers are able to publish DRM-free books in multiple formats. Make your books available in all the major formats (kindle/epub), and you will kill Amazon, Apple, Google, and anyone else. The question is, what will those companies do to stop you?
    • by nedlohs (1335013)

      If it is that easy why aren't you doing it?

      • by utkonos (2104836)
        You know what. Why not?
      • There are a million things that are easy for me that I jsut dont want to do. Does that make me incapable? Your 'put up or shut up' rhetoric is tiring.
        • by xyzzyman (811669)
          A million things that are easy for you? Name em or shut up.
        • by nedlohs (1335013)

          of course not.

          Ans the simple answer to the question is: "it doesn't interest me enough to do so" or "I make more money doing other things" or a bunch of other equally valid reasons.

          But instead you interpret it as a qurstion of your capabilities? I guess that says more than a real answer.

    • by jbolden (176878)

      There are plenty of independent publishers, though the number os shrinking. The content distribution isn't difficult people know how to create DRM free versions of books.

      To kill Amazon, Apple, Google they would need to sell a very very large number of copies. What evidence do you have that DRM free mid quality books will do that.

    • by Telvin_3d (855514)

      Independent from what? Even the biggest publishers have a fairly flat structure and if there is ANY media industry known for it's small time producers it's the publishing industry. If they can convince someone that there is readership (or are willing to put up their won money) anyone has been able to get anything published since as long as the printing press has existed. There are no gatekeepers in publishing and never have been.

      And the publishers running their own stores is a bad idea in the same way that

      • by aaarrrgggh (9205)

        A small publisher doesn't need a best seller, but then do need 10-20 books a year that sell 50k copies with reasonable margin.

        Anecdotally, the only fiction I have read in the last 5-7 years is the Stei Larsson trilogy. This despite getting the amazon library off TPB. It is just too much work to find books: the publishers have failed at marketing. Amazon had a good system going to recommend books, but that was really only effective with proper bookworms, as best I can tell.

        A healthy market needs the long

  • Oxford Comma matters (Score:2, Interesting)

    by nastav (2611511)
    From Page 6, Bullet #7 (emphasis mine) "This lawsuit wrongly seeks to condemn Apple based on the Government’s apparent dissatisfaction with the impact of competitive entry, demand stimula- tion and innovation (ignoring significant indicia of consumer and market benefit), not based on any anticompetitive conduct by Apple. This is contrary to law and sound economic policy." "This is contrary to law and sound economic policy" means ( "This is contrary to law" ) AND ( "This is sound economic policy"
    • by david.emery (127135) on Sunday May 27, 2012 @02:54PM (#40129677)

      I was with you until you misused "it's" in your link.

    • "This is contrary to law and sound economic policy" means ( "This is contrary to law" ) AND ( "This is sound economic policy" )

      No, it doesn't. That would be written, "This is contrary to law and is sound economic policy." (More likely, it would be written, "This is contrary to law but is sound economic policy.")

      When written correctly, with the Oxford Comma in place, it would have the intended meaning

      There is no place for the serial (also known as "Oxford" or "Harvard") comma in that sentence, since where

  • The Department of Justice better be careful. Apple can buy or sell them anytime it wants.

    What's that? "Too late", you say?

  • Important Dates (Score:4, Interesting)

    by ZombieBraintrust (1685608) on Sunday May 27, 2012 @04:21PM (#40130165)
    2006 Amazon was the king of books sold online. If you purchased a book and had it delivered to you house via Fedex chance are you purchased your book from Amazon or its chief competitor Barnes and Noble. Amazon was the Walmart or the Tower records of books.
    Sept 2006 Sony releases the PRS-500 e-ink ereader.
    Nov 2007 Amazon releases the Kindle and begins marketing it on Amazon.com to its large book buying customer base.
    Nov 2009 Barnes and Noble, Amazons primary competitor, releases the Nook two years after the Kindle. It receives good reviews. B&N starts marketing the device in B&N stores to its millions of customers.
    Mar 2009 Amazon releases the Kindle app for IPhone (app would later work on IPad)
    April 2010 Apple releases the IPad with IBooks three years after the release of the Kindle and 1 year after the release of the Kindle app. The Agency model replaces the wholesale model.
    July 2010 Borders starts selling the Kobo ereader three years after the release of the Kindle
    Oct 2011 Borders goes into bankruptcy. Kobo survives and still sells books under the Agency model.
    So saying there was no competition is strictly true. With the exception of Sony, Amazon did not have any competition for 2 to 3 years. So of course it gained 90% market share. And of course that market share went down after B&N started selling the Nook. If you look at current market share it is similar to Amazons share in 2006. Amazon in #1 and B&N is #2.

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