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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 Anonymous Coward on Wednesday July 10, 2013 @10:19AM (#44237931)

    http://www.nytimes.com/2013/07/05/business/as-competition-wanes-amazon-cuts-back-its-discounts.html?hpw&_r=0 [nytimes.com]

    As Competition Wanes, Amazon Cuts Back Discounts
    By DAVID STREITFELD, NY Times
    Published: July 4, 2013

    "Jim Hollock’s first book, a true-crime tale set in Pennsylvania, got strong reviews and decent sales when it appeared in 2011. Now “Born to Lose” is losing momentum — yet Amazon, to the writer’s intense frustration, has increased the price by nearly a third.

    Jim Hollock wrote a true-crime story set in Pennsylvania.

    Mr. Hollock’s first book had decent sales when it appeared in 2011, but now that it is losing momentum, Amazon raised the price.

    “At this point, people need an inducement,” said Mr. Hollock, a retired corrections official. “But instead of lowering the price, Amazon is raising it.”

    Other writers and publishers have the same complaint. They say Amazon, which became the biggest force in bookselling by discounting so heavily it often lost money, has been cutting back its deals for scholarly and small-press books. That creates the uneasy prospect of a two-tier system where some books are priced beyond an audience’s reach."

    • by gl4ss (559668) on Wednesday July 10, 2013 @10:27AM (#44238059) Homepage Journal

      around here you can't have a product listed on "sale"(as in firesale or whatever) permanently.. why? because it's deceiving. if it's never at the normal price then there's never a special sale price... just the usual price. so if something is 10% or 20% off permanently, all the time, it's just a trick to fool the customer and therefore there are statuary limits on how long a sale can last..

    • 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.

      • 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.

  • 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.
    • Why do they even bother crying "false allegations." Are their consumers out there who were awaiting the results of this trial to determine if they were going to buy an iphone or an android? Are stock brokers saying "SELL SELL SELL... wait... Oh, nevermind, apple says the court is wrong. We don't need to dump the stock."
  • by bobstreo (1320787) on Wednesday July 10, 2013 @10:31AM (#44238125)

    Everybody who ever bought any number of books will get a single $1-5 credit toward buying another book. States and Federal government will collect
    millions of dollars and fines.

  • The price increase is about 30%. Apple's commission on all sales through iTunes, perhaps?
    • by will_die (586523)
      The cost from the average distributor and seller is higher then that. The 30% charged by Apple is cheap.
  • by macsimcon (682390) on Wednesday July 10, 2013 @11:15AM (#44238827)
    I love Apple's products (no really, I do), and I make my living supporting them, but anticompetitive behavior is a crime against capitalism itself. It hurts us all. As soon as Apple entered the market, E-book prices went UP. If Apple had truly represented more competition, as they claimed in court, prices should have gone down. The prices went up because Apple illegally colluded with others to fix a higher price (perhaps so they could get their 30% cut). The court should fine Apple something meaningful. How about the $140B they have in cash? Distribute that to everyone who bought E-books. Or put Tim Cook in jail for anticompetitive behavior. No CEO would ever do anything anticompetitive again if they knew they might personally go to jail. I would even support a corporate death penalty for Apple if it sets a precedent: engage in anticompetitive behavior, and the government will terminate your company for good. White collar criminals are different from blue collar criminals in that they usually consider the consequences of getting caught. Only with serious and meaningful punishment can we stop anticompetitive behavior going forward. Let's begin with Apple.
    • by Dixie_Flatline (5077) <vincent,jan,goh&gmail,com> on Wednesday July 10, 2013 @11:53AM (#44239447) Homepage

      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 Dixie_Flatline (5077) <vincent,jan,goh&gmail,com> on Wednesday July 10, 2013 @11:25AM (#44239003) Homepage

    The way Amazon was doing business before this all went down was a sure-fire track to an anti-trust case. They priced books below their own wholesale costs to keep competitors out of the business (the margins on Kindles are pretty slim to nil; I don't think you can even call the cheap books a loss leader, since it just leads to more losses). They controlled (still control?) over 90% of the eBook business, and their DRM BS isn't even compatible with the DRM BS that other companies use. (I can buy books from the Kobo bookstore and use a Sony eReader, for instance. And vice versa. No such luck if I buy a Kindle book, though. I have to have a Kindle.)

    Apple did Amazon a favour by stepping in and gathering the publishers together. Now Apple's lost a lawsuit, but as far as I know, the agency model will still persist. Amazon dodged a bullet there.

    • by Daemonik (171801) on Wednesday July 10, 2013 @12:38PM (#44240147) Homepage
      By your logic Target & Wal-Mart are treading on anti-trust grounds ever time they have a sale. When a retailer (like Amazon) buys a product wholesale (like ebooks) they have every right in the world to resell that product for whatever price they wish to set. Did/does Amazon have a large share of the ebook market? Yes, because they aggressively pursued that market and do more to market ebooks than anyone, the publishers included. You do not have to have Kindle hardware to read Kindle books because Amazon freely distributes their reader software for numerous devices, just like you can put ePub reading software for Nook books on a Kindle.
      • by Dixie_Flatline (5077) <vincent,jan,goh&gmail,com> on Wednesday July 10, 2013 @01:23PM (#44240975) Homepage

        That's a false equivalence. If I want a widget that Wal-Mart sells, it's not necessarily the case I that I need only buy Brand-X widgets. Brand-Y widgets, which Target sells, are probably just as good.

        If I want to buy Game of Thrones, I can't buy some off-label Game of Thrones and get the same thing. They're not equivalent. If Amazon is selling it at lower than their cost basically 100% of the time, how can a competitor hope to break into the market?

        Basically, they can't. Not in a meaningful fashion. This is why Amazon still rules the roost when it comes to book sales.

        Amazon's wrong doesn't absolve Apple in particular; the judge thinks what Apple was doing was shady, and so I'll accept that decision since they know more about the legality of such things than I do. I maintain, however, that given the course that Amazon was on, they would've been subject to an anti-trust trial at some point. They were using their near monopoly position to maintain that position and keep other entrants out of the marketplace. If sales are anything to go on, they were doing a good job.

  • So now can we work on the major publishers as well?

  • by Anonymous Coward on Wednesday July 10, 2013 @12:09PM (#44239717)

    Summarized:

    Apple got them to agree to sell the books to them at X percentage of the sale price.
    They also negotiated that if someone else can sell the book for price N, they have to allow apple to do so, but with Apple's cost still being a percentage of a sale price.

    Music Industry:
    The music industry was dead-set against selling digital music, DRM or not. Period.
    Apple made the heavy DRM concessions up front, but negotiated hard to get a profitable model. By the time digital music was mainstream (through Apple's active marketing/etc.), the music industry was so desperate that they had to turn to Amazon to shake stuff up, and they lost DRM in the process . . .

    Amazon had the book industry by the book-bindng . . . don't you think it was just the industry trying to save itself?

    Amazon is NOT lillywhite, nor are the book publishers; authors are NOT always compensated for Kindle/Nook editions, the same way that Music Artists don't get a 'fair' (meaning what they SEEMED to agree to previously) cut.

  • Books must then be sold like gasoline at 9/10ths subject to availability, wars and costs not obvious to consumers like IP lawyers, patent suits, web-hosting outages, alternative energy hosting costs, etc...

  • 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.

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