Apple gets smacked by $450M e-book price-fixing fine
zdnet.com
zdnet.com
Unless I've read patently false accounts of the behavior, discussions, and conduct of Steve Jobs on behalf of Apple circa the iBooks store preparation and roll-out, this is one of the most laughably false statements that a lawyer has put to paper in 2016. The year is still early though.
When Amazon has 90% of the market it's silly to call what Apple did price fixing. Apple didn't work with competitors to fix prices for consumers, they told publishers to get on board or get bent.
That should be an option every company has, unless they own the market, IMO.
Edit: Somehow typed the word "eBay" instead of the word "what" - for THAT I do blame Apple ;)
No, they worked with publishers to fix the prices for consumers
The iBook store didn't exist before, so Jobs had to win the publishers somehow, that means that all had to agree to some model that would be favorable to them and certainly more favorable than Amazon's.
And how was that anti-competitive or worse?
Does anybody have some exact references, like the court decision that explains that?
> The iBook store didn't exist before, so Jobs had to win the publishers somehow, that means that all had to agree to some model that would be favorable to them and certainly more favorable than Amazon's.
They forced the model TO ALL the stores
[0] http://dearauthor.com/wp-content/uploads/2013/07/Cote-Decisi...
[1] http://dearauthor.com/features/industry-news/thursday-news-j...
So far nothing has explained to me how Apple forced the pricing model upstream to Amazon - has anyone read this and determined that?
> The agency model has something called "most favored nation"
"Most Favored Nation" clause, as stated in the court document:
http://dearauthor.com/wp-content/uploads/2013/07/Cote-Decisi...
"The MFN guaranteed that the e-books in Apple’s e-bookstore would be sold for the lowest retail price available in the marketplace." Why shouldn't be Apple able to propose that in its contract? It's on publishers to accept it or not.
It was obviously the opposite of "raising prices" it was a protection for the Apple book store to remain competitive.
Why should Apple be responsible for what the publishers do with their own contracts to Amazon once the Apple's store opens? Of course the existence of Apple's store changes the market conditions, and why shouldn't it?
Why should Apple be guilty that the publishers made new, what they saw as better for them deals with Amazon once the Apple's store opened? It's the Amazon that got the competition at that moment, not that Apple behaved anti-competitive. Amazon effectively haven't had any competition before. Once it had, the publishers wee able to renegotiate.
"Every Publisher with whom Apple met lamented Amazon’s pricing New Releases and NYT Bestsellers at $9.99. Several of them made clear that they were actively searching for a way to gain more control over pricing and were implementing tactics they did not enjoy, like windowing."
"As Apple had expressed to the Publishers, it strongly believed that withholding content would interfere with the growth of the digital market and was inconsistent with its business goals and practices. Apple thus embraced the model that Hachette and HarperCollins had proposed -– the agency model. Apple was already familiar with this model since it used the agency model to sell apps through its App Store."
Edit: just posting a link to some newspaper article doesn't prove anything. Under "specific" I mean a "specific proof" that somehow negates the quotes from the court decision I've presented or shows them in completely new light.
I don't think it is. There's an opportunity for some store to do that.
For what it's worth, I agree with you that it isn't so cut and dry that Apple set out to fix prices or do evil here. They were simply one gateway to higher prices desired by publishers. Selling electronic goods is sufficiently different from selling tangible goods to warrant additional consideration beyond existing case law.
I think the DOJ/government finds Apple difficult to work with. During the encryption congressional hearing, Trey Gowdy was begging Apple to lobby for legislation, or come up with their own new legislation. It was disgusting. The DOJ and our Congress do not understand technology and it hurts the industry.
It didn't work that way: the publishers renegotiated their deals with Amazon, it was they who wanted it differently. They were able to sell for 9.99 if they wanted. Apple was just "ready to sell for more," contrary to Amazon who insisted on selling for 9.99 no matter what.
https://www.washingtonpost.com/news/wonk/wp/2013/07/10/a-jud...
"It was as apparent to the Publishers as it was to Apple that Apple’s proposal would only allow the Publishers to raise the consumer prices for e-book versions of their key titles above Amazon’s $9.99 price point to the proposed price caps if they moved Amazon and their other e-tailers to agency."
"During this week, Amazon had a long-scheduled set of meetings in New York with the Publishers. In separate conversations on January 20 and over the next few days, the Publisher Defendants all told Amazon that they wanted to change to an agency distribution model with Amazon."
I don't see anything else but that Apple negotiated the deals which pleased the publishers. They did what they believed they had to do (introduce higher prices) even before Apple. That it was "apparent to Apple" doesn't mean guilt, for me.
That the prices raised doesn't prove more but that the publishers wanted them higher and were able to set them.
"From: Eddy Cue
To: Steve Jobs
Subject: Books - Publisher update
Date: Tue, 15 Dec 2009
Steve,
[...] Clearly, the biggest issue is new release pricing and they [the publishers] want a proposal from us. Everyone was estatic to see Apple and what it could mean for their industry."
...
"They decided they had to come up with a way that would move the whole market off 9.99 and they think an agency model is the only way to do it."
"They believe that this is the best chance for publishers to challenge the 9.99 price point ...."
Clearly and explicitly recognizing that collusion is the only way to achieve the price that they desire.
...
"I am told Random House is concerned about the future of e-books and the potentially dominant role played by Google and Amazon. Would it make sense for the 2 of us to have meetings / diner with Markus Dohle, Brian Murray, John Sargent..."
Conspiracy to meet and fix prices. Collusion like this across competitors is illegal price fixing. Competitors do not have a legitimate reason to meet and discuss common pricing.
...
"You are absolutely correct: we've always known that unless other publishers follow us, there's no chance in getting Amazon to change its pricing practices."
...
"It is important to Apple that there be 'some level of reasonable pricing'. They feel the only way to get this is for the industry to go to the agency model." (additional illegal collusion to fix prices)
"When they thought it through, they didn't think anything else would keep the market from its current pricing 'craziness'" (i.e., market prices -- demonstrating conspiracy to fix prices)
"[Eddy Cue, Apple] also thinks that book prices are becoming too low - he is worried about consumer perception. Therefore he suggests an 'agency model'".
...
"To: Carolyn Reidy (Simon & Shuster)
From: Eddy Cue (Apple)
Subject: iTunes
Date: Mon, 04 Jan 2010
"[...] As we discussed, here is what I think is the best approach for ebooks. Just like the App Store, we are proposing a principal-agency model [...]"
The same email is repeated and sent to Markus Dohle of Random House, and then John Sargent of Macmillan, and very similarly to David Young of Hachette Book Group.
"After talking to all the other publishers and seeing the overall book environment, here is what I think is the best approach for ebooks", Eddy Cue wrote to David Young, and to David Shanks of Penguin, and Brian Murray of Harper Collins. He goes on to outline the illegal price fixing scheme which they successfully colluded to implement.
...
Additional points that establish the case:
- Additional emails go on to demonstrate how the model will be forced on all retails and result in the price fixing
- Graphs of data of how prices changed over time as Apple deployed its price-fixing scheme.
- Apple provides information about one competitor's prices and desires to another, explicitly communicating one competitor's pricing desires to the other.
- Evidence of collusion as copy/pasted statements make their way into material from several publishing house leaders, all on the same day following meetings with Apple.
- "Agency is anti-price war territory." Yup.
- Clear recognition by the competitors that they were engaging in illegal price fixing. "We would have to 'get everyone else to go to the agency model'. When I said, 'but of course we can't talk to our competitors', [Eddy Cue] said he didn't mean other publishers, but our accounts - to which I replied, if we make these our terms, then they are our terms." Carolyn Reidy, discussing her deal with Apple to other people.
- Additional evidence of Apple taking an active role in conducting these discussions with publishers and bringing about the actual consensus of getting them all to agree to it. Apple was the common party that actually brought the coordination about by facilitating the conversation and proposing the actual price fixing terms.
- Publishers recognize that their deals with Apple force them to an agency model for all sales.
- One publisher balks about being forced to do this. Apple enlists other publishers to convince them. Further publishers are waiting for other publishes to agree, before they agree to terms with Apple (collusion; they should be making deals independently)
United States of America v. Apple, Inc. - https://www.justice.gov/atr/case-document/file/486701/downlo...
I think the evidence is pretty overwhelming. Have you examined the actual data? I hope this provides a good starting point.
