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Apple E-book Price-Fixing Trial Begins 213

Posted by timothy
from the arrogance-of-power dept.
An anonymous reader writes "Technology giant Apple is to begin its defence against charges by the US government that it tried to fix the prices of e-books. The iPad-maker is accused of working with publishers in 2009 to set prices in an effort to compete in the e-book market dominated by Amazon. Quotes from Steve Jobs' official biography have been cited as evidence in the case."
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Apple E-book Price-Fixing Trial Begins

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  • cheaper books? (Score:4, Insightful)

    by zappa88 (2938615) on Monday June 03, 2013 @05:36AM (#43894259)
    Yes please.
  • They'll be fine, with maybe a small fine of much less than the money made from the deals. At least they won't likely get their 'pet' judge this time.

  • If Apple doesn't set the prices, how can they fix the prices?
    • Re:Still confused (Score:5, Insightful)

      by bloodhawk (813939) on Monday June 03, 2013 @06:12AM (#43894373)
      They set an artificial floor price through contracts that ensured they can't be undercut by the competition. Price fixing doesn't just refer to the actual price, it refers to setting/fixing of minimum or maximum prices in an industry as well.
    • Re:Still confused (Score:5, Informative)

      by Sockatume (732728) on Monday June 03, 2013 @06:18AM (#43894387)

      Apple's iBook publishing deals included a clause that no other eBook outlet could get a better price than Apple. So, yes, they were engaged in price-fixing that directly favoured them as a seller. In a wholesale bookselling model that's not quite so terrible - you can compete by eating into your margins - but in an agency model where the selling price is set by the publisher isn't allowed to be any lower than on iBooks, you're fucked.

      • Re:Still confused (Score:4, Interesting)

        by Daemonik (171801) on Monday June 03, 2013 @07:35AM (#43894641) Homepage

        Don't forget that Apple controls the apps through their app store and competing book reading apps can't purchase e-books through their app like Apple's, you have to open a web browser and go to their webstore to make a purchase.

        • Re:Still confused (Score:4, Informative)

          by Sockatume (732728) on Monday June 03, 2013 @07:44AM (#43894687)

          You can, in principle, sell content through your app using the in-app-purchasing API*, but Apple has to get a 30% cut. Under most "agency model" ebook deals, the publisher gets 70% of the purchase price, leaving the retailer with zero. (This is why the only thirdparty content stores you'll find on the App Store are publisher outlets like Dark Horse, and not retailers/resellers.)

          *The IAP API is horribly unsuitable for that purpose, but that seems rather moot.

      • by the_B0fh (208483)

        You do realize that Amazon is paying $12.99 for new ebooks, and selling them at $9.99 right?

        So... what changed now that Apple has a deal with the publishers to sell the book for $12.99 and gets 30% of it?

        Can amazon stop selling it at $9.99 regardless of what they paid for it? Or did something else change?

        • by Sockatume (732728)

          Yes, something changed. Previously Amazon had a "wholesale" contract with most ebook publishers, meaning Amazon buy the books for $X and sell for $X+Y. The publisher gets $X, and the retailer gets $Y. After meeting with Apple, all of the major publishers - all of them - went to Amazon and stated that their ebooks would only be available on the "agency model" from then on. Under the agency model, the publisher sets a price of $Z, and the retailer and publisher each receive a share of that price (typically 30

        • You do realize that Amazon is paying $12.99 for new ebooks, and selling them at $9.99 right?

          Nope. Amazon sells *some* eBooks for less than cost. With most eBooks they make some profit.

          Please stop spreading the misinformation that Amazon sells all eBooks below cost.

          • by MrMickS (568778)

            You do realize that Amazon is paying $12.99 for new ebooks, and selling them at $9.99 right?

            Nope. Amazon sells *some* eBooks for less than cost. With most eBooks they make some profit.

            Please stop spreading the misinformation that Amazon sells all eBooks below cost.

            Isn't Amazon using their volume sales overall to discount popular books below purchase price and effectively shutout competitors that need the profits from the popular books to fund their service anti-competitive too? Sure, in the short term the customer gets a good deal, but long term Amazon's price manipulation will favour them rather than the public. Or am I missing something?

            • by bws111 (1216812)

              What possible long-term negative impact could Amazon's low prices have on consumers? The only one I see mentioned is that once they have removed the competitors they can raise prices. That, however, doesn't hold water because selling ebooks has a very low barrier to entry, so as soon as they raise prices even a little competitors will re-appear, forcing prices back down.

              The current case has an obviuous and immediate short-term and long-tem negative impact on consumers.

      • by Thruen (753567)
        I keep reading comments from people claiming it was a clause in the contract, but I haven't seen any such thing in actual news articles. I admit, I haven't read them all, but that's the type of thing I'd expect to see in every article about it given the general anti-apple tone I normally see. Instead, I keep seeing them quoting Steve Jobs' biography as evidence. A book published by the industry that supposedly engaged in this collusion written at the request of and about the founder of the company they coll
        • by Daemonik (171801)

          That said, I question the ethics of Amazon's own pricing plan if it caused such a problem for publishers, and I find it hard to believe that something like that wouldn't have damaged consumers as much if not more in the long term. Here's my reasoning: Amazon, as we all know, was willing to sell titles at a loss to maintain their low prices. This sounds great for consumers, because we save money right away. But over time, the businesses that can't afford to sell titles at a loss go under. Amazon no longer needs that super-low price to be the lowest price around because their price is the only price, now they can finally sell it for a profit without fear of consumers just walking to a book store or clicking over to the next site. Book prices go back up, competition is gone with little hope of return, and Amazon stands over the corpses of Borders and B&N triumphantly.

