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The Almighty Buck The Courts Apple

Court Bars Apple From Making Industry-Wide E-book Deals 130

Posted by Soulskill
from the play-nice-with-others-or-else dept.
itwbennett writes "The federal judge presiding over the U.S. electronic books case against Apple has barred the company from striking deals that would ensure that it could undercut prices of other retailers in the e-book market and also prohibited Apple from letting any one publisher know what deals the company is striking up with other publishers. For its part, Apple said it plans to appeal the ruling (PDF), denying that it conspired to fix ebook pricing. Meanwhile, Amazon is alerting customers of their potential payout, which could be as much as $3.82 for every eligible Kindle book."
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Court Bars Apple From Making Industry-Wide E-book Deals

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  • by ISoldat53 (977164) on Friday September 06, 2013 @03:25PM (#44778119)
    Barnes and Noble is also notifying their nook owners about the payout.
  • by tuppe666 (904118) on Friday September 06, 2013 @04:06PM (#44778633)

    Apple always seem to do so well in court. The timeframe has dropped to 10 years to five. The remedies to include "music, movies, television shows or other content," all gone. Apple having to allow Amazon, Barnes & Noble, and others to sell content through links to their own stores in their iOS apps, thereby avoiding Apple's 30 per cent tariff.

    Apple is not going to be concerned about a few $. It is becoming increasingly necessary for content to move cross platform easily, without being treated as a criminal for removing trivial DRM, for all content and I include Applications. There is no technical reason for this today.

  • by Anubis IV (1279820) on Friday September 06, 2013 @04:43PM (#44778969)

    The payout is a separate thing that's a result of the settlements the DoJ struck with the publishers last year. It's part of the same issue, but it was settled out of court and wasn't part of this case.

    For this ruling, the judge is barring Apple from engaging in "most favored nation" clauses (i.e. "our store will always have the lowest price for your product, or will be tied for having the lowest price") and is forcing them to stagger re-negotiations with the various publishers over the next few years in order to ensure that no collusion occurs. As I understand it, and I may be mistaken, they are not barred from engaging in agency model deals (i.e. "you get to set the price and we'll take X% cut"), which was actually a large part of what led to the price increase in the first place. Prior to that, the industry standard was the wholesale model (i.e. "we negotiate a price that you sell the book to us for, but then we can sell it to consumers for whatever")

    Personally, I think the lawsuit was rather ridiculous, since Amazon was poised to destroy the entire industry, and the shift to the agency model was a necessary one to ensure the long-term health of the industry. Prior to Apple showing up with iBooks, Amazon was in a position to leverage its monopsony on the eBook market (like a monopoly, except it's when someone commands the buying side of the market, rather than the selling side) to force the publishers' hands and demand lower and lower wholesale prices. The publishers recognized the threat that posed them, so they worked out an agency deal instead, which led to lower short-term profits (despite the increased cost to consumers, simply because the agency model took a bigger cut than the wholesale model was at the time), but provided them with long-term control over their own prices.

    Effectively, they took away Amazon's ability to do what was best for itself at the expense of the industry as a whole. After all, Amazon wins by lowering prices regardless of what happens to the publishers: by forcing them out it becomes the de facto publisher for virtually all eBooks thanks to its self-publishing tools, and by lowering their prices to unsustainable levels it pleases consumers and locks some of them into its ecosystem through the proprietary .azw and .kf8 eBook formats. Had the publishers been colluding to increase profits by gouging customers, I'd definitely be in support knocking them around for antitrust stuff, but the fact that they were making less money per unit sold under the agency model tells me that this was a long-term play to stay alive, rather than a short-term one to turn a quick buck at the expense of the consumer, and as such, the DoJ should have left it alone, even if it did increase the cost to consumers.

    (Admitted lack of citation: I did read in multiple places over the last few months that profits were down under the agency model, but I'm knocking this comment out quickly, so I don't have time to look them up. Sorry. Doubters and welcome to doubt.)

    • Cheaper Prices (Score:4, Interesting)

      by tuppe666 (904118) on Friday September 06, 2013 @04:52PM (#44779029)

      Personally, I think the lawsuit was rather ridiculous, since Amazon was poised to destroy the entire industry,

      Ignoring your waffle. By Industry you mean "bleeding customers" by Middle Men who are desperate to remain relevant post paper. Raising ebooks prices has been *damaging* to the ebook industry. Hopefully these parasites will become obsolete one day, how they treat authors is appalling. hopefully we will see a rise in self publishing.

