Judge rules Apple conspired to raise prices on e-books
reuters.com
reuters.com
Amazon ruled the ereader/ebook marketplace, because it was the first company to offer both a reader and electronic books together, so you could order books right of the reader. A page from Apple's playbook, a la the iPod.
At the time, ebooks were sold like print books, where the retailer set the price. This is how most retail works, and let Amazon drastically discount their ebooks so they weren't taking any profit, just to move Kindles. The publisher had no say over the price of the book, so a Kindle owner could get ebooks cheaper than print (which, if you think about it, makes perfect sense). The publisher didn't make any less, so the only one paying the price was Amazon (and they took a hit on their stock for it, if I recall). The publishers were forced into this model by Amazon because there was no other resource for ebooks, and everybody loved their Kindles so to deny that market meant your competition would kill you if you didn't play along.
Apple came along with the iPad and that gave publishers an out. If you go back to that time and read the articles on this, Apple actively worked with publishers to change the model to one that was better for publishers and Apple, but worse for consumers. They created a new kind of contract that let the publisher set the price of the ebook, which is really unheard of in retail, except for maybe video game sales. At its heart, it's really an anti-competitive practice, though that may seem counterintuitive. Look at it this way: it's a great way to break into a marketplace controlled by a stronger competitor without really competing. You force your competitor to raise their prices and thus reduce the attractiveness of what they offer, and suddenly you have a share in the market without having to compete with better products or prices.
I also don't understand pro-Apple stance on this issue. I'm a huge fan of Apple products, but I was not a fan of this change in the ebook market. My guess is this opposition is coming from people that don't buy a lot of ebooks on either the iBook store or Amazon, or ever experienced the Kindle store prior to this change in the market. It used to be that ebooks on Amazon were priced around or less than the price of a paperback. Now they tend to cost the same or more than the hardbound edition. How is this a good thing for consumers? You now have publishers in control of the ebook market the same way they're in control of the video game market, through price fixing and predatory pricing models, and retailers have no say in the matter.
It seems to me if an offense was committed, it was committed by publishers in renegotiating their Amazon contracts, in unison, towards the agency model. How is Apple implicated?
The agency model wasn't the illegal thing, it was just the one part of the mechanism of the used for the illegal price fixing conspiracy.
> It seems to me if an offense was committed, it was committed by publishers in renegotiating their Amazon contracts, in unison, towards the agency model.
The publishers were, indeed, charged with conspiring in the price fixing scheme. All of the charged publishers settled with the DoJ rather than going to trial. Apple wasn't singled out, it just seemed that way because they were the only defendant left when the trial started.
> How is Apple implicated?
Apple is implicated as a member of the publishers' horizontal price-fixing conspiracy who sought to advance, encourage, and profit from that conspiracy.
>This meant that the iBookstore would always have the e-book at the cheapest price. It also meant that if a retailer was offering the book for a cheaper price, the publisher would have to lower the retail price to match it. If that meant the price was below what it cost to produce, the publisher would take the loss, not Apple — they would still get their 30% cut.
>The traditional purpose of MFNs are used to protect a retailer’s ability to compete, ensuring that they aren’t disadvantaged by the wholesaler giving their competitors a better deal. The DOJ contends that the way this MFN works, it was designed to “protect Apple from having to compete on price at all, while still maintaining Apple’s 30 percent margin.” Those are strong words, but there is certainly a kernel of truth to that.
http://www.macstories.net/stories/understanding-the-agency-m...
It's also worth pointing out that the publishers didn't change their prices. Amazon artificially lowered what the consumer was paying, but the publisher still got their $12.99 (or whatever they charged). It would not surprise me in the least if Amazon's long-term plan was to stop discounting books once they cemented their hold over the market.
Interesting reason for the $12.99 books: the ones I see are from Random House and are being sold under the agency model still. You can tell because it says "price set by publisher". Random House was not part of the price fixing suit.
And yeah, generally speaking, this whole case was about bestsellers. No one cares about downlist stuff, they care about hurting the value of their NY Times bestselling hardcovers.
Random House, the largest publisher, resisted Apple's call to adopt the agency model in 2010. But the company capitulated a year later in order to get its books on the iPad.
