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Judge Rules Apple Colluded With Publishers to Fix Ebook Prices 383

Posted by Unknown Lamer
from the captains-of-industry dept.
Despite many publishers themselves settling with the DOJ over allegations of price fixing ebooks, Apple held firm and recently went to trial. And now the verdict is in: Apple conspired with major publishers to control ebook prices in violation of anti-trust laws. A trial for damages has been ordered. Quoting Reuters: "The decision by U.S. District Judge Denise Cote in Manhattan is a victory for the U.S. government and various states, which the judge said are entitled to injunctive relief. ... Cote said the conspiracy resulted in prices for some e-books rising to $12.99 or $14.99, when Amazon had sold for $9.99. 'The plaintiffs have shown that the publisher defendants conspired with each other to eliminate retail price competition in order to raise e-book prices, and that Apple played a central role in facilitating and executing that conspiracy,' Cote said. 'Without Apple's orchestration of this conspiracy, it would not have succeeded as it did in the spring of 2010,' she added." Update: 07/10 16:36 GMT by U L : The ruling is now available (160 page PDF).
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Judge Rules Apple Colluded With Publishers to Fix Ebook Prices

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  • by nimbius (983462) on Wednesday July 10, 2013 @10:27AM (#44238063) Homepage
    now if we can just get a judge to rule the fundamental concept of an "e-book" is bullshit and nothing more than an encumbered text document designed to peddle locked down e-garbage hardware and fleece the ignorant.
  • by LordLucless (582312) on Wednesday July 10, 2013 @10:27AM (#44238065)

    Maybe because it's not illegal to change your prices?

    And it's authors who are complaining? Authors are the ones who control the supply - if they're upset about other people controlling the pricing of their work, then maybe they shouldn't have sold that right off. The barrier to entry for distributing e-books is minuscule - if an author wants to maintain control over the distribution of their work, there is absolutely nothing stopping them these days.

  • Almost not news (Score:5, Insightful)

    by DeathToBill (601486) on Wednesday July 10, 2013 @10:29AM (#44238093) Journal
    Hard to see how this was ever going any other way when the publishers involved all settled, including admissions of guilt in the settlement. According the the BBC, Apple will 'appeal against the ruling and fight "false allegations".' Apple has now definitively departed from the reality-based community.
  • by RenderSeven (938535) on Wednesday July 10, 2013 @10:39AM (#44238221)
    Indeed a 'book' is nothing but an encumbered text document stored on paper. Which I guess you would call 'p-garbage' by the same logic, and the printing press is nothing but a big expensive copy prevention device.
  • by Anonymous Coward on Wednesday July 10, 2013 @10:40AM (#44238233)

    First off, no company evil and it can't be. A company isn't sentient, the people are.

    Group dynamics, dude.

    Groups act like a single entity - case in point military. It has been shown time and time again, put a person in a uniform and have them identify with the organization and you can get them to do just about anything. The Nazis were expert at this. (I will bitch slap the first person who improperly invokes Godwin's law on this!)

    It's the same with a company. When folks are working for a company, they identify with that company. That's why when speaking to a representative of a company and you slight the company - not them personally - many times they'll get irate as if you DID insult them.

    If a company "culture" can be just a like a personality. I mean, why is that the cell providers, satellite tv, airlines, and cable companies, even though they are made up of individuals, treat their customers like garbage and have no problems ripping them off?

    It's because of a company personality or "culture".

    So, yes a company CAN be Evil.

  • by BemoanAndMoan (1008829) on Wednesday July 10, 2013 @11:19AM (#44238891)

    if they're upset about other people controlling the pricing of their work, then maybe they shouldn't have sold that right off. The barrier to entry for distributing e-books is minuscule - if an author wants to maintain control over the distribution of their work, there is absolutely nothing stopping them these days.

    Wow, just no barrier to stupidity on the internet, is there. Do you realize how fantastically low the success rate is for e-books? No distribution, no public awareness, no marketing ... other than the seventeen people following you on twitter. I'm not saying publishers go out of their way to push every book (far, far from it) but without a physical presence on the bookshelves you chance of getting noticed or even an ounce of publicity is fantastically low.