      • Re: (Score:3, Interesting)

        by Anubis IV (1279820)

        I'm actually with you on hoping for a rise in self-publishing, though not as it is now, nor am I rooting for the demise of the publishers, since I think they serve a valuable function in the market.

        Publishers, despite their name, actually do quite a bit more than publishing. Really, their worth today is in their editing and marketing, and both of those are EXTREMELY important in the self-publishing market, where most of the stuff that's there simply isn't worth our time, making it hard for anything that's g

        • As for Amazon, my complaint was more that Amazon was on the verge of engaging in anticompetitive practices by leveraging their monopsony in the wholesale market to destroy the publishers, which would, in turn, boost their own self-published eBooks business.

          You mean, Amazon was guilty of precrime? It wasn't what they had done, it was what you feared they might do.

          • As for Amazon, my complaint was more that Amazon was on the verge of engaging in anticompetitive practices by leveraging their monopsony in the wholesale market to destroy the publishers, which would, in turn, boost their own self-published eBooks business.

            You mean, Amazon was guilty of precrime? It wasn't what they had done, it was what you feared they might do.

            Pretty much.

            Granted the way you put it makesw\ it seem silly. But I simply haven't thought of another reason for Wall Street to shower cash on a company that is basically breaking even (their Q1 profit margin was 0.5%) on the basis that "aggressive sales growth in new markets is expensive" unless Wall Street is convinced that as soon as Amazon hits a certain point in said markets it will jack up prices. Since they do not create new markets they are taking sales from somebody, which means they are driving th

            • Since they do not create new markets they are taking sales from somebody, which means they are driving their competition out of business.

              Well, yes. Every business ever does that, or dies. There is a finite amount of money. If your cash flow is increasing, there's money being spent on your products/services that isn't being spent on other companies. This hold true even if they are create new markets. There's always something that money isn't buying.

              Which would be highly illegal, and very difficult to un-do. I don't know that Bezos is actually gonna do anything quite this unethical/illegal, but I'm not entirely comfortable just trusting him to not be evil.

              Which puts you in a bit of a bind, cause that's pretty much the basis of society. I don't know my neighbour's not going to burn my house down when I'm a way; I don't know that the guy down the road

              • I think you're over-simplifying business a lot when you claim "every business ever" sucks money from other businesses. Economic growth is a thing that exists. Apple really takes advantage of this by putting together new ideas (granted, frequently those ideas don't originate in Cupertino) into new products and creating sectors. They frequently end up putting people out of business, but generally the people who get put out-of-business aren't their direct competitors. They're either in completely different sec

    • by 0123456 (636235)

      Personally, I think the lawsuit was rather ridiculous, since Amazon was poised to destroy the entire industry, and the shift to the agency model was a necessary one to ensure the long-term health of the industry.

      The lawsuit was nothing to do with Amazon. It was to do with Apples actions and those of the big publishers.

      • I'm aware of that. What I was intending to convey was that they were responding to an anticompetitive threat posed by Amazon's monopsony, and as such, it's strange that they're being punished for taking necessary steps to protect their businesses against that threat.

        As I've clarified elsewhere, I do believe that they engaged in price fixing, but that came in the form of the most-favored nation (MFN) clause that Apple had in its contracts. The switch to the agency model, which is what was largely responsible

        • by 0123456 (636235)

          I'm aware of that. What I was intending to convey was that they were responding to an anticompetitive threat posed by Amazon's monopsony, and as such, it's strange that they're being punished for taking necessary steps to protect their businesses against that threat.

          You don't get this whole 'law' thing, do you?

          • Hmm...apparently you either skipped over or didn't understand the relevance of what I said after the part you quoted. Let's see if a car analogy helps, since I actually think the fault is mine for not communicating well enough.

            If you flew on an airplane and then later that day got a speeding ticket while driving home from the airport, you'd be shocked if you saw that the speeding ticket claimed you were traveling at (car's speed + plane's speed), and that you were being punished accordingly, right? Clearly

            • IANAL either, but they're not being penalized for doing a bunch of legal activities, they're being penalized for the collusion. The penalty is a limitation in their ability to make contracts using the legal activities they used during the collusion so that it will be harder for them to collude again in the near future. This includes forcing Apple to stagger their contracts with the publishers.