(These conspiracies to fix prices seem common for Silicon Valley companies, don't they? Apple and other tech companies were similarly involved in antitrust litigation: https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L... )
As far as I understand, they also sold other things already under the same conditions for all the publishers (music, apps).
I understand the courts had another view, but I don't agree. The publishers did raise prices, but they just wanted for the possibility to do so anyway. It was inevitable, in my view, it was Amazon that forced (by having an effective monopoly until Apple appeared) all the publishers to sell the way they didn't like, so of course it was unstable state, possible to be preserved only if the Amazon's monopoly remains.
Sorry, you have it all wrong. This isn't about Apple giving the same deal to all publishers. This was about Apple convincing all publishers to give all other retailers the same deal as Apple -- and all at the same time, as a single group across essentially the entire industry, thus resulting in price fixing and price increases.
Imagine the absurdity if the manufacturer of a car (motor vehicle) could dictate the terms at which their cars were sold by all retailers. Essentially, the manufacturer exclusively determines the price that all auto sellers must charge. Does that analogy make better sense? No car dealership can offer a discount because the manufacturer has exclusive control.
Then imagine that it's not just one auto manufacturer: it's all of them, all at once. That's what happened with ebooks - virtually the entire industry colluded. It's not just working to get the same terms for their publishers, it was also getting those publishers to, in concert all with each other, force all of their retailers to do the same thing. Only with the collusion of a cartel could they have achieved this, and the result was illegal price-fixing that harmed consumers.
Competitors are not allowed to collude, and not allowed to collude to raise prices. Competitors have no legitimate business to meet and discuss with each other and make agreements about what price they'll all offer together, as that's an illegal cartel, yet that's what happened as a result of the conspiracy that Apple led.
> The publishers did raise prices, but they just wanted for the possibility to do so anyway
Publishers always had control over the price at which they sold their books to retailers. They just did not have control over the price at which those retailers subsequently resold them to consumers. And why should they? When books were historically sold at wholesale price for 50% of their retail price, why should a publisher stop a retailer from competing on price, by offering (say) a 190% markup rather than 200%, if the retailer has a more efficient operation? Once the book is "handed off" from the publishers to the retailer, what legitimate reason is for the publisher to control that transitive resale -- and why should the publisher have control over all of those resales among all retailers? That is the cartel that Apple brought about.
Imagine if the manufacturer of a toothbrush had the power to force all stores that sell it to have the same price. Why should they have that power? Why can't stores offer a discount if they have a more efficient supply chain, or more insightful pricing strategy? And then suddenly all toothbrush manufacturers in the entire industry did the same thing at the same time? I hope this paints a better picture of what happened with Apple and ebooks, and the reason why they were convicted of illegal collusion to fix prices.
The true reality of the situation, in my opinion, is that with the advent of the Internet, the incremental value of publishing has begun to drop. Authors are increasingly required to deliver fully complete and ready-to-publish manuscripts, rather than handing off a draft to the publisher for editing and typesetting. Furthermore, individual authors are better able to market themselves and generate interest online than in the older days when advertising had a higher cost, and required printing a large order of books up front and buying retail space. It's becoming cheaper and cheaper for authors to offer books online themselves. Consider what's happened with books like The Martian: it was (as I understand it) self-published as an ebook, and then gained a following, and eventually Hollywood bought the film rights. The value added by a publisher diminishes if they're not printing and distributing your physical book - they become a publicist. So, publishers saw the reality for what it was, and saw that their industry was all trending toward undifferentiated "perfect competition". They reacted to the situation by cooking up a collusion across the industry to conspire to keep prices artificially higher than they otherwise would have been, using the combined market power of their collusion to bring it about.
The problem is, here it is claimed that the term in Apple's contracts that guaranteed Apple the lowest retail price was the "dictate" as you say, here's from the summary of the decision to which other pointed here:
""the use of a unique "most favored nation" (MFN) clause. Under the DOJ's reading of the Seventh Circuit's Toys "R" Us decision, the DOJ argued that this was a per se violation of Section 1 of the Sherman Act."
That reading is certainly disputable, especially knowing the context: the MFN gave Apple right to sell at the lowest price on the market, and the claim was also that MFN was a pressure because Apple demanded 30% from the retail price and that was somehow bad. But that's the same percentage they took in the apps store before. I understand it was decided as it was decided, but I still claim it didn't have to be so.
If the answer is "not making MFN" then it's what apparently the court decided. But MFN actually guaranteed Apple lowest prices, not the highest.
Would you really even think "that Toys R US case is relevant here"?
I think they're great questions, really interesting and forward thinking, and it's too bad you're being downvoted for promoting interesting discussion.
The ruling doesn't undo any of the results of what happened, as far as I can tell. I see varying ebook prices on Amazon and I can only imagine that publishers now have the ability to do agency model pricing.
All this means is that Apple and others will be really careful about working with content creators or publishers in the future who are stuck with a wholesale model but desire agency-model pricing. And maybe content quality will go down since the creators earn less. Or maybe more people move to independent publishing sooner. I guess it is impossible to know.
Ironically, back around 2000, we hailed Jobs for working together with the record labels and convincing them to enter the digital age. Until the iTunes store, nobody was able to convince the labels that mp3s could be a safe way to make money. It wasn't exactly the same situation, but I could see how, from Apple and Jobs' perspective, the effort involved in the ebook situation would've seemed the same and innocent. The difference was, instead of being first to market and able to set prices without oversight, they were second and had to figure out how to compete. They realized they could compete by giving publishers a legit pricing model that they wanted, but didn't realize they could be held liable for price fixing.
Another thing I'm wondering about is why the publishers were so insistent that the others must also join. Each told Apple they would only join the plan if a minimum of 4 others did too. I don't follow why that was necessary, since books are published exclusively by one publisher and there wouldn't be any overlap. Anyway, I'm with you. It sounds like the publishers were begging for this circumstance and Apple was caught unaware. The DOJ saw an easy prize on a desirable target based on existing law and they went for it. Ultimately, though, Apple ought to have known better about the risks, and it seems they could have launched this model, albeit slower, without such a concerted effort.
He is downvoted because those questions have nothing to do with the case and are just a smoke curtain to no admit what Apple did. > Another thing I'm wondering about is why the publishers were so insistent that the others must also join. Each told Apple they would only join the plan if a minimum of 4 others did too.
Because if a majority of publishers are on board, they can force the OTHER stores threatening to stop selling ebooks though them
> Because if a majority of publishers are on board, they can force the OTHER stores threatening to stop selling ebooks though them
Some of the publishers did not support windowing, that is, withholding new releases from being available as ebooks, so that argument doesn't quite hold up.
No, agency model gave LESS revenue to publishers
> Some of the publishers did not support windowing, that is, withholding new releases from being available as ebooks, so that argument doesn't quite hold up.
What the heck has to do windowing with what I have said?
It is clear that you have your opinion fixed on stone. It is a waste of time trying to discuss anything. For you Apple is innocent, period.
Why would publishers ask for an agency model if it earned them less money?
> What the heck has to do windowing with what I have said?
Your last sentence above, "Because if a majority of publishers" runs together. Perhaps I misunderstood what you said.
> It is clear that you have your opinion fixed on stone.
I don't
> It is a waste of time trying to discuss anything
At this point I agree
> For you Apple is innocent, period
Not really. To me it seems Apple was a final piece to the puzzle and not a ring master. As I mentioned in another comment, I believe Apple ought to have known better about the risks of appearing like the master conspirator in this case. Apple ought to have known better about the risks, and it seems they could have launched this model, albeit slower, without such a concerted effort.
The difference between us is, for you, Apple is guilty, period. For me, it isn't so obvious.
> No, agency model gave LESS revenue to publishers Why would publishers ask for an agency model if it earned them less money?
This is the the difference between you and me, I have read a lot about the case. You don't know anything about it. You don't know that with the wholesale model, publishers earned more from ebooks than with the agency model. And you don't know why they prefer to earn leass with the new model. Please, read about the case before posting uninformed thing like you have being doing in all your posts.
> Your last sentence above, "Because if a majority of publishers" runs together. Perhaps I misunderstood what you said
Yes, you have misunderstood, and it was very lear,. All the publishers together were able to force the other stores to the agency model with the threatening of pulling the books
> The difference between us is, for you, Apple is guilty, period
No, the difference is that different courts have found guilty Apple, period.
You're the one saying that all the courts are wrong without any evidence of it, just because you don't like the outcome.
This is irrelevant and has nothing to do with the case. The case is about Apple colliding with the publisher to FORCE all the stores to change to the agency model.