"Apple decided to pressure Random House to join the iBookstore," Cote wrote. "As Cue wrote to Apple CEO Tim Cook, 'When we get Random House, it will be over for everyone.' Apple had its opportunity in the Fall of 2010, when Random House submitted some e-book apps to Apple’s App Store. Cue advised Random House that Apple was only interested in doing 'an overall deal' with Random House. By December, they had begun negotiations, and Random House executed an agency agreement with Apple in mid-January 2011. In an e-mail to [Steve] Jobs, Cue attributed Random House’s capitulation in part to 'the fact that I prevented an app from Random House from going live in the app store this week.'"
It's a dangerous precedent that a new player bringing new customers to a market, refusing to engage in monopolistic tactics, and refusing to sell above a certain price, is price fixing.
Price fixing hurts consumers by many sellers agreeing to artificially raise the price of something such as to avoid the pain of competing on price.
Apple convinced publishers to accept a lower price - nominally - and to sell at a reasonable market price, or they couldn't be stocked in their store. A brick and mortar retailer could never be faulted for refusing to sell products at a loss!!!
I'm not saying Apple is perfect, but in this case they behaved more responsibly and in the interests of content creators and consumers, in the long run, than all other parties involved.
The true price fixing was Amazon and the publishers, pre-iBooks, agreeing to sell some items as high as 24.99 for eBooks - something Steve Jobs refused to do. Average price higher, highest price lower.
I still buy books on Amazon instead of iBooks because my Kindle is handy as a dedicated reader and hey, I want to pay less out of self interest. I also got my Kindle for free.
But it must be clear this is surely fucking the authors.
Also, to those who think eBooks should be far cheaper than print, what do you think it costs to print a thousand page novel? You think the hardcover costs $10-15 more, or that it's a premium sell?
I very seldom encounter books that are cheaper to buy (new) physically than electronically. I agree that the electronic versions should be even cheaper, but that's a separate story. The first order reason that ebook prices rose in response to Apple's entry into the market is simple -- competition. In this case, Amazon had a monopsony and dictated prices to publishers. Apple broke or offered the whiff of a break in the monopsony and the rest is history. What does this competition look like up close? A bunch of contract negotiations.
Did Apple "orchestrate a conspiracy" to raise ebook prices? That's another question altogether. The video of Jobs saying prices won't be higher simply indicates he knew about the "most favored nation" contracts. I couldn't be bothered reading through the entire judgment, but certainly followed coverage pretty closely and I just don't see a case.
http://www.amazon.com/The-Shadow-Factory-Eavesdropping-Ameri...
I will never buy an electronic copy for more than a paperback. Ever. I've actually written to published to complain about it.
And because it was selling ebooks for less than it was paying publishers for them.
Some people are arguing about amazon, but again, that is irrelevant legally.
As I wrote 43 days ago here:
"A finding about Amazon will be completely irrelevant to Apple's conduct in this case. The question is whether Apple committed horizontal price fixing. Amazon's possibly illegal conduct is going to be completely irrelevant in that, as horizontal price fixing is still per-se illegal. They could prove Amazon hurt the market a lot. They could prove whatever they like. As long as the DOJ proves they committed horizontal price fixing, it's game over. Now, the supreme court may, in the end, decide horizontal price fixing should be analyzed under the rule of reason instead of being a per-se violation, but that's completely irrelevant to the current state of the law, and in fact, Apple's behavior. SCOTUS is not going to change the doctrine because they think Apple did the right thing here, they will change doctrine because they think the doctrine was wrong in general. However, that doctrine is the current state of the law, and what this case, and the appeal, will be analyzed under."
This is exactly what happened. From the decision:
"In sum, the Plaintiffs have shown not just by a
preponderance of the evidence, see Herman & MacLean v.
Huddleston, 459 U.S. 375, 390 (1983), but through compelling
direct and circumstantial evidence that Apple participated
in and facilitated a horizontal price-fixing conspiracy. As
a result, they have proven a per se violation of the Sherman
Act."
Note that the judge, being prescient, also wrote part of the decision to explain why she believes Apple would also be guilty under the rule of reason (IE if it was not a per-se violation). This portion of the decision takes into account Amazon's conduct.
This was done so that if the supreme court declares horizontal price fixing to be subject to the rule of reason, they won't need a new trial.
Vertical price fixing is an entity at one level of the chain of production controlling prices at another level (typically, its a manufacturer dictating retail prices.)