              There's nothing illegal in the way Amazon got it's monopsony by sometimes selling ebooks cheaper by accepting lowe

    • Okay, so, I actually already disagree with some of what I said here, such as my assertion that "the lawsuit was rather ridiculous".

      I revised some of my opinions [slashdot.org] elsewhere in these comments. At this point, I take issue, not so much with the lawsuit itself, but more with the size of the damages being pursued, which I feel are not in alignment with the actual damage caused by the anticompetitive behavior in which Apple and the publishers engaged (and which I do agree occurred). Put differently, I think they're

      • I've bought a lot of ebooks (well over a thousand), and most of them I bought on sale before agency pricing model took effect or after the settlements. I never bought any ebooks from Amazon before agency pricing model, and I calculated that I would have had to pay triple, at least $3,000 more, after agency pricing model took effect over what I paid. With that sort of price increase, I don't think they're being unfairly punished.

        While Amazon's monopsony might make it harder for publishers to raise prices

    • Effectively, they took away Amazon's ability to do what was best for itself at the expense of the industry as a whole. After all, Amazon wins by lowering prices regardless of what happens to the publishers

      I am not sure that is the way it works. The publishers can make any sort of deal with Amazon that the publishers want. The publishers could tell Amazon, and anybody else, this book has to sell for at least $X. If Amazon did not agree, then Amazon could not sell the book, and publishers would sell the ebook

      • Saying "this book has to sell for at least $X" is actually considered a form of price fixing when you're working with a wholesale model. That's why the "S" in "MSRP" stands for "suggested", rather than being an "R" for "required". In fact, Apple has run into that issue with their electronics, since premium pricing is part of their brand image, yet it's difficult to enforce it without running afoul of antitrust legislation.

        And regarding my assertion, I think there may be a misunderstanding, since some of wha

    • by Xest (935314)

      "Personally, I think the lawsuit was rather ridiculous blah blah blah"

      So to cut a long story short, what you're saying is that you don't like healthy markets where prices are reduced for consumers naturally due to competition and where companies that refuse to be competitive risk being put out of business and you instead prefer to see price-fixing scenarios where consumers are screwed due to industry collusion preventing competition amongst publishers to naturally bring prices down?

      How... odd. Do you work f

      • I've already retracted that particular statement, actually. Please see my response to myself in another comment. I agree that price fixing occurred and that it needs to be punished accordingly. Where I disagree is in the accounting, which seems to largely be punishing them for perfectly legal activities (e.g. the agency model and the corresponding price increase that resulted from switching to it).

        But to answer your question, I'm fine with competition. My issue here was that there was no competition since t

  • by apcullen (2504324) on Friday September 06, 2013 @05:54PM (#44779427)
    Seems like Apple is getting let off very easy after carefully organizing the screwing-over of consumers.

    So they get to try this again in 5 years?

    And shouldn't the solution be forward looking? Is Apple actually doing the same thing with movies or other content besides books now and getting away with it?
    • Keep in mind that the fines penalty phase of the trial hasn't happened yet. According to a commentator on Ars technica's thread the footnotes of the decision indicate the financial penalty phase will be in May. As for Apple currently doing this with other content, it's unlikely it would work with other content because other content-producers aren't going to agree to increase retail profit margins at their own expense to screw some third party. It's not like the movie studios are paranoid that Netflix will

      • by apcullen (2504324)

        As for "carefully organized screwing over of consumers," that's what the DoJ thought it convicted Apple of. But the Judge seems to be more convinced Apple carefully organized a screwing of Amazon, which had the extremely illegal side-effect of screwing consumers. And if that's the case the way you prevent future occurrences isn't by gutting Apple, it's by ensuring there's a guy at the Board Meeting who can say "Morons, if you do this business move it will screw consumers and I will tell the Judge to fine you $8 Billion."

        It's a very fine line, but I think you (and the judge) are probably on to something there.That having been said, they knew what they were doing.

        BTW, I sincerely doubt Apple's fine will be as high as you'd like.

        I don't particularly want to see apple fined at all.They obviously make very good products that people like. Because of this, they don't need to screw consumers, but they did it anyway. I think they should be prevented from doing so again. Personally, I'd rather see them forced to allow people to be able to buy ebooks through the kindle or nook app than forcing them

        • I hope they get fined something. Screwing consumers is not supposed to be a painless business strategy even if it makes sense.

          It'll almost certainly be a rounding error in context of a company with $140 billion in revenue annually, but it will be something.

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