The case is not Apple dealing with their OWN store
You mean, actually selling the books? The only change from wholesale to agency is that the retailer is forbidden from purchase.
Exactly, and I quote the exact formulation of MFN from the court's decision in my other (possibly harder to read) comment here.
The publishers even before Apple arrived tried various steps to change their deals with Amazon and let it sell for more, they just haven't had any negotiation power.
From the court document:
"Well aware of the Publishers’ experimentation with windowing, Apple also told Publishers that it opposed windowing; it believed that withholding e-books alienated customers and led to piracy."
It was one attempt of the publishers before.
This makes it very clear: https://www.washingtonpost.com/news/wonk/wp/2013/07/10/a-jud...
And how was Apple doing anything what the publishers didn't do themselves? The CEO's had their meetings without Apple, even before, as I've already quoted. And after the meetings with Cue, they continued. Cue didn't organize them:
"After Young had met with Apple but before S&S had its meeting, Young could not resist calling Reidy to share the wonderful news that the “Top Man” at Apple opposed $9.99 pricing. He hesitated to say more because S&S would be meeting with Apple the following day, and he did not want to “spoil [the] fun.”"
It's obvious the publishers communicated, but I don't see Apple's guilt.
All my quotes here and in other posts here are from the court decision.
[0] http://allthingsd.com/20130515/heres-that-steve-jobs-e-book-...
It's like it was written as an admission.
If that still did not convince you, then I don't see the point discussing it further.
Note that antitrust laws are there to protect consumers.
All of your quotes here and in other posts are cherry picking form the court decision to much your beliefs.
Read the 160 pages of the ruling and then post. But it seems that nothing will change your views
I'm reading the 2013 material and I can't find the "meat." OK, they establish that Apple did propose the "agency model" which was not available to the publishers by Amazon, that Apple did say it was ready to sell books for more than 9.99 that was an Amazon's fixed price. But how was that "making conspiracy"?
Amazon held the market, the publishers effectively had no choice before Apple introduced their store. Apple offered something different. The publishers were able to make new deals with Amazon. And? What was actually wrong to do? To even mention that they were willing to sell the books for the price that publishers liked more, even if it's higher than 9.99? Why? That is in the document claimed as the "start of conspiracy." How is that? To design the iBook store to have an "agency model"? Why is that not allowed? To even meet the publishers about all that? How should it be otherwise done? What was Apple supposed to do? Just offer what Amazon offers? Isn't that the opposite of the any reasonable principles?
Does it mean nobody is allowed to disrupt the current model of the effective store monopolist? That he can't sell in his store at higher prices? That he cant have another model in his store? That he can't discuss his own model? What?
But they coordinated without Apple anyway, it's also in the court decision that the executives had meetings among them before Apple even appeared on the e-book scene:
http://dearauthor.com/wp-content/uploads/2013/07/Cote-Decisi...
"On a fairly regular basis, roughly once a quarter, the CEOs of the Publishers held dinners in the private dining rooms of New York restaurants, without counsel or assistants present, in order to discuss the common challenges they faced, including most prominently Amazon’s pricing policies."
Apple made the iPad, with the reading experience up to then unmatched by anybody (no tablet with such characteristics existed before 2010), wanted to open the e-book store, gave the publishers the offer they liked, but definitely didn't invent that communication between the publishers.
What was Apple supposed to do, given that whatever coordination existed, it existed even before Apple approached the publishers? Apparently not a single publisher was satisfied with Amazon's (monopolist) terms. Of course Apple offered them different terms.
"Hachette and later HarperCollins surprised Apple with their suggestion that, instead of a wholesale model, Apple adopt an agency model for the distribution of e-books."
It sounds like http://www.indiana.edu/~p1013447/dictionary/nomfall.htm (They "conspired" because we call them "participants.") It doesn't actually prove anything.
A fact that the publishers decided not to contest.
I still don't see any argument under which Apple had to insist on the same terms that Amazon had. And Apple didn't have to insist on the same terms, and had the right to open their own store, what it actually did wrong?
Can anybody really say that Apple had to say "no we won't open the store if the prices aren't the same as at Amazon"?
Apple actually made the clause that their prices are allowed to be minimal of all other stores. And Apple didn't have the problem to sell items even for $0.99, that's how they started with the iTunes store years earlier.
Apple was the one to provide the service, and ultimately enabled it. How can you possibly suggest that leaves Apple blameless?
What was Apple supposed to do, in your opinion, as it wanted to open its e-book store?
Start with the opening presentation:
https://www.justice.gov/atr/case-document/file/486701/downlo...
I spent 5-10 minutes looking through that document and can't find anything that makes Apple look bad. I see the publishers telling each other to "double delete" each other's emails. That looks bad. But it isn't obvious to me that Apple is engaging in any illegal behavior based on the email quotes in that document.
It seems more like consumers and government were accustomed to Amazon's pricing model, in which they sometimes take a loss. Then, when publishers wanted to set their own prices, they sought a service that would allow them to do that and found Apple. I'm a consumer and don't like high prices, but I can also understand how a publisher might like to decide how to price their books. It's beyond me why that should be deemed illegal.
<rant> If the DOJ or FBI get an increased budget I hope some of that goes towards increasing their transparency by not only making information available, but also making it searchable.
And why do I need to pay for C-Span transcripts? Wouldn't it be nice if we could all read and search through what our representatives are saying? </rant>
At what point will you admit Apple's wrongdoing and stop talking about the searchability? Please have the grace to admit you were wrong in public.
Apple did this on the principle that they should have the right to collude with the industry and increase prices to the consumer. That's what the company did. Its partners in this process all agreed to settle. The only people who continued to protest this characterization were at Apple. And they just lost a massive court case over it.
I dunno what more you want.
Hi Kirin, I'm a different commenter with my own opinion.
Increasing transparency of government actions is something I care about. I also believe in competitive markets.
The first slide isn't evidence showing Apple knowingly conspired to do evil, in my opinion, and nor is the rest of the deck. Before Amazon started selling eBooks, publishers were able to sell hardcover books, i.e. new releases, for a higher price point. Then Amazon, being the only ebook retailer, was able to very quickly undercut the publishers' in-store new-release prices on a global scale due to the nature of digital products and their position as a monopoly in the ebook retailer market. This cost the publishers money. Then Apple appeared as another retailer and publishers asked Apple to give them their agency model back. And, publishers said they would only join Apple if all the publishers would do it. Apple said okay.
Regardless of this court decision, I imagine we'll see more agency model pricing in the future when more options open up for publishers.
It's perfectly fine if you disagree. I'm not trying to convince you. I'm just sharing my opinion.
This case was in court for years. If it were so cut and dry as you proclaim, the case would have been over much sooner.
What? Apart that Amazon paid full price for the ebooks to publishers, there was a time window before the hard cover release and the ebook release.
> Then Apple appeared as another retailer and publishers asked Apple to give them their agency model back. And, publishers said they would only join Apple if all the publishers would do it. Apple said okay.
You strangely forgot the part about the publishers forcing the agency model to all the stores.
I am not pointing a mind control ray at you or threatening your family. I'm saying the evidence strongly suggests your opinion is not founded in reality.
"Evil" is not an interesting conversation here. "Legality" is another. Apple saw an opportunity to break the Google+Amazon pricing lock on the market. They realized this opportunity by working with publishers to beachhead a new model. They acknowledged that this explicitly raised prices for consumers, and would only work if the publishers all used Apple as the leverage.
I know you want to say this is in favor of competition. Apple sure does. But everyone agrees that it was illegal. You can't just say "Apple Happened To Be There™." They facilitated the entire process, and it was built on the back of their dominance in desktop computing, mobile and media reach.
And while no SINGLE slide tells that whole story in a single pithy quote, the ENTIRE linked deck certainly tells that story. You've been given a smoking gun and Eddy Cue's fingerprints and replied, "Gosh that sounds complex, why isn't this easier to search?"
> I am not pointing a mind control ray at you or threatening your family.
That's good. It would be really strange if you were. This is an internet conversation which I consider to be pretty casual. Most likely, only you and I will ever read this, and whoever else reads it will stop when they find it uninteresting.
> "Evil" is not an interesting conversation here.
That's subjective. I say it's interesting, you think it isn't. I have no problem with that.
> You can't just say "Apple Happened To Be There™."
I gave a summary of my take on the situation. Again, I see no problem with that.