    Your suggestion is akin to suggesting a farmer open a fruit stand instead of working with wholesalers.

    At this point you will likely point out one or two of those exceptions as some sort of straw man argument. Me, I've just worked in and around the industry for decades (on both sides).

    Authors control the supply ... I'm going to laugh about that one for a while.

  • Would you have the same opinion if the oil companies together decided that you should pay $30 a gallon for gas?

  • Prices couldn't go down; Amazon was selling below wholesale as a means to control the market. Apple's got deep pockets too, so they probably could've done the same, but it's not really a sustainable business model.

    Really, Apple's error here was not understanding the legal position that this put them in. They should've waited for what I think was the inevitable anti-trust case against Amazon and entered the market afterwards. This was a freebie given to Amazon and Apple detractors by some Apple executives being impatient.

  • by bws111 (1216812) on Wednesday July 10, 2013 @11:55AM (#44239493)

    Books are not a fungible commodity. People don't decide what book to read based on price, they decide based on the book. Yes, if they set the price too high people won't buy it, but that is not the issue here. The issue here is that if you are using other businesses (retailers) to sell your product, then those other businesses should have a say in how much they will sell the product for. That competition has been completely eliminated by this collusion. And the purpose of the collusion was not simply to set the price of the product, but to ensure that a single retailer no longer had to compete on price.

  • by immaterial (1520413) on Wednesday July 10, 2013 @12:50PM (#44240391)
    Your argument defeats itself. As you pointed out (as the court determined), it took many players working together to raise the price of ebooks. That's the definition of collusion. Not a monopoly.
  • by teg (97890) on Wednesday July 10, 2013 @01:43PM (#44241237) Homepage

    I would argue that "monopoly power" is the ability of *one* player to reset the price above the what would normally be a market price. Since the deal Apple brokered among publishers raised the cost of ebooks across all platforms, the term should apply here.

    I disagree. In this market, you had en extremely dominant player with 80-90% market share [cnn.com] selling products at a loss. One of the benefits of this was extending and maintaining the market share of the Kindle eco system, thus raising the barrier to entry to the market. Another was to train customers into a certain price range. Combining these, it is likely that they could later impose these prices on the suppliers.

    Apple entering this unstable market gave the unhappy suppliers an option, which they took advantage of. A new player entering a previously almost monopolized market, and still being a by far smaller player - Kindle still has 50-60% of the market [paidcontent.org] - and being hit by anti-trust laws sounds strange to me. Sure, they probably guessed that prices would increase but that was caused by the intrinsics of this specific market with the 800 lb gorilla selling at a loss. While I think Apple's MFN tactic [cnn.com] should be disallowed - at least as far as MFN being applied to the customer price, rather that what Apple would be paying - Amazon also had MFNs in their contracts [cnn.com].

  • by Marrow (195242) on Wednesday July 10, 2013 @02:56PM (#44242201)

    Dont nail them for some arbitrary amount that will be isolated and written off by the accountants. Hit them where it really hurts them: deny them the right to compete in a market. That would be a real punishment for them.
    After all, they cheated. Let them be forced out of the game for a while. Then when they try to come back in, they will be so far behind they may actually have to offer some benefit to the consumer.

  • by Anonymous Coward on Wednesday July 10, 2013 @04:14PM (#44243073)

    I take it that you've never gone in and unbound a book, scanned each of the pages, run through OCR Software, fixed any interpretation errors, and then gotten the new document converted to an appropriate digital format for further use.