          People said the same thing about Wal-Mart, except somehow Target spanks their a** every quarter. Either way, your supposition has a few problems, notably Amazon, unlike Apple, still sells the physical copies of the books, as well as the e-books. Said physical copies are NOT covered by the Apple agreement and Amazon is free to price them as it wishes. Amazon, as a part of their business, allows other retailers to compete with them ON THE SAME PAGE. You can see other prices for both new and used books, ri

          • Amazon, as a part of their business, allows other retailers to compete with them ON THE SAME PAGE.

            It's hardly competing if it's part of the Amazon business model, performed under Amazon's terms and conditions, and contributes to Amazon's bottom line.

            You might as well say Apple allows developers to compete with them ON THE SAME PAGE by letting them into the Apple App Store. Though of course in THAT case you're more aware of the conditions than you are in the Amazon case.

            It was either buy books at wholesale, setup a division to manage prices and take a loss like Amazon, or collude to change how the market was structured. Guess which one they picked.

            They picked neither of those. What they did was extend the existing model of selling songs, apps and movies to ebooks. The absolutely mo

    • If Apple doesn't set the prices, how can they fix the prices?

      Furthermore, for the sake of argument: What if Apple Loses? They'll be ordered to ... what? Fix the prices?

      • Re:Still confused (Score:5, Interesting)

        by Sockatume (732728) on Monday June 03, 2013 @06:36AM (#43894445)

        If it's anything like Europe, Apple will be required to end their most-favoured clause immediately, and publishers will be required to offer Amazon discounted prices on their books for a few years to offset the elevated prices that they'd been forced to accept under the anticompetitive regime that existed.

        • If it's anything like Europe, Apple will be required to end their most-favoured clause immediately, and publishers will be required to offer Amazon discounted prices on their books for a few years to offset the elevated prices that they'd been forced to accept under the anticompetitive regime that existed.

          In reality what has happened in Europe was that Apple had to give up their most-favoured clause immediately, while Amazon got to keep theirs. And that's all that has happened.

          • by Sockatume (732728)

            It is the nature of punitive action that it will tend to favour the transgressor rather than the transgressed, yes. What "most-favoured" clause of Amazon's are you talking about?

  • Comments (Score:5, Interesting)

    by puddingebola (2036796) on Monday June 03, 2013 @06:10AM (#43894371) Journal
    Fascinating comment at the end of one of the stories linked to here. The writer claims that Amazon's model is unsustainable and equivalent to the Standard Oil play of selling at a loss to drive competitors out of business. In his opinion, Apple should be commended for raising prices by a few dollars per book? What say you Slashdot? What I have trouble determining in this shift from physical media to digital is how the artists are making out in this brave new world.
    • Re:Comments (Score:4, Insightful)

      by Sockatume (732728) on Monday June 03, 2013 @06:22AM (#43894401)

      Amazon's ridiculously thin margins aren't a short-term tactic to eliminate competitors. If they were, Amazon would've started hiking up prices in things like books and videogames where they've all but eliminated the competition. Slim margins are the entire (incredibly dubious) business model, and they'll continue with that process, bringing in fractions of cents of profit per dollar of sales, indefinitely.

      It ain't healthy for anybody.

      • Re: (Score:3, Insightful)

        by Anonymous Coward

        Ii all Amazon are ever interested in doing is making purchasing / delivery ever more efficient, then isn't that what we'd like to happen? [I don't believe they will restrict themselves to that, but it's pretty hard to see why it would be a problem if they did.]

        If not can you explain
        -what is the problem
        -what you want to see happen
        -what does Amazon have to do with it?

        Is it "damage to competitors"? The public prefer to buy things for cheaper. The value of a shop floor where they can see or try certain goods is

        • Re:Comments (Score:5, Insightful)

          by Sockatume (732728) on Monday June 03, 2013 @07:33AM (#43894633)

          Monoculture, essentially, is the issue. If Amazon was one of a half-dozen ultra-low-margin online retailers, we wouldn't be having this conversation.

          • Monoculture, essentially, is the issue. If Amazon was one of a half-dozen ultra-low-margin online retailers, we wouldn't be having this conversation.

            What I find curious, given the fear of monoculture, is how publishers continue to let fear of pirates(who, at last writing, don't seem much deterred by current DRM schemes, and who often have access to scanned versions in any case) drive them right into the same mistake that Team Music made.