It's hard for me to see Apple as a ring leader as the DOJ claims, or that publishers were convinced by Apple to pursue this course. They already had this plan together before Apple came to the table. Apple was more like the final piece to the puzzle than the ring leader. They asked Apple for a proposal and told Apple the terms under which they would agree, essentially creating the proposal themselves, yet having it come from Apple's mouth.
Perhaps it will make you feel better to know that I believe Apple ought to have known better about the risks of appearing like the master conspirator in this case. As I mentioned in another comment, Apple ought to have known better about the risks, and it seems they could have launched this model, albeit slower, without such a concerted effort.
> You've been given a smoking gun and Eddy Cue's fingerprints and replied, "Gosh that sounds complex, why isn't this easier to search?"
None of us are privy to all the details of this case. We get summaries, and I'm saying they are in a lousy format, unsearchable and low resolution. It's a side rant but relevant towards increasing transparency of our government. We all have limited time, and making things easier to read helps everyone. If you feel that's off topic, that's cool. My comment about the DOJ's awful document-creation skills is not the basis of my support of Apple. However, it does contribute to my theory that our government does not understand technology, and that we need more representatives who have technical knowledge like Ted Lieu.
So please, respond as you like. But I'm filtering out your posts from now on. You're the exact kind of person I shouldn't engage with on HN.
It does make a difference in the ruling and applied punishment.
The 7th circuit's decision from Toys R Us vs. FTC decision states,
As TRU correctly points out, the critical question here is whether substantial evidence supported the Commission's finding that there was a horizontal agreement among the toy manufacturers, with TRU in the center as the ringmaster, to boycott the warehouse clubs. [1]
The Toys R Us ruling was referenced in the 2nd circuit court of appeals ruling against Apple. Therefore, the above statement has bearing and Apple did need to be perceived as the ringleader to receive the brunt of the punishment.
> So please, respond as you like. But I'm filtering out your posts from now on. You're the exact kind of person I shouldn't engage with on HN.
That's your choice. I think I've been cordial. Feel free to point out anywhere I haven't been respectful. If disagreement is disrespectful to you, I don't know how else I can help.
Mmm, no, the publishers forced ALL the stores, not only Amazon, the agency model and the forced the SAME price for all the stores
This is an article the legal reasoning behind why the iBookstore MFN clause was an antitrust violation - it was designed to impose financial penalties on publishers that did not get all of their retailers to switch to an agency pricing model.
This is similar to an earlier case about Toys 'R Us. They got a group of toy manufacturers to agree to restrict their toy sales to warehouse clubs, so long all the manufactures in the group agreed to do so.
Strange.
Edit: "the use of a unique "most favored nation" (MFN) clause. Under the DOJ's reading of the Seventh Circuit's Toys "R" Us decision, the DOJ argued that this was a per se violation of Section 1 of the Sherman Act."
Beyind that, Apple's practices extended to iOS. All ebook vendors from then on had to take 30% cut of whatever price the publisher. Then apple forced all vendors trying to sell their wares on iOS to only sell through their merchant interface, with no price disparity allowed. And what is Apple's cut? 30%.
So any vendir trying to sell ebooks on iOS had to relinquish all their margins to Apple, pretty much locking all vendors out of the sales point.
Amazon is the only one that benefitted from this, ironically, since they were well established and did not need iOS sales to survive. All other competitors just withered away.
These circular arguments only exist because the culprit in the case is Apple. Apple tried to fix prices by colluding with a cartel of book publishers instead compete in a free market. They have been found guilty of this by one court, the decision has been upheld by another court and the Supreme Court has rejected there appeal. It then used its market power to force all competitors off iOS. They literally killed the ebook market.
Competing suppliers agreeing on anti-competitive acts is what collusion is.
Anti-competitive to whom? To Amazon, the owner of the only e-book store who actually forced the publishers to the prices they didn't like? And how it affected Amazon? It lost the monopoly and the upper hand.
To the costumers as the DOJ said.
Please, if you don't want to read what the case is about, stop posting. You're your repeating the same things again and again. And they are wrong.
https://www.law.cornell.edu/wex/collusion
https://www.law.cornell.edu/wex/collusive_bidding
https://www.ftc.gov/enforcement/anticompetitive-practices
https://www.accc.gov.au/business/anti-competitive-behaviour
The suppliers agreed to perform mutually beneficial acts, with Apple as a mediator and facilitator (see the emails and meetings referenced in this HN thread), which systematically reduced competition between the suppliers in the eBook market.
It's quite plain, which is why Apple has been required to pay $450M in damages.
Price fixing has nothing to do with market share. Thanks to Steve's emails this was a very clear cut case for the government to make but if at this point in time you still can't see it then nothing will make you.
Amazon, and I am not joking, in an article called Amazon: We have 70-80 percent of e-book market[0] through there kindle chief makes that claim.
Also credit suisse released a report prior claiming 90%[1] in the wall street journal.
This article itself also links to 5 publishers in a signed statement within an amicus brief claiming these figures and that dumping was taking place. thus prices set above that of a 90% market concentration single actor, make it reasonable to assume that increasing prices is infact the market rate.
Steve Jobs was a dick, maybe they were anti-competitive. I doubt they made 450million charging more than the market leader...
http://www.cnet.com/news/amazon-we-have-70-80-percent-of-e-b...
[1]http://blogs.wsj.com/marketbeat/2010/02/16/analyst-amazon-e-...
Nearly everything here is fact. So i find it difficult to understand what is being objected to...
The agency model allows each publisher to pick the price for their book at the seller takes a percentage. I'm still having a hard time wrapping my head around the idea that this is price fixing. It doesn't prevent other sellers from using other models (Amazon, wholesale model), or other sellers from using the agency model with a different 'cut' or for publishers to set different prices for their books.
It the end, I think this action seems to have the unintended consequence of strengthening the control of Amazon rather than encouraging a competitive environment for book sellers.
The case has been argued or reviewed by every level of the Justice system and Apple has lost every time. They simply violated the Sherman act and the result was noticeably higher prices for the customer. Interestingly there are no apparent winners in the case because Apple hasn't had success selling ebooks and the new higher prices resulted in significantly less sales.
Really? I'm pleading ignorance here but, for example, how could Apple's actions be considered collusion with Amazon (by itself a huge part of the market).
They colluded with Amazon's suppliers. To use your soda example: it's as if 7-11 were growing tired of Walmart door-busting with 1-dime sodas. So they collude with Coke and Pepsi and change the contract for all soda retailers to say "you can't sell soda at a price that you (the retailer) wants. You will sell the soda on our behalf at a price we want"
So let's say there's 6 major publishers because I'm too lazy to look up the correct number. If apple had approached one of them individually and offered them the same deal and they had agreed everything would have been fine. But individually it looks pretty bad. The result would be that on Amazon (where 90% of the sales come from) the one publishers books would be available for $12.99 and 5 other publishers books would be available for $9.99 and they wouldn't compete. So individually the publishers would have turned them down. The illegal part comes in where Apple tells the publisher "Don't worry, we have talked to all the other publishers and they've agreed to the same deal so you won't have to worry about competing." Just like it would be illegal for all the CEOs to get together and agree on one price. It's not suddenly legal just because a third party is facilitating the price fixing.
So you have amazon selling at 9.99 and a fragmented group trying to compete. They owned, by their own calculatoions, 70-80% AFTER the ipad launched.
So you have a single supply channel dictating price. Apple exploited it the other way, increasing prices collectively so amazon didnt blacklist phblishers.
Its not black and white. You have a monopoly and the kartel formed to fight it.
It is pretty laughable that they were fined 450m being anticompetitive, when they actually introduced competition.
So both companies were acting in their iwn best interest. I would almost argue thus is pure capitLism because the only way to offset a monopoly is collude or you will get blacklisted. This is gametheory, and while the optimal societal outcome of this situation may have been Apple accepting a lower price, if you garuntee cooperation you get higher value.
Obviously, the optinal societal utility would be many many distributers giving markets the ability to dictate price instead of the opposite,
Given the situation, they had no choice, and frankly society ended up bettet off as eventually more player were able to compete (although the market would be different with many players and it will necer have that )
1. There is nothing illegal about having a monopoly. It is illegal to abuse monopoly status. When Amazon gets around to abusing their monopoly, the DoJ will act. Accusing of future abuse now is just pre-crime.
2. Apple were free to compete by legal means. They got smacked-down because they chose to break laws, not because they were "fighting a monopoly"
It really is in black and white, as affirmed by Apple losing at every court the case was heard.