Vertical price fixing is also rarely naked "price fixing" (IE directing a price to sell something at), it's usually resale price maintenance:
Two fake (I think!) examples:
Microsoft tells amazon they can't sell the xbox 360 for less than 399.99 (minimum resale price maintenance)
Microsoft tells amazon they can't sell the xbox 360 for more than 299.99 (maximum resale price maintenance)
Horizontal, on the other hand would look like this:
Microsoft and Sony agree that they will not let anyone sell the xbox360 or playstation 3 for less/more than 399.99.
Your local gas stations get together and agree they won't undercut each other's prices anymore.
(IE they've made a horizontal agreement not to compete on price)
So it'd be a cartel-like behaviour?
Cartels do plenty of other antitrust related behaviors too (bid rigging, gouging, etc)
>>"The U.S. Department of Justice said this conspiracy was designed to undercut online retailer Amazon.com Inc's (AMZN.O) dominance of the fast-growing e-books market."
How can they undercut Amazon's dominance by charging more?? It might make them look better to publishers but not consumers. From my perspective Apple looked at the market (Amazon), realised their pricing wasn't sustainable, and agreed to a more sustainable model with publishers. I could understand the problem if Apple tried to raise prices and had a monopoly on ebooks but the fact consumers could just download the Kindle app to an iOS device and get the lower prices (and Apple was new to the market) rules out that argument.
A chief stumbling block to raising e-book prices was the Publishers’ fear that Amazon would retaliate against any Publisher who pressured it to raise prices. Each of them could also expect to lose substantial sales if they unilaterally raised the prices of their own e-books and none of their competitors followed suit. This is where Apple’s participation in the conspiracy proved essential. It assured each Publisher Defendant that it would only move forward if a critical mass of the major publishing houses agreed to its agency terms. It promised each Publisher Defendant that it was getting identical terms in its Agreement in every material way. ... Without the collective action that Apple nurtured, it is unlikely any individual Publisher would have succeeded in unilaterally imposing an agency relationship on Amazon.
You can argue whether or not Amazon is participating in predatory pricing now, but should Amazon end up raising prices (not entirely obvious that will happen)[2][3], then this case could end up being pointed to in the future as a lost opportunity to let the market correct itself.
[1] http://paidcontent.org/2013/07/09/barnes-noble-throws-out-it...
[2] http://www.csmonitor.com/Business/Saving-Money/2013/0518/Wil...
[3] http://www.nytimes.com/2013/07/05/business/as-competition-wa...
The fundamental import of Apple's actions was that it significantly increased prices for eBooks without fundmentally altering the value proposition (i.e., eBooks before Apple's price-fixing are no different than eBooks post-price-fixing). The difference in price is the "harm" that consumers have suffered--it represents the increased prices they have to pay over the prices they would have paid had Apple not colluded to artificially increase prices in a way the market did not support.
That's not true. Apple eliminated windowing. I.e. pre-Apple some ebooks were being delayed for some time after their print releases. Apple's scheme guaranteed they'd be released at the same time. That's a major difference and a major value-add.
In this ebook deal, Apple was negotiating the prices up with multiple parties so that they could get their cut and the publishers would still make the same or more than they did from Amazon.
The difference is, if you are in negotiations with multiple publishers (read: conspiring) to raise prices, that's bad for consumers. As an analogy, imagine if Exxon, Shell, BP, Total, et al. somehow colluded to sell gas for 50 cents more per gallon. If all the major oil companies did it, none of them would lose very much business.
The only part I'm missing is how this is as bad as my analogy, because consumers could still choose to buy from Amazon. There are even Kindle apps for almost every device including iOS devices.
Maybe someone can enlighten me on that part.
Working something out with all the big publishers is pretty much the definition of an illegal cartel.
"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."
This is classic, slam dunk antitrust, no need to spin elaborate economic theories, just prove to the court's satisfaction that consumers were harmed by an overt conspiracy to raise prices.
Important here is that the agency model would only have gone into effect if the publishers jointly succeeded in changing their Amazon contracts. They were able to do so because their joint Apple negotiations geave them the leverage to jointly renegotiate their Amazon contracts.
Joint negotiations aren't always an antitrust issue. But when the result is to increase prices or otherwise burden the market, it's usually (as here) indicative of antitrust activity.
