DOJ Calls for Apple to End Book Deals, Link to Rival Bookstores

http://allthingsd.com/20130802/doj-calls-for-apple-to-end-book-deals-link-to-rival-bookstores/

by daegloe • 13 years ago

45 53 13 years ago

allthingsd.com

6502hero• 13 years ago

Wow, this opens up the market a LOT. Fortuitous timing for B&N's ailing Nook division?

daegloe• 13 years ago

Apple's obligatory response:

“Plaintiffs’ proposed injunction is a draconian and punitive intrusion into Apple’s business, wildly out of proportion to any adjudicated wrongdoing or potential harm. Plaintiffs propose a sweeping and unprecedented injunction as a tool to empower the Government to regulate Apple’s businesses and potentially affect Apple’s business relationships with thousands of partners across several markets. Plaintiffs’ overreaching proposal would establish a vague new compliance regime—applicable only to Apple—with intrusive oversight lasting for ten years, going far beyond the legal issues in this case, injuring competition and consumers, and violating basic principles of fairness and due process. The resulting cost of this relief—not only in dollars but also lost opportunities for American businesses and consumers—would be vast.”

http://allthingsd.com/20130802/apple-slams-feds-proposed-e-b...

lostlogin• 13 years ago

Seems a weird solution, given they aren't the gorilla in the ebook market - but what comes to mind when reading this, are the battles Microsoft had with regulation. I wonder if this is the beginning of the same era for Apple.

dragonwriter4• 13 years ago

Seems a weird solution, given they aren't the gorilla in the ebook market

While some of the remedies are related to the market that was affected by the illegal actions they were found to have engaged in, the remedies as a whole aren't limited to the ebook market, and it seems more concerned with Apple using its mobile position and related retail platforms to facilitate similar publisher schemes in other markets to the one it engaged in in the e-book market.

Which, IMO, is what you'd expect of a company that wasn't found to be leveraging a monopoly or otherwise abusing power as a dominant player in one market, but instead was found to have used a significant-but-not-necessarily unique position in one market to provide a pivotal role in a price-fixing conspiracy among producers in another market.

AsymetricCom5• 13 years ago

Don't be fooled, Apple sells a lot of eBooks, but I don't think anyone has numbers. Apple has a lot of power in the market right now, and has already shown to be willing to abuse it in ways worse than MS ever did in the 90's. They don't have the market power to be subject to anti-trust laws, if they were, I can imagine it being worse than the Microsoft judgment.

Having that said, it's really a different case than eBook price fixing. It's almost like they're giving them a punishment for a different case...

ehm_may• 13 years ago

I've heard quite a bit about this case over the past month or so, but don't understand it.

Can someone explain what Apple 'fixing' e-book prices means and how that is illegal?

hga3• 13 years ago

In very brief, Apple and a half dozen publishers engaged in a white line price fixing conspiracy, all the publishers pled guilty, and naturally their counterparty was found guilty. A price fixing conspiracy that causes damage to consumers is white line illegal in the US; in this case, the prices of many ebooks went up by quite a bit.

Which leads straight to all but one of the remedies, like terminating all those deals with the publishers and for 5 years refraining from striking any vaguely similar deal with publishers. And extending this sort of thing to other media, seeing as how they are now a convicted (and unrepentant) price fixer.

As for the remaining remedy ... don't know about the legal basis for it, but Amazon was the main target of all the parties in the price fixing conspiracy.

There's a bit more detail here: http://en.wikipedia.org/wiki/Apple_Inc._litigation#eBook_pri...

jolohaga4• 13 years ago

"in this case, the prices of many ebooks went up by quite a bit"

But no one was coerced into buying those books. Where's the crime?

dragonwriter4• 13 years ago

The full version of what they were found to have done wrong is at: http://www.justice.gov/atr/cases/f299200/299275.pdf

TL;DR version, the court found "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."

MBCook6• 13 years ago

Amazon used to buy all their eBooks on the wholesale model; the same one used for print books. They would buy the books from the publisher at a fixed price (say $10 each), and then sell them at whatever price they wanted. Amazon often sold the books at/below cost to get people to buy Kindles.

So when Apple decided to start the iBook store, all the publishers decided to use that as an opportunity to band together and force Amazon to use the agency model, which is how Apple sells apps (publishers set the price, Apple gets a cut).

The had the effect of causing book prices to go up (because, again, Amazon often sold at or below cost). Because Apple was the new player whose contracts caused this, they got in trouble.

Many people find this quite questionable. Prices will go up with this settlement because publishers get more control. Amazon had a de facto monopoly, which Apple actually broke up. Also, this wasn't Apple's idea, it was the publishers.

Of course, Apple was more than happy to take advantage of the situation, so they weren't exactly innocent.

It's a really a strange case.

coldcode2• 13 years ago

It's funny that you can monopolize a market as long as you lose money doing it. I wonder what would happen if Amazon then raised ebook prices to 19.99.

jolohaga4• 13 years ago

What's wrong with publishers getting more control? Don't they pay authors? We're not talking about scientific journal publishers here. Who's forcing them to reduce their prices?

revelation3• 13 years ago

Why do people keep bringing Amazon into this? It's like asking a criminal on his philosophy to life. It simply doesn't factor into the law. Amazon is not a party to the case, and it is not a defense.