You've probably indeed heard patently false accounts.
What practice exactly do you think constituted price-fixing, based on the accounts you've read?
Good talk, man. Glad you sorted that out.
Just as with an individual person, I can wholeheartedly disagree with them on one opinion while agreeing completely on another. Just as with individual people, there's rarely an "always right" or "always wrong" company. In matters of policy and opinion, there's often not even a true right or wrong at all. Different interests. Different priorities. Sometimes they align with mine or what I think is more important overall and sometimes they conflict. Otherwise there would be no need for debates or lawsuits.
>At Amazon headquarters, however, they're probably popping open the champagne.
>Amazon, however, is probably grinning like the Cheshire Cat.
The author is not doing justice to his job as a reporter. If you want to opine then separate it from the facts. Amazon which has nothing to do with the ruling gets depicted as a villain and Apple which actually is guilty doesn’t get its share of bad words. What is worse is that he starts to paint Amazon that way before he gives any of the details of ruling.
It is relevant to mention Amazon. Although Amazon isn't named in the case, Apple was competing with Amazon directly by offering publishers a service through which they can set their own prices. With Amazon, publishers don't set the price of books, Amazon does.
The ruling does effect Amazon's business. They have one less competitor model to worry about.
This checks out.
https://s-media-cache-ak0.pinimg.com/736x/af/20/c6/af20c61ff...
> Shortly after January 31, Amazon sent a letter to the Federal Trade Commission complaining about the simultaneous nature of the demands for agency model agreements from the Publishers who had signed with Apple.
Implying internet bloggers are reporters. The prestige of the journalist today is in the toilet because the barrier to entry is essentially nil. You can just start writing for some fly by night site and get hundreds to thousands of readers overnight, without any basic understanding of the profession or established practices.
If your making a living by reporting your a reporter. Just like all other professions you make a living at it that's your profession. To belittle that profession if they don't have a degree or at a smaller place well that isn't quite the same thing. This is the place where journalism lives since there are so few non-internet reporting positions.
Steven J. Vaughan-Nichols isn't a blogger the guy has been around since the 1980s reporting on technology. https://www.linkedin.com/in/sjvn1
Care to qualify that with something that even makes that analogy work? Blogger and Reporting are almost meaningless words. Some of the best reporting in technology would also be called a blog. Mary Jo Foley is a great example and re/code with Walt Mossberg and Kara Swisher.
> "The publishers Apple had joined forces with were Hachette; News Corp's HarperCollins; Penguin Group Inc; Macmillan; and Simon & Schuster, a division of CBS (ZDNet's parent company)."
They can lobby for a law change but it's not acceptable that people/entities with lots of money can decide which laws they obey and which not.
“The increases at Amazon within roughly two weeks of moving to agency amounted to an average per unit e-book retail price increase of 14.2% for their New Releases, 42.7% for their NYT Bestsellers, and 18.6% across all of the Publisher Defendants’ e-books,”
https://www.justice.gov/atr/case-document/file/486691/downlo...
I'm not sure how prices have adjusted since then though.
Every time you go on Amazon and look up an Ebook priced over $9.99, and it carries a note that says, "this price was set by the publisher," that's a book that Amazon would sell you for less money if the publisher let them.
It's hard to find a clearer-cut case of price fixing.
https://www.washingtonpost.com/news/wonk/wp/2013/07/10/a-jud...
Does ANY for pay OS today not come with a Browser? How the hell else am I supposed to get a Browser without some form of browser? Go to the store and buy one?
Yeah, boo IE, hiss Microsoft, but honestly including core functionality like HTML rendering in your operating system is not morally wrong.
They then managed to not ship this selection screen for a year or so on Windows setup disks and ISOs. Hence they got the $1b fine.
Although to be fair, they cheated the original developers of IE out of their money, too, by promising them a cut of the sales on IE (which they had absolutely no intention of delivering, seeing as they planned to give it away for free), so it wasn't quite "at a loss".
This is kind of a weird claim. They gave Notepad and Solitaire away too. But they weren't giving any of that away at a loss; the "at a loss" concept doesn't even apply to software sales.
The wheels of justice turn slowly, but back in 1994 or so when this all happened, people did go to the store and buy netscape navigator on disk or CD-ROM.
For the historical record:
ftp ftp.mozilla.org
cd pub/firefox/releases/I'm not sure I would want to live in a world where administrative regulations were punishable through imprisonment. I think there would be some pretty severe unintended consequences to economic activities.
Helpful definition of criminal vs. civil law: http://www.diffen.com/difference/Civil_Law_vs_Criminal_Law
This case may be more clear-cut, but that's generally why you see these differences.
In this case, why let Apple continue their service?
Or, multiply the fine by 50.
https://www.ftc.gov/tips-advice/competition-guidance/guide-a...
"The penalties for violating the Sherman Act can be severe. Although most enforcement actions are civil, the Sherman Act is also a criminal law, and individuals and businesses that violate it may be prosecuted by the Department of Justice. Criminal prosecutions are typically limited to intentional and clear violations such as when competitors fix prices or rig bids. The Sherman Act imposes criminal penalties of up to $100 million for a corporation and $1 million for an individual, along with up to 10 years in prison."
Like an end to collusion to fix higher prices for customers?
What is not criminal about it? It's not a wrong against a specific person it's a wrong against everyone else who operates in that market, customers and suppliers alike. It's also a general wrong in perverting the financial systems around that market. Those who instigated such efforts certainly committed a crime in my view.
If you convert these civil violations into criminal violations those risk management techniques don't apply. You can't purchase insurance that sends someone else to jail if you are found in criminal violation of a regulation.
So what I was suggesting was that criminalizing regulatory violations would make companies highly risk adverse as well as giving regulators really big sticks to force concessions. Changing the business environment in such an extreme way is going to have lots of unintended consequences.
Amazon, at the time, was trying to create an expectation for consumers that all ebooks were $9.99. What the consumer didn't know was that Amazon was taking a loss on each ebook. Amazon was able to get publishers on board with their plan by paying the 'list' price on an ebook, and turning around and selling it for a loss at 9.99. Amazon's long play was 1) creating a market for ebooks in a price band they thought was attractive and 2) forcing the publishers to capitulate later when they had more leverage. Amazon never wanted agency pricing since they would lose their competitiveness if it ever came to bare.
But Apple was successful - it eventually got publishers to adopt agency pricing, and that also meant Amazon ebooks had to adopt agency pricing (if you're setting the price, you can't give one outlet a better price). Amazon hated this development and championed this price fixing suit as a result.
If you ever wondered why physical books are priced less than ebooks at times, this is why. Agency pricing.
Ok, I get that they were going up against a monopolist who appears to be dumping. In what world does responding to that by building a cartel of suppliers engaging in monopolistic behavior to raise the pricing above the price of physical books and fix the pricing across all retailers turn into "innocence"?
We as consumers are worse off for what Apple did here.
Litigation takes a really long time. By the time you win, you've lost.
Jobs wanted to launch iBooks right now and was willing to cut corners to get what he wanted.
Nicely put. I'll note that phrase down for future use.
If I break into warehouses, steal merchandise by the truckload, and sell it at a tenth the price, that also benefits my consumers.
I think that's a good approach: someone openly breaks a rule that they think is unfair and/or outdated, and then society can decide whether to re-evaluate the rule or fine them (even into bankruptcy, if they're a company).
Some places say Henry Ward Beecher (brother of Harriet Beecher Stowe). If I had to guess, though, it's hundreds or thousands of years old.
https://en.wikiquote.org/wiki/Grace_Hopper
Disney used it in a slightly modified form: "Better to beg forgiveness than to ask permission."
Telling me that it's just a sentence isn't persuasive in any way. Showing me something mostly similar from before 1986 would do a lot more to persuade me.
Oh, you don't know who the Beechers are. They're from the 1800s.
http://freakonomics.com/2010/06/24/quotes-uncovered-forgiven...
I deliberately invoked Galt because the book is appeals to the same group that thinks the law doesn't apply to them (when convenient),and they also believe they own/are themselves "the engine of the world". See BioShock for an equally fictional critique of what happens when the "best individuals" are left to their devices, without pesky laws.
Otherwise, the underlying assumption is that regulations on industries are always in the best interest of the market, even when the industry changes OR that regulations change fast enough to adapt to the market. Both of these, I think, are demonstrably false.