The agreements also included a price parity provision, or Most-Favored-Nation clause (“MFN”), which not only protected Apple by guaranteeing it could match the lowest retail price listed on any competitor’s e-bookstore, but also imposed a severe financial penalty upon the Publisher Defendants if they did not force Amazon and other retailers similarly to change their business models and cede control over e-book pricing to the Publishers. As Apple made clear to the Publishers, “There is no one outside of us that can do this for you. If we miss this opportunity, it will likely never come again.”
Despite that, I must admit, I feel ambivalent about the ruling. Amazon's below-cost retail pricing appeared to have otherwise prevented Apple from even attempting to enter the market, at all, unless they came up with some way to profit. I guess they picked the wrong way.
(The "some reason" would appear to be a hope they can get the Supreme Court to change the law.)
Now imagine that one day, all the sunglass makers come to you at once, and say, you have to sell at MSRP, and it's $100. Since you are in the sunglass selling business, this sucks but what choice do you have? That's why this is also generally illegal, for competitors to collude in setting prices.
The best part is how Apple decided that the Publisher sets the price, and Apple gets 30% regardless of profit margin. Apple also stated that they were able to price match anyone who undersold them, and they STILL get 30%, pushing losses onto the Publisher. At least with Amazon, they ate the loss due to their price fixing.
Edit: Fixed last paragraph
Apple didn't have to bully the publishers in general, because this deal was a big win for them.
Jobs even admitted that Amazon would profit Publishers more in the short term, essentially admitting that Apple was going to make Publishers eat losses by price matching Amazon. Then, once Amazon was forced to increase prices in order to make a profit because they've been squeezed out of their Monopoly position, then the profit starts rolling in.
Very illegal, and also leaves Apple unscathed because they don't take any losses. You can understand how bullying would be required in order to get some reluctant Publishers to conform.
And how's that a "scare tactic"? Sounds like something entirely reasonable for the publishers to consider.
Also, Jobs also stated rampant piracy would be a major issue if attempting to sell E-Books through alternative means.
If Apple comes to them and tells them they are the saving grace of the publishing industry it isn't a scare tactic. It's just meaningless bluster. Microsoft, Google, Amazon et al would be saying exactly the same thing. It doesn't mean anyone has to listen.
So in what way is this bullying again ?
"You can either join us, or we'll collectively squash you."
TL;DR: Lose money when Amazon starts taking a bigger cut, or lose money due to piracy.
Not really. He was certainly encouraging them, but both the charges and the findings here are that the publishers themselves were actively colluding and looking for pretty much exactly what Apple offered before Apple offered it. The conspiracy didn't start with Apple, it was just that Apple's active, enthusiastic involvement was necessary for it to move forward.
Right. Which is why it took an illegal horizontal price-fixing scheme with notional competitors (the publishers) conspiring to raise prices to do that. Apple was a member of the conspiracy who sought to profit from it, but really the principal wrongdoing here was the conspiracy among the publishers.
Apple looks like they were singled out because they were the only one that went to trial, but that's just because they were the only participant in the conspiracy that didn't settle with the Justice Department prior to trial; the involved publishers were all charged along with Apple.
> I could understand the problem if Apple tried to raise prices and had a monopoly on ebooks
How about if many of the biggest publishers, together controlling significant market power in the ebook market, got together and conspired to raise prices, with Apple as willing and necessary co-conspirator (since they needed a retailer with a platform with instant mass reach so that they could have a credible threat of jointly abandoning Amazon if Amazon didn't match the terms they got from the new retailer.)
Because that's what was charged, and that was what the judge found the evidence supported. Its not about what Apple did on their own.
[1] http://www.inquisitr.com/486164/google-intel-and-apple-under...
But this wasn't about no-compete clauses, this was about the companies having an off-the-books agreement not to give unsolicited job offers to the competitors' employees.
Second, the existing DoJ settlement specifically allows publishers to police this. One of the terms the settling publishers are allowed to insist on is "no losing money on my catalog overall". That's more than enough to prevent truly anti-competitive discounting.
Third, yes, startups will have a hard time. But they had a hard time with the agency model too - which restricted their maneuvering room in significant ways. For instance, with a publisher-specified price you weren't just forbidden from charging "too little", you couldn't charge "too much" either. That means models where startups charged a premium for ebooks in order to support other services their target readers wanted were no longer possible.
Seemed pretty clear to me there was nothing that Apple did to force Amazon to raise their prices.
That last sentence means that publishers basically had to force Amazon onto the agency model, or else lose money selling on Apple's store. And their intention was clearly to force Amazon onto the agency model causing Amazon's consumer prices to increase.