            While there effect on pirates is muted, DRM schemes certainly do help encourage a winner-take-all market by tying a customer more heavily to a given store the more he has used it in the past. With computers and high-capa

      • Amazon's ridiculously thin margins aren't a short-term tactic to eliminate competitors. If they were, Amazon would've started hiking up prices in things like books and videogames where they've all but eliminated the competition. Slim margins are the entire (incredibly dubious) business model, and they'll continue with that process, bringing in fractions of cents of profit per dollar of sales, indefinitely.

        It ain't healthy for anybody.

        So it's actually a long-term tactic to fuck over their shareholders. And I wouldn't call losing 20% on most ebook sales "slim".

        • by Sockatume (732728)

          It would not surprise me if a majority of Amazon's sales on everything came out at a loss, with enough big profit items to shift it back across the other side of the line. They're playing a dangerously volatile game.

          • You might want to go look at their profit statements over the life of the company.

            They've always been playing this game.

            Making millions while selling billions.

    • Re:Comments (Score:4, Informative)

      by Daemonik (171801) on Monday June 03, 2013 @08:32AM (#43894903) Homepage

      " What I have trouble determining in this shift from physical media to digital is how the artists are making out in this brave new world."

      A couple of artists that sell e-books direct through Amazon have become millionaires actually. http://blog.nathanbransford.com/2011/03/amanda-hocking-and-99-cent-kindle.html [nathanbransford.com]

      The problem with e-book prices, in the main, is the perception of value. When they are listed next to the retail prices for the paperback version and it's still cheaper to have a paperback shipped to your home, then something is very very wrong. When the e-book version of a book that has been out of print for a decade or more hits the market for $9.99, you know that's not a fair price.

      • by bws111 (1216812)

        There is a very simple formula for deciding if the price of a luxury item (like a book) is fair: If the seller is willing to accept the price, and the buyer is willing to pay the price, then the price is fair.

    • Re:Comments (Score:4, Interesting)

      by bws111 (1216812) on Monday June 03, 2013 @09:37AM (#43895417)

      Standard Oil didn't get in trouble because they had low prices, they got in trouble because they created a trust. They not only sold oil, but they either owned or controlled most of the oil transportation system. Because of that control, nobody could compete with them in the oil market because it would have been too expensive for a competitor to build their own transportation system. Therefore, competitors could not arise, and SO could in fact raise prices to very high levels.

      Ebooks are not remotely like that. Sure, Amazon could drive competitors out of the ebook market by having very low prices, but as soon as they try to raise prices competitors will pop up, as it is stupidy cheap to retail ebooks.

      • Re:Comments (Score:4, Insightful)

        by tlhIngan (30335) <(ten.frow) (ta) (todhsals)> on Monday June 03, 2013 @12:08PM (#43896787)

        Standard Oil didn't get in trouble because they had low prices, they got in trouble because they created a trust. They not only sold oil, but they either owned or controlled most of the oil transportation system. Because of that control, nobody could compete with them in the oil market because it would have been too expensive for a competitor to build their own transportation system. Therefore, competitors could not arise, and SO could in fact raise prices to very high levels.

        Ebooks are not remotely like that. Sure, Amazon could drive competitors out of the ebook market by having very low prices, but as soon as they try to raise prices competitors will pop up, as it is stupidy cheap to retail ebooks.

        Except by then, everyone would have been using Kindles for ebooks and have significant investments in Kindle ebooks.

        Remember, books have DRM, and unless an upstart platform were to offer them DRM-free (try getting publishers onside for that), then people won't bother. The barrier to entry is extremely high and people with Kindles won't want to buy your book reader because it won't read their Kindle books.

        Remember what happened a few years ago with iTunes? Prior to it going DRM-free, it was all DRM'd and even worse, no one could sell DRM music that worked on the iPod (the most popular music player at the time). Sure there were competitors, but they were related to crap "PlaysForSure" style stores who more often than not closed shop because of low traffic.

        With DRM, once a platform has achieved critical mass, there's no way to break it, short of going DRM-free. It happened for music, but publishers seem reluctant to adopt that model.

        And ebooks were sold prior to Amazon releasing the Kindle - Sony did it. But once the Kindle came out, it was pretty much over - the Kindle was superior - easier to get books on it (no PC required), you could get books from anywhere with 3G, etc. So it legitimately took over the market. Except the publishers (like the music industry) were getting unhappy with Amazon's tactics. Apple offered them an alternative that they readily adopted, which pressured Amazon into switching models as well. Of course, the Apple model didn't really do much - other than allow other bookstores to open (besides Amazon's store, there's also the Barnes and Noble Nook, Kobo and iBooks. Even though iBooks is probably the smallest, the fact that other stores have popped up is generally a good thing).

        Of course, Amazon isn't in the clear - I come across many "kindle only" books where the author typically takes the "amazon exclusive' offer and with no print option... the only alternatives would be to do without (better) or pirate (I don't have any Kindle books).

    • Artist without a publisher are making lots of money. They can now get 70% royalty instead of a 10-15% royalty and be just a available as Harry Potter to the consumer.
  • Glad to see they have enough evidence to go after Apple.
    It seems fairly obvious that they are guilty.

    Now how about some banks?

  • Wow, I guess it does pay to keep a low profile, especially when, after you died, your biography can be used against the company you built! :) Cautionary Tale for those who like to showoff? :)

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