For example, for the moment, Uber are running a version of their service for people with physical disabilities - this is probably solely in response to the argument that lack of regulation would result in no such service existing. If there were no threat of regulation, would they run it? Probably not, it's probably not very cost-effective.
The majority would probably happily use cheap, dirty energy for as long as they can, but what externalities does that have? If it were possible, would it be OK to run such a power station against the law?
I understand that Apple violated the letter of the law with the price fixing. But I'm having trouble seeing the actual harm it did to the market. And I'm especially having difficulty feeling "sad" that Apple was able to bundle, into the cost of the ebooks, the potential fines for violating it. Consumers were given a product for a price they deemed fair in a market more competitive than before Apple entered it.
From some reading, I think the issue is basically that as a result of Apple's collusion with the publishers, Amazon could no longer sell without significant markup - thus price-fixing. I could be wrong.
We should be precise here. Jobs preferred to cut legal corners with respect to the antitrust laws instead of cutting financial corners by directly competing with Amazon on price.
To me, this is exactly the sort of choice the legal system should punish, even if Jobs had been right about the merits of his hypothetical antitrust complaint against Amazon (which he almost certainly wasn't - Amazon has testified that the Kindle store was a sustainable business on its own, i.e. that the headline new bestseller discounts were more than covered by profits on backlist titles). The antitrust laws, like other laws, shouldn't have exceptions for "justified" vigilantes. That way lies chaos.
As an author it's a great time to self publish and make it work on your own, but I find it absurd that ANY of those companies would attempt to dictate the price of books.
P.S. You can read my book about creative work for free here: http://brianknapp.me/books/creative-pursuit/ I talk about the importance of Self Publishing in Chapter Four.
Isn't that exactly what a court ruling does. It settles what really happened.
Isn't that what every major seller of goods does? I watched a documentary on Wal-Mart a while back where they were working with Chinese DVD player mfgs to get the price Wal-Mart wanted.
I genuinely don't understand the harm of their actions, and would be thrilled if someone could explain?
The harm in the short term was to Amazon - under threat of being cut off by every publisher, it would have forced Amazon to move to a different model of pricing. The follow on effect would be to raise prices for all consumers.
"the market for retail distribution of electronic books ... was essentially a monopoly, with Amazon.com ... controlling 90% of e-book sales. Amazon sold many of the most popular e-books at a loss, making it difficult for other retailers to enter the e-book market as they 'would run the risk of losing money if [they] tried."
along with the 1999 conviction of Microsoft being a monopoly in part because they gave away Explorer.
A monopoly is historically identified with having a higher than market price, not a lower.
1. higher - gouging, profiteering, monopolistic rents
2. same - collusion, price fixing
3. lower - unfair competition, predatory pricing
All are illegal!
Charging higher prices as a monopoly is not in itself illegal. Other conditions have to be true.
Collusion and price fixing require you to conspire.
Charging lower than someone else while being a monopoly is not illegal either. The FTC has a little page for this: https://www.ftc.gov/tips-advice/competition-guidance/guide-a...
Are you sure ? AFAIK it's about market shares, not about how much one sells their goods.
> along with the 1999 conviction of Microsoft being a monopoly in part because they gave away Explorer.
They were giving away nothing, Users had and still have to pay for Windows.
There was no technological challenge to this. Google wasn't around. VCs at meetups talking to young entrepreneurs would explicitly say they wouldn't fund anybody competing with Microsoft.
Think what would have happened if IE contained adblockers: Google would have been killed at the outset.
With no competition an important downward pressure on price is taken away (and an important upward pressure on innovation would be, too).
True but there were competitors to Microsoft (such as Linux and Apple), and there was no evidence of an upward march in prices. The free software revolution was gaining steam rapidly.
I've been in the software business for 40 years, and the free market free-for-all in software has been legendary. Pricing has trended to $0 for lots (most?) of products, and yet innovation continues at a furious pace.
The only really bad part has been the execrable patent wars.
In the 90s, aside from some niche use (artists and home) the Mac was done. I finally switched with Win 95. The only software that was (as far as I could tell) completely compatible between Apple and Win was Mathematica. By that I mean that if I wanted to collaborate electronically (with non-technical folks) I pretty much needed a Win system. So I got one.
And while I'm a huge fan of free s/w I still have to use office to collaborate with people who don't have strong tech skills and perhsps aren't too clever. Ever try to co-write a presentation or doc with someone using Win Office when you are using Libre Office? They just can't seem to keep themselves from formatting and it screws everything up.
So some prices have trended to zero, but there is a large discontinuity in the product set. Office 2003 has all the features I need, and I suspect that's true for most of us. So we are being coerced to upgrade by different means- the latest push is to rent the software so it can be continuously updatable. For all these things I don't need. And we are stuck in a tragedy of the commons situation: If I refuse to play along, I can't collaborate.
Consumers were 'harmed' by the actions taken by Apple to approach and collude with publishers to break a monopoly that would benefit the publishers and Apple more than the consumers, even though the publishers felt they had no choice but to deal with Amazon and accept is loss-leader business model.
It doesn't seem rational that breaking up a monopoly would be worse for consumers, but based on the situation of this Apple/Publishers/Amazon case, that's essentially what was argued and the court system agreed at the end of the case(s).
In American antitrust law, it historically can be identified with either one. The usual assumption is that artificially low prices are one tool used to create and/or maintain monopolies, and then secure monopolies are profited from by raising prices. It's actually the first part that's illegal; the Sherman Act bans "attempt[s] to monopolize" a market, not profiting from a monopoly that already exists (if it came into existence without foul play). High prices can be used as evidence that a monopoly exists, but a monopoly can exist without high prices, if for example the company is aggressively defending it with predatory pricing. The general concept of "predatory pricing" goes back to at least the 1910s.
I think someone at Google is secretly grateful for the existence of Amazon's Android fork (FireOS). They can rightly claim: "Android is free and open source - you don't have to take our version if you don't like our T&C's. You can fork your own competing version (that you maintain), like Amazon did"
The law is not like programming, if something is 'technically true', it's probably false as far as the law is concerned. The law is much more concerned in this area with what is 'practical'. It is not 'practical' to fork Android, and operate as a business with it.
I've never heard anyone say that, that's really insightful. Can you say some more stuff about law?
Similarly Amazon sold at a loss to get customers to use their gateway above all others. Their strategy is to take a cut from so many pies that it doesn't matter that their slices are so small. They're okay if some of those slices end up not covering their costs as long as none of their competition gets any pie at all.
This is not the definition of a monopoly.
What Apple (and Amazon) are being accused of is predatory pricing to root out competition. Monopolies are not bad because they raise prices. Over the long-run, the tend to do so, but raising prices itself is not "bad."
Monopolies are prosecuted when they use their position to discourage competition, which stifles innovation. That's what Apple is in trouble for, by lowering prices such that less-funded incumbents cannot enter the market. That's what $MSFT was in trouble for with IE. Yes, they gave away a browser for free, but in the process abused their power as distributor of Windows to corner another market. No company could reasonably compete with a pre-installed browser, meaning $MSFT would be discouraged from innovating.
In some instances, monopolies are a natural conclusion of free-market dynamics. Centralizing production into one entity maximizes possible economies of scale (ain't no scale like 100%!) Most government programs are based on this principle. The assumption is the NASA, bringing together the financial and technical capabilities of the entire United States, has the best opportunity to advance aeronautic engineering.
In other instances, monopolies use their position to prevent competition. These are the bad guys and gals. Think Standard Oil or the old AT&T. Sometimes, multiple independent companies will collude to form a cartel and abuse their collective market power. Airlines do this by raising ticket prices together, despite no external force (like higher taxes, union wages, or oil prices.)
NASA is a great example of a monopoly that does not abuse its position. It actively encourages competitors (e.g. SpaceX) by granting the contracts.
EDIT: Replaced incorrect usage of "market power" with "predatory pricing". Thank you @baddox and @chipotle_coyote for the corrections.
Throughout SO's antitrust trial, its market share was declining, and Rockefeller was unable to stop it. See "Titan" by Chernow.
Has that helped competition at all? It seems like before Apple's foray, Amazon owned the eBook market, and now... Amazon owns the eBook market. I don't really see how competition could have gotten worse, and after Apple's legal failures it hasn't gotten any better.
You mean the years of strict wholesale pricing?