They fixed prices, and theres no situation where this yields a upside to customers. And in fact, it didn't. That's why they had to pay up, and Apple, failing to come to terms with the DOJ, will now have to pay much much more dearly for ever bringing this into a court.

rverghes• 13 years ago

This is my understanding of the situation:

Traditionally, book publishers sell to stores at a wholesale price. Stores then mark up the price a bit and sell it to the end consumers.

Amazon then started selling books for prices below the wholesale price, deliberately taking a loss.

The publishers got scared that this would destroy all non-Amazon channels, giving Amazon inordinate power over them.

So they got together with Apple and set up a scheme where the publishers would all use the "agent" model. Instead of selling the books to Apple for a fixed wholesale price, they would set the prices however they liked, and Apple would take a cut of 30%.

The publishers would then all refuse to sell to Amazon unless Amazon switched to the agent model.

That, however, is pretty straight-forward collusion and against the law.

hga3• 13 years ago

How many non-intrinsically expensive ebooks had reasonable wholesale prices above $10?

What I've read is that the "below the wholesale price" didn't happen a lot until publishers started raising that price after Amazon created the market. Now, maybe the latter discovered they couldn't afford below $10 wholesale prices, but the method they used to deal with the problem as, as you noted, "straight-forward collusion", and as I add, that harmed the consumer; add the two together and you get a slam dunk anti-trust case.

ben1040• 13 years ago

allow for two years rival e-book retailers like Amazon and Barnes & Noble to provide links from their e-book apps to their own e-bookstores without paying any fee or commission to Apple on sales made through them.

This doesn't exactly seem fair to all the other companies who would still have to give up 30% commission over to Apple but can't raise their price (e.g. Netflix, Dropbox, etc).

anigbrowl• 13 years ago

Those firms weren't injured by Apple's participation in a conspiracy (that we know about).

dragonwriter4• 13 years ago

This doesn't exactly seem fair to all the other companies who would still have to give up 30% commission over to Apple but can't raise their price (e.g. Netflix, Dropbox, etc).

The term at issue is a remedy for harms done by Apple's role in the ebook publisher price fixing scheme, which isn't relevant to Netflix, Dropbox, etc.

Insofar as the kind of thing Apple did here would be relevant to app makers in markets other than the ebook market, those app makers are beneficiaries of the provisions of the propsed remedy that exist to prevent Apple from engaging in schemes that are similar to the ebook scheme in other markets.

AsymetricCom5• 13 years ago

I could understand why apple would get a 30% of scamware f2p shit recoded flash games that couldn't exist without their ripoff platform. But why should they get 30% of book sales when they don't even care about piracy or make any serious efforts to stop it?

coldcode2• 13 years ago

Amazon wasn't harmed one iota yet now they get freebies from the DOJ. In fact the only people "harmed" by this are the very people who get nothing. Mind you this is the same DOJ that sees nothing wrong with the NSA, FBI and their ilk recording our emails, browser history, phone calls and whatever else they feel like collecting. But sure, Amazon isn't making a profit lets give them some.

Steko5• 13 years ago

You gotta love antitrust regulators that work hard to further entrench the dominant competitor.

Get your External Antitrust Monitor resumes up on LinkedIn kids, xmas is coming early this year.

voodoo1234• 13 years ago

Why is this being downvoted? It's clearly true.

freehunter3• 13 years ago

That's because being the dominant competitor is not illegal. Price fixing and colluding to drive competitors out of the market by extending a powerful position in one market into another market is illegal.

Steko5• 13 years ago

I haven't claimed that Amazon did anything illegal or that Apple didn't. The claim I'm making is that the remedy for Apple's transgression needn't be a gift to Amazon. And while the DoJ could decide to look into Amazon's own actions for various reasons, does anyone seriously think a proper penalty might include the DoJ enabling a "Buy at Barnes & Noble" button on Amazon.com?

ryanwhitney• 13 years ago

Anyone have insight into what sort of timeline this is on? How long Apple could drag this out until books disappear from iTunes and consumers are stuck with the Kindle iOS app and it's non-native text selection bullshit?

Steko5• 13 years ago

I don't think it prevents them from recontracting immediately with the publishers, just they can't get most favored nation.

"entering new e-book distribution deals which would free it from having to compete on price"

addandsubtract• 13 years ago

Puts this in a whole new light: http://qz.com/87184/the-steve-jobs-emails-that-show-how-to-w...

HN discussion: https://news.ycombinator.com/item?id=5752212

r0s• 13 years ago

It's sad and terrible to see the last, best vestige of old media being constrained by supposed innovation.

ChuckMcM• 13 years ago

This was interesting "without paying any fee or commission to Apple on sales made through them."

It is interesting because I see it as a request to keep Apple from enriching itself but abolishing the fee entirely makes for a really harsh sanction. We'll see what, if anything, the court decides is reasonable.

jolohaga4• 13 years ago

I can't wait to see links to iTunes on the Amazon web site one day.

DOJ Calls for Apple to End Book Deals, Link to Rival Bookstores

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