This is, essentially, a sham trial in which the USG was always going to win.
See: http://tech.fortune.cnn.com/2013/05/24/apple-ebooks-antitrus....
"Asked during a preliminary hearing Thursday to share her thoughts about the Department of Justice's case against Apple (AAPL) in the long-awaited e-book antitrust trial, U.S. District Judge Denise Cote said this, according to Reuters..."
In bench trials, where the judge is making the decision anyway, the judge does not sit as a tabula rasa absorbing the evidence until the very end of the trial. Like anybody would do, they read the materials in the pleadings and some of the evidence and form an initial opinion. It is not uncommon for them to share this opinion with the parties as the case progresses so that the parties can settle before things go any further.
But in a non-jury trial, the judge studies all the evidence independently, and the courtroom phase is just supplemental. You don't need someone to testify to the facts in their report if you can just read the report, right? The courtroom phase is also quite expensive, which is why a judge would indicate that based on the evidence she had seen, it probably wasn't worth doing it. To save everyone the effort.
The judge had received a preponderance of evidence both in pre-trial and related rulings before making that statement. Pre-trial opinions are specifically designed to inform the two parties of the judge's current temperament.
Are you talking about this[1]? The statement wasn't to reporters. It was a tentative in-court statement in response to an inquiry by one of the lawyers. Hardly the basis for a serious accusation of misconduct against a federal judge.
[1] http://www.reuters.com/article/2013/05/23/us-usa-apple-ebook...
In Apple's case, every conspirator involved except Apple settled with the government. Apple are the only ones that chose to go to court. The "tentative view" that Judge Cote formed by reading the pleadings was a way to tell the Defendant: you sure seem guilty based on the evidence you and the government provided. If you want to save yourself some money, I suggest settling.
Sometimes cases are so clear cut that it is just not right for it to proceed to a full trial. That's where things like tentative views and Summary Judgments come in.
Amazon was, and is, the monopolist using classic monopolist tactics (lock-in, undercutting prices, etc.) to retain a monopoly. Of course once their monopoly was ensured they'd pivot to make a true profit if pesky Apple hadn't interfered: http://www.nytimes.com/2013/07/05/business/as-competition-wa...
I can't help but feel that this was driven by politics/optics (to your average person, of course lower prices is better).
At the time of the agency switch it was obvious something fishy was going on with the whole Amazon v MacMillan "buy button" battle. The DoJ's investigation uncovered plenty of evidence about what that was: a conspiracy among publishers to force Amazon to the agency model. And all the publishers settled before getting to trial, which certainly supports the strength of the DoJ's evidence and case.
Now consider a publisher conspiracy. The DoJ's argument against Apple is that they were the enforcer that made the publisher conspiracy possible. You may agree or disagree with the judge about whether or not the evidence supports that argument, but it is a serious, carefully-thought-out line of logic either way.
No, the line of logic was that because there was specific evidence of them conspiring with the Publishers, it was (to the standard required in civil cases, which is far from "must be") apparent that there was a conspiracy.
> Amazon was, and is, the monopolist using classic monopolist tactics
Whether or not Amazon is a monopolist (or even illegaly leveraging a monopoly) might be relevant in an anti-trust trial of Amazon, but it really doesn't have any relevance to an alleged price-fixing conspiracy involving several of Amazon's suppliers and one of their competitors.
1. Being a monopoly isn't illegal. You don't say this, but using the word monopolist makes it seem like you think that such a thing alone is criminal enough.
2. Lock-In? What part is the lock in? The fact that I can buy a Kindle and never purchase anything from Amazon? The fact that the DRM used for ebooks from Amazon are optional and decided by the publisher?
3. Undercutting prices? So?
and another great ruling. let's wait for that monopoly around ebooks to fully develop until it's too late.
And by the way, DRM is at the heart of this ebook conspiracy. One of the publishers' fears was that too many readers would be trapped in Amazon's ecosystem by DRM, giving Amazon too much leverage. The correct response to that problem is to drop the pointless, self-inflicted DRM (as some have started doing in response to the antitrust cases). Instead, the publishers chose to work with Apple to try and limit Amazon's power...
But only after threatening them that their books won't benefit from the latest amazon technologies such as text-to-speech if they opt out of DRM!
"Nous avons rencontré [Amazon] recemment pour comprendre cet ajout de DRM sur nos titres et en