It's not really fair to accuse Apple of "price-gouging," either. (It's also not generally illegal.) Apple never mandated prices for publishers any more than they mandated prices in the App Store; publishers could have moved to the agency model and still decided to sell all their books at $9.99 or less. They didn't have any intention of doing that, of course, but that has little to do with Apple. Publishers were afraid that Amazon was on its way to becoming a monopsony, and that with 90% or more of the ebook market they would be able to simply tell publishers "we've decided you're going to sell your ebooks to us for less now, and because you have nowhere else to go if you want to sell them, you're going to do it."
And honestly, that wasn't an irrational fear. From all appearances, Apple did really violate antitrust law due to the collusion, and one can make a good case that ebook prices from major publishers are generally higher now than they would have been otherwise. But that doesn't mean that this couldn't become a "Vlasic and Walmart" situation, where one seller becomes so powerful that they distort the market. To me, this is the real irony of this whole case: the DOJ was essentially right to go after Apple, but Apple's argument against Amazon is also essentially right. If Apple had just said "we're using the agency model, set your own retail price," they wouldn't have gotten into trouble...and, of course, they'd constantly be undercut by Amazon, which just like Walmart is perfectly willing to sell stuff at a loss to hurt their competitors.
This is something I still worry about with Amazon and "indie" publishing; friends of mine who are self-publishers often say that they make 80-90% of their sales on Amazon. And that's great, at first glance, but Amazon already finds a lot of asterisks to attach to that "70% of your retail price goes to you" promise. (That's only true within a certain price range, they deduct "delivery charges," and there's the whole fustercluck of Kindle Unlimited.) And if at some point Amazon says, "You know, going forward, only 60% of your retail price goes to you," well, who's the competitor who's going to keep them in check? Apple?
My post was meant to elucidate why monopolies (like price-gouging) are not themselves illegal. It's the consequences on the market which are tracked.
But market power is well defined as the ability to raise the market price of a good above its marginal cost while still earning a profit. People seem to be confusing market power with predatory pricing, which is a very different concept.
https://en.wikipedia.org/wiki/Predatory_pricing
> If competitors or potential competitors cannot sustain equal or lower prices without losing money, they go out of business or choose not to enter the business. The predatory merchant then has fewer competitors or is even a de facto monopoly.
If GNU dumped the LGPL and GPL and re-licensed everything under AGPLv3 then I could see a lot of GNU stuff being dropped in favour of more business friendly licenses.
The fact that you can't restrict redistribution means that it is is hard to keep the price high after you have distributed it once. It will tend to zero [0]. The consequence of that is that you have to charge for new work rather than copies of old work. Many people now make a good living doing that, though relatively few companies have figured out how to build a business model around it.
The reason competitors and innovation are not stifled in this model is that there is a market for new work. Organizations are willing to pay for new functionality -- or even new solutions altogether. You can see the kind of benefit that a company can get from developing free software when you see companies like Facebook being able to recruit new staff that are already trained in their internal tools (React).
Whether or not you could replicate this kind of success in another field is questionable. People are willing to pay for "upgrades" for free to play games. Are there people willing to pay to be the first to read the next chapter of the Harry Potter series, even if they could read it for free a week later? I suspect so, but I doubt you would maximise profits this way.
[0] I know of a few obscure GPLed products that are able to sell their source code because nobody is motivated to distribute it for free. It's rare, but it happens.
Does Amazon also sell books at a loss?
I understand that the price of something isn't determined by the costs of the inputs, but ebooks are often more expensive than having Amazon retrieve a paperback from their warehouse, put it in a box, then pay UPS to bring it to my front door.
Is it possible that an ebook at $9.99 is sold for a loss while the paperback for $8.99 is profitable?
Apple cared enough to try and appeal the case to the highest possible level (SCOTUS). To paraphrase a commenter on Ars Technica: $500,000,000 is a lot of iPads/MacBooks sold. All down the drain due to anti-consumer shenanigans.
Still, it's worth comparing to how much money they make. So, a half-billion fine once in the last few years, and they made $18billion this quarter:
http://moneymorning.com/2016/01/26/q1-apple-earnings-2016/
I honestly don't see Apple being seriously hurt by this.
Comparing to the numbers in their last FY (Oct '15), the settlement is 0.94% of their annual profit. I too wouldn't be "hurt" by a 1% fine of my net annual income, but I'd rather put it to better use.
Verizon is a common carrier that manipulated the traffic in the service it provides from its government granted monopoly for 4 years and is fined 1.350M.
This is why people vote donald trump. It is the voting equivalent of YOLO. It's basically the civic equivalent of a weapon, and proving the point that he can get elected may draw into stark contrast that we might need to make a few tweaks here in there with how we operate going forward.
The media didn't care about the peaceful protests over the Freddie Gray murder. But burn 1 CVS down and everyone shows up.
That's an absurdly partisan statement considering his likely opponent is currently under investigation for reckless behavior while serving as a senior government official.
If, as seems more and more likely, Trump is elected, I guarantee the following: no "border wall" will be built, the TPP and TTIP will both be ramrodded through, and the "1%" will get even more "1%" than they already are.
Source? There's a quote about him claiming that he'd "run as a republican, since they're the dumbest voters in the country." but that quote has been debunked.
I would be interested to know if they even made that much in profit. If I could buy a car at 9 out of 10 places I go for $5000, why the fuck would I seek out the one place selling an identical car for $5300? If by chance I didn't shop around, it is likely that I am not motivated by price, and thus descrimination here has a negligible effect.
Now that all small book retailers and Borders Books have gone out of business, and Barnes and Noble is quite close we can look back with 100% certainty and say Apple's anti-competitive tactics of meeting a supply flood with increased pricing was the linchpin in their demise. As we know from history, people will hunt for a bad deal, and ruthlessly work against their own self interest even with significant friction.
Do you have a source for that accusation of dumping? To my knowledge, the ebook division was profitable.
> If I could buy a car at 9 out of 10 places I go for $5000, why the fuck would I seek out the one place selling an identical car for $5300?
There was no place to buy the car for $5000
edit: just to be clear, that is a link to this thread, which references the article we are discussing. That article includes a link to the amicus brief filed on Apples behalf from the publishers making that exact claim to the Supreme Court.
It is a joke, isn't?
Amazon head of kindle saying apple is overstating market share, we have at least 70-80 percent, "[apple's] math doesn't add up", in the cnet article Amazon; We have 70-80 percent of the e-book market"[1]
Crediit Suisse also released a famous report with the 90% figure, which was discussed by the wallstreet journal[2]. The daily finance also stated that figure citing interviews as well as the CS report.
I was just having a bit of a laugh at the absurdity of charging them with anti-competitive tactics, when in fact they introduced competition in a welkl agreed upon narrative that is quite literally the definition of a monopoly. It can also be evidenced buy the fact that, they engaged heavily in dumping and while not 100% proveable, the booksellers were aware of their price structure. Knowing that dumping, being charachterized by an outsized market actor selling significant capacity below market value to drive competition out of business, we can retroactively assume with some confidence that booksellers claims of dumping, followed by a steep price reduction and numerous inbdustry actors going out of business could be a decent heuristic to assdume they are correct.
Once again, my point isn't whether Apple was right or wrong, but that it is difficult to assume a rational body would conclude given this information, that Apple had inflicted 450M worth of damage, and also ignore the tight concentration of supply Amazon was allowed to control.
The second point I will now make, which I make here daily now, is that these dynamics are dangerous and we need to be careful about reliance on a single entity as it can be damaging. It is unpredicatable how the laws are enforced, granting a monopoly to one company who uses it to upsell ads and tracking software and fining them under 1/10th of the CEOs annual pay for a 4 year offense, and the implication that a player with 3/4ths of the market control(likely more by their own admission) was allowed to manipulate prices while 2 companies buying and selling goods, negotiated the price they were willing to sell to the market, were served a 450m fine for anti competitive dealings.
I am very concerned about how things are playing out. And I hope others are as well.
edit: further youyr original posit:
>"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
I wanted to point out that while if we assume Smith to be correct here, it is irrelevent. You seem to raise the point that 2 people of the same industry meeting to discuss business is bad for competition. However, Apple a buyer/market maker meeting with suppliers is what one would expect, as that is how markets work. Maybe they were nefarious, but meeting with buyers and negotiating the terms of a new platform and price structure seem fairly in line with what I would expect to find in the economy. If the publishers themselves all met in secret and withheld supply then I don't see how, even if complicit, it would solely fall on apple & if they did in fact do that, Amazon had secured the rights, so Apple would actually be worse off having colluded & agreed to a higher price, while a market leading competitor enjoyed a better rate.
