Dear DoJ: You Need To Sue Apple Again

http://mikecanex.wordpress.com/2012/04/11/dear-doj-you-need-to-sue-apple-again/

by mikecane • 14 years ago

24 50 14 years ago

mikecanex.wordpress.com

salem5• 14 years ago

This is the real issue with the Agency model and Apple, it may or may not have prevented an Amazon monopoly on ebooks, but it did guarentee that nobody but Apple could make money selling ebooks via iPhone apps.

megaman821• 14 years ago

The real question is, has Apple sold enough tablets to be considered a monopoly in the marketplace. Even if it is a monopoly, it definitely isn't in phone (even smart-phone) marketplace, so it is unclear what exactly the DoJ could do to influence the iPhone's in-app purchase fees.

gte910h3• 14 years ago

I think once a lawsuit counts the number of iPod Touches and iPads or the total in app purchasing revenue, or total purchasing revenu of the iOS vs Android platforms, they may still try.

It's unfortunately still very lopsided.

rbarooah12• 14 years ago

A monopoly is more than just having the largest market share. There has to be no viable competition. With Google and Amazon in the game that's clearly untenable.

pwthornton3• 14 years ago

This is like arguing that Walmart shouldn't get a cut of book sales. It's Apple's store. Apple still allows iOS users to purchase and use books from other stores on their devices.

What's the point of operating a store if you don't get a cut of the sales?

But if you just get rid of the agency model, which the DOJ is trying to do, this naturally goes away. With a wholesale model, Apple, Amazon and the publishing companies can all make money on an ebook sale. The agency model doesn't leave room for two middlemen.

ajross2• 14 years ago

The analogy is flawed. Consumers don't get locked into a 2-year contract forcing them to shop at Walmart exclusively. If they did, and Walmart required, say, a cut of all DVDs purchased for play on a Walmart-sold TV, I think that certainly would qualify for restraint of trade. Target could push their DVD prices all the way to zero and shoppers would still be stuck with their Walmart contracts.

(edit for those not reading carefully: Saying that the contract is willful has nothing to do with the argument. Consumers do not sign contracts with retailers. So applying logic about retail sales is a flawed analysis. Doing things like leveraging the illiquidity of platform choice to increase prices in a way that would be legal for a retailer is not, necessarily, legal for a platform vendor. Apple has control over the market that Walmart does not. That's what the whole idea of "restraint of trade" is about.)

danielsoneg• 14 years ago

Nobody gets forced into anything. You agree to a 2-year contract when you decide to get a phone for ~$400 below market price.

rbarooah12• 14 years ago

Nobody gets locked into a 2 year contract forcing them to do anything with Apple.

iPads are not sold on contract. iPhones come with a contract, but the contract doesn't force you to keep using the device - just the wireless service.

You can sell the phone and buy a different one to use with the same contract if you don't like it.

web_chops• 14 years ago

Considering the fact that only legitimate way to get an app on the device is through app store, its more like your ISP demanding a cut from developers based on different features in web applications. ISPs are reduced to dumb pipes. It's time app stores go the same route.

rbarooah12• 14 years ago

In the days before the consumer internet, there were online services like Compuserve, Prodigy, and AOL. They did demand a cut from developers based on different features they provided.

They were driven out of business through competition from the open internet.

If the current situation is analogous, then over time we can expect open app stores to drive the closed ones out of business. No need to involve the government.

MatthewPhillips4• 14 years ago

> It's Apple's store.

Amazon's website is not Apple's store. Amazon, Barnes & Noble, etc. do not sell books through the Apple App Store.

The analogy would be Walmart getting a % from songs bought on an iPod if the iPod itself was purchased from Walmart.

pwthornton3• 14 years ago

You can still purchase books on Apple's devices from Amazon's store. You just can't download an app for Apple's store and sell in-app purchases without paying a cut. I buy Kindle books all the time on my iPad. I just go to amazon.com, which is Amazon's main store.

tvon2• 14 years ago

That doesn't make any sense.

> Amazon's website is not Apple's store.

Indeed, and Apple gets no money from things you buy on Amazon.com.

> The analogy would be Walmart getting a % from songs bought on an iPod if the iPod itself was purchased from Walmart.

Only if you buy those songs through Walmart.

huggyface5• 14 years ago

"It's Apple's store."

But it's your device. When I buy a consumer product -- such as a $700 tablet -- why should the manufacturer (who happens to make enormous margins on it) get a cut of everything else I do on it? Why, if I bought a book in the Kindle app (which I can't do because of this problem), does Apple deserve a penny? I of course can't install alternatives outside of the App Store as Apple prevents it.

This is akin to GM demanding a 30% cut of all groceries that I buy and carry in it. Where else in the market is this sort of behavior tolerated? My television manufacturer demanding a 30% cut of the DVD that I bought. Etc.

A consumer could simply buy an alternative, but that is seldom as simple as it at first blush may seem. "Just use something other than Winodws" a million apologist would rant. That's why large companies get constant oversight.

This is where Apple's incredible success is going to, well, haunt them a bit. When they were the underdog, emerging from years of excellent products but little commercial success, they could get a way with this. As a $600 billion dollar colossus with completely unprecedented profits, however, the behaviors get more attention.

rbarooah12• 14 years ago

Except that you know this is a strawman, since you regularly argue that the competition is strong:

http://news.ycombinator.com/item?id=3822163

http://news.ycombinator.com/item?id=3823863

ralfd2• 14 years ago

> Where else in the market is this sort of behavior tolerated?

Have you ever seen a gaming console? Have you ever seen an eInk Kindle Reader which is tied to Amazons eBook store?

Also here is a fun fact from the past: Before the iPhone mobile App developers (yes, there was stuff like J2ME applications, but it was a tiny market compared to the App store economy of today) were glad if they earned 20% on the price of their products. The providers or download portals pocketed the fat end.

unreal37• 14 years ago

There was an interesting article on HN today about the "wholesale model" versus the "agency model". Apple is forcing the agency model down all publisher's throats - music, movies, books, apps.

The agency model lets Apple get a fixed 30% no matter what the price the publisher chooses to sell. The retail price is in effect fixed to the wholesale price, and there are no sales and no competition at the retail level.

The wholesale model is the publisher sets the price and the retail sells it for whatever they wish. So one store can offer New York Times bestsellers at 30% off, while another store sells them fixed price, and another store has a "buyers club" that gets you 10% off everything in the store.

The variable pricing model, wholesale, is better for consumers. The fixed pricing model, agency, is better for the retailers. It's the same for publishers since they get their wholesale price either way.

Apple is smart - they think this "sell it as cheap as you can make a profit" model is not for them. It's always been their model actually.

ralfd2• 14 years ago

Doesn't make sense, because the big six publishers _wanted_ the agency model. They used Apple to force Amazon to use it too. What happened I think (correct me if I am wrong), is that till two years ago Amazon used its market power to pass on their low wholesale prices to the publishers: "We only will sell your eBook if we can get it for this price" In the agency model the publisher can set its own price.

Also notice, that Apple only uses the agency model for Apps and eBooks. Music songs are sold in the iTunes store for a constant price (99 cents).

salem5• 14 years ago

No what Apple did was force all sales of virtual goods to use their API, with a 30% cut for them, while also forcing all book sales to only give a 30% cut to the retailer, ergo no one but Apple can sell ebooks via iPhone apps. I can think of at least one YC company that might have been forced out of the market by this.

noodle• 14 years ago

That is not exactly what is happening, based on how I'm reading this.

Apple is demanding 30% of any sale made on Amazon's website through Amazon's app, because it is an iPhone app. Amazon is not selling products through iBooks.

salem5• 14 years ago

The analogy is flawed because Walmart has not made a deal with publishers to ensure that physical books sell for the the exact same price in every retail outlet, and the same wholesale price to every retailer.

rbarooah12• 14 years ago

Apple is quickly enjoying a dominant position in mobile devices that Microsoft once enjoyed with desktop computers.

This can't be true while Android is the dominant mobile OS, and Amazon is the dominant eBook reader.

gte910h3• 14 years ago

Android is only dominent looking solely at phones (in the US). iOS is on more iPads, iPod Touches (and there are HUGE numbers of these), and iPhones than Android is on phones and tablets (in the US).

rbarooah12• 14 years ago

This blog has a strangely contradictory nature. The tagline is "Nature does not like or grant monopolies. Monopolies Fail", and yet the piece is all about how government needs to intervene.

davidngo4• 14 years ago

Absolutely agree. If the conditions set forth by Apple don't please you, stop being their customers or developing for their platform. Simple as that.

sosuke• 14 years ago

"By contrast, all eBook apps from competing eBook stores — such as those from Amazon, Kobo, Barnes & Noble, and others — cannot offer an identical shopping experience. They are disallowed by Apple. Apple has demanded from each of its iBookstore competitors a 30% cut of any purchases made using Apple APIs for what is called “in-app purchasing.”"

Saying that Apple doesn't allow those publishers to sell books at all and then in the next sentence saying they do allow it doesn't help your argument.

davidngo4• 14 years ago

Am I missing something? Nobody is forced to purchase an Apple device. Nobody is forced to earn all of their revenue through Apple's devices. Nobody is forced to use their iBooks app either. How is this a monopoly? If you don't like their conditions, don't start your business or purchase books on their platform.

huggyface5• 14 years ago

Nobody is forced to purchase an Apple device.

Actually a lot of people are forced to buy Apple devices. See Apple's educational efforts as a good example of that.

Am I missing something?

Yes, you are -- Apple is big enough, and dominant enough, that even without a monopoly they can exert significant control over the rest of the market. How often do we hear on here -- strangely by people gloating on Apple's behalf -- that they have locked up complete supply chains, starving competitors? When Apple forced their book pricing model, it forced prices up at Amazon as well. When Apple limits or taxes competitors on the iOS platform, users who usually have no idea of this behavior will naturally migrate to Apple's solution because it provides just that much easier usability (geez why can't I buy that book I want in the Kindle app...oh well, here it is in the App Store). They are using their influence and control of that high-margin device that you paid for to build dominance in their other products. Not illegal or even immoral, but it eventually impacts everyone.

davidngo4• 14 years ago

I'm honestly curious what instances you're referring to where people were FORCED to buy Apple devices. So if they didn't buy these apple devices what would happen? They would be put in jail?

Also, exerting significant control over the rest of the market of smartphones still doesn't mean Apple has forced you to buy their products. Just means they are the leader in their particular market. you don't have to buy ANY smartphone or start a business based upon smartphones. Not sure how this is a violation of anybody's rights.

VengefulCynic• 14 years ago

Anti-competitive behavior doesn't become a violation of US law until it involves the abuse of a monopoly position, involves market collusion, or breaks some other law. While anti-competitive, Apple doesn't currently exercise a meaningful monopoly in mobile device operating systems: either one looks at handsets where they are actually not even the market leader or one looks at tablets which is hardly a developed market.

Apple's actions with regard to the Agency Model aren't prosecutable because of any Apple monopoly but because it involves market collusion. Now, if Google and Apple colluded to prevent eBooks from being sold on mobile OS marketplaces without a 30% cut, THAT would be prosecutable.

davidngo4• 14 years ago

Exactly. Thanks for explaining this.

Dear DoJ: You Need To Sue Apple Again

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