    I cut paperbacks into 2-3 sections then chop 400 pages (200 sheets) at a time with something like this:
    http://www.amazon.com/Professional-Guillotine-Desktop-Stack-Cutter/dp/B003D6JQ62/ref=sr_1_1?ie=UTF8&qid=1373486777&sr=8-1&keywords=stack+cutter

    I then drop it into this:
    http://www.amazon.com/Kodak-1147925-Scanmate-I1120-Scanner/dp/B002N0QJ0K/ref=sr_1_1?ie=UTF8&qid=1373486701&sr=8-1&keywords=scanmate+i1120+scanner

    You can easily get 50 sheets at a time in, with room to drop another 50 in when it's almost done. Takes about 5 minutes per hundred "pages" and you only need to pay attention every fifth minute or so. I get a 300dpi full color, full text search PDF in about 10 minutes per 100 pages - 5 mins to scan, 5 mins to process/OCR/PDF. BnW text only (ocr text searchable) in half that. Once in a while I need to blow dust off the scanner and rescan a stuck page. I put the scanner on top of a box that catches the paper for me in case there's any "2 for 1" pages sticking to each other so I don't have to do more than toss in the next stack when it runs low.

    When I'm done, I take half a minute to check if the page numbers are accurate and find any missing pages. Usually happens about 2 in 12 magazines with super-thin glossy paper, maybe once per half dozen novels.

    You can do it while watching TV/youtube/netflix/debunking others on slashdot...

  • by cpt kangarooski (3773) on Wednesday July 10, 2013 @04:54PM (#44243563) Homepage

    Let me clarify: a publisher can whip up copies of a book as easily or more easily than a pirate can. Yes, the initial creation of the book is difficult and costly, but the marginal cost of each copy thereafter is not greater for the publisher than the pirate merely due to the state to which technology has advanced. I was never addressing the issue of paying for the labor needed to get the book ready to publish to begin with; those sunk costs are not going away and are not too closely linked to publishing technology. Hell, some authors still write books longhand.

    For example, if the cheapest way to print a paper book is to use a huge offset press, publishers likely have an advantage over pirates who will either have to conceal their huge illegal printing operation or use inferior techniques, such as xeroxing books one at a time. OTOH, if xeroxing books one at a time somehow happened to become a cheaper means of printing than anything else, the legitimate publishers would have the offset press hauled away, install a bunch of xerox machines, and still not be behind the curve of the pirates.

    Digital distribution has greatly reduced the risks, while digital copying has eliminated the investment and greatly increased the profit margin

    That only brings pirates toward technological parity. Legitimate publishers are not prohibited from using the latest tools. It may be difficult for them to figure out how to make money whilst selling books over Bit Torrent or whatever the kids are using these days, but they needn't be shackled to the old ways.

  • Re:Almost not news (Score:5, Insightful)

    by DeathToBill (601486) on Thursday July 11, 2013 @08:28AM (#44249035) Journal

    It's tricky. Amazon did have a dominant position in the market and were selling at very low prices, sometimes below cost. They were willing to this because they could make profits on other sales that they were happy with, and also arguably because they could price everyone else out of the market and then use their dominance to raise prices (though this is speculation and it never got that far). This created a considerable barrier to entry for other players in the market. So Amazon might well count themselves lucky that they weren't on the wrong end of a competition probe themselves.

    When Apple wanted to get into that market, what they probably should have done was complain that Amazon's business was anti-competitive and got the regulator involved. Instead, what they did was go to all the publishers and convince them to switch to the agency model. In this model, the publishers don't sell books to the retailers. Instead the retailer acts as an agent for the publisher and the contract of sale is direct between the consumer and the publisher, through the agency of the retailer. It means that the publishers get to set the price of books, not the retailers. An extra term in the contract said that the publishers wouldn't enter non-agency agreements with any other retailer and they wouldn't sell through any other publisher for less than they sold through Apple. Funnily enough, the price the publishers chose was basically the old retail price + Apple's 30% cut.

    This was obviously good for Apple, as it meant Apple could compete with Amazon while still taking their 30% cut on every sale. It was also good for the publishers, because it helped break Amazon's dominance and so gave the publishers room to negotiate prices upwards. It might even have been arguably good for the market, at least in the long term, as Amazon were using their position to fend off new entrants and increase control. They might then have used that control to increase prices.

    So this prosecution is basically saying to Apple, "Two wrongs don't make a right." Amazon wasn't behaving very well before Apple entered the market, though it looked like short-term good for consumers, but collusion and price-fixing is not an acceptable way of breaking that sort of market dominance, either.

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