[0]http://www.scotusblog.com/wp-content/uploads/2015/12/No-15-5...
[1]http://www.cnet.com/news/amazon-we-have-70-80-percent-of-e-b...
[2]http://blogs.wsj.com/marketbeat/2010/02/16/analyst-amazon-e-...
[3]http://www.dailyfinance.com/2010/02/17/amazons-e-book-market...
And even if Apple didn't want to compete with Amazon over price, others did. For instance Google - their Play Books pricing model seems to be "discount whatever we can, wherever we can". Even in these "agency lite" days, they're still a useful price-match reference for the Kindle Store. Or consider Kobo - they had a regular stream of coupons that made them worth checking for a lot of books... until agency pricing clamped down on the books you could apply them to.
Instead, agency pricing more-or-less froze the ebook market starting in 2010 until 2013 or so (when the last publisher defendant settled and started allowing discounting again), entrenching Kindle as the default platform for most readers, crushing smaller companies that wanted to try something different. More over, this has worrying downstream effects - encouraging many independent authors to be Kindle-only and so on.
Pretty consistently, when I am not fucking about on here and trying to have a good sense of humor about various absurdities that we have all come to accept, I make the same broad points. So no I don't actually care that that amazon has the ebook market, and it wasn't encouraging that if Apple hadn't raised prices Google was waiting right there. My point was that Apple acted quite rationally however the system is unpredictable and rife with power imbalance. Which underscores the point I always make which is that; in this example, Amazon had a massive power imbalance.
However, I also find it dosconcerting that Apple has end to end control over an entire ecosystem, albeit smaller than Amazon and Google.
I Also find it disconcerting that almost exclusive access to internet and telephone communications is owned by 4 companies.
I find it slightly absurd that one company controls almost exclusively the english language interface to the internet, owning operating systems, hardware, isps, DNS, browser, search, most code cdns ect.
Amazon owns most of the underlying hardware developers build on, by some counts they have more servers than google. They own distribution of media both print and AV, as well as distribution of physical goods, which they service themselves and soon they will move deeper into transmission with automated freight movement of goods. Given that most manufacturing will go completely automated soon, Amazon will have the ability to operate the entire value chain almost completely aurtomated.
Apple owns cellphones, router, laptops, music distribution, video distribution, controls a nontrivial sofgtware marketplace and has tons of other vertically and horizontally integrated side services.
> Instead, agency pricing more-or-less froze the ebook market starting in 2010 until 2013.
Agency pricing has caused a systemic underinvestkment in infrastructure at a time when it is more dire than ever. So while "encouraging many independent authors to be Kindle-only and so on" may be a problem, it has likley been solved by the millions of voicing empowered by the internet.
so, i am trying to simply interject that we have maybe one more chance to fix it, and I should try and encvourage people to think at a higher level (not talking down to you as you seem to have more domain expertise) but in this sense it is kind of like a fractal pattern right, this small issue of content distribution and collusion, is actually a very tiny symptom of a very big content distribution and high concentration problem set.
tl;dr I torrent e-books.
Then you should read what people post. Perhaps then you won't sound like a rude person.
I diddn't said anything about the 90% market sahre, I asked about your accusation of price dumping
And until now you have provided 0 proof of it. Amazon was selling some books at a loss but the whole division was profitable. Amazon was investigated by the DOJ and they didn't found anything
So yes, I will ask again, what is your source for the price dumping accusation. And, no, something said by the publishers accused is not proof of anything.
The only "reason" why temporary price dumping is bad, is if it is being done for the purpose of raising the price in the future. But I don't think that was what was happening in this situation.
Amazon wins by having prices as low as possible, and beating everyone else at the cost cutting game. This is awesome for consumers as it means low prices.
The only thing that matters in monopoly/price fixing situations is what is good for consumers. Company welfare doesn't even enter into the equation.
> Amazon wins by having prices as low as possible, and beating everyone else at the cost cutting game.
Amazon wins by dumping, making it very unattractive and then keeping prices low/stabile but using its bargaining power and unchallenged distriubution network to negotiate lower prices than competitorsm, thus it does higher volume, pays less and controls distribution. This is not good for competition, because there is little keeping them in check.
So I think those ideas are "somewhat" at odds.
Price dumping is often embargoed (thou difficult to detect) because short term it is good for the consumer, but bad for the competition. The idea is that you gain control and then you can use that to either keep market share or to raise prices.
largely, dumping is unpredictable. It can backfire, thus great for the market, a competitor goes down and subsidizes many consumers with goods. Or it can buy repreive, in that short term they recover the losses but competitionb moves in, or they can get in at the beginning of a trend and prevent others from getting in.
China did this with solar panels for a while and effectively subsidized solar for the world. It is "good" for someone most of the time, it is usually unclear who.
In a scenario where the person dumping also owns most of the distribution of goods and the infrastructure running most applications, local delivery networks, and content distribution networks like streasming video, music and devices to consume biooks and other media, it isn't great. This goes for apple and amazon.
I'm sure people vote Donald Trump for many reasons, however I don't really understand the need to insert Trump in this conversation, and given Trump business record he is no stranger to shady business practices.
As for Verizon fine vs Apple fine , I'm no lawyer so I don't know what Verizon's case maximum penalty was, though the fine seems quite low.
edit: s/tactics/practices
Fiscal policy being the other one. However, we don't have money, and since the amount of money in the economy grows exponentially, when you have outsize lending the amount of money gets ratcheted the fuck up.
So you have no more levers to pull here.
Russia, I beleive their equivalent of secretary of state, that there was "a new cold war", just google that phrase. Also, the people Motherfucking Security Board of the Bulletin of Economic Scientists[0] have set the doomsday clock the closest to midnight it has ever been. recently? no, ever.
No one is talking about the ban China just laid down on any foreign entity competing in technology. Happens on Thursday. In a loose interpretation, it would only be all media companies, anyone with published works and media, and any imagery. Darker interpretations have it being interpreted as "publishing" being the app store. However, it is all based on a single reuters qoute and the law which has been published, which you can look up.
Then you have US banning china from selling their flagship phone (happened today/yesterday).
Unemployment is insane.
At this point a rougue agency has near complete control over the entire worlds communications.
N. Korea is firing nukes and shit, but honestly that isn't even a big deal at this point.
We created a fucking rogue state in the middle east, and hundreds of thousands of people are fucking stampeding through the world to get out of there.
Stock market is "up" from the 3.3 TRILLION dollar nose dive the world markets took in the opening 2 months of trading.
According to 538[1] it looks like we have effectively grasped this as a nation, and have identified the economy and a poorly run government as the top 2 issues.
Now I am about as cynical as they come. However, I am a fucking patriot even with my fairly contrarian views. I refuse to believe that Donald Trump as a person is how the nation succeeds, and I hope most people believe this as well. HOWEVER, the verizon/apple thing (btw just currently going to trial to prevent the governemnt from getting the last 1% of the phone) is indicative of how fucked up everything is. So, yes I do think the election is fairly relevent to this. If you will notice in history, people will put up with horrible consistent conditions, but they do not fare well with uncertainty. So that was my point.
[0]http://thebulletin.org/press-release/doomsday-clock-hands-re...
[1]http://fivethirtyeight.com/features/year-ahead-project/#part...
No, Apple got sued for conspiring with the publishers to raise the prices and force Amazon to rise the prices as well (through agency pricing).
The iBookstore has been a near total failure too, so all Apple really accomplished is to make readers pay more for books on Amazon.
I think those Amazon <---> publisher contracts all got nullified as part of their settlements with the government.
And you'd otherwise see Amazon's return to its old scheme where normal ebooks never cost the consumer more than $9.99, whereas, to take a random example I just looked up, Jim Butcher's latest novel published half a year ago goes for $13.99, ~$1.50 more than the paperback and only ~$2.50 less than the hardback: http://www.amazon.com/Cinder-Spires-Aeronauts-Windlass/dp/04...
"When the publishers all settled out of court they were forced to renegotiate their e-book distribution contracts with Amazon, Apple, Barnes and Noble, Kobo, Google and all of the other minor players."
That article also says HarperCollins since returned to it, and this one: http://www.digitalbookworld.com/2014/simon-schuster-strikes-... says Simon Schuster returned to it as well. I'm not sure about the others.
No, Apple and the publishers were sued for colluding to fix the prices in all the stores, including the ones from Apple, Amazon, B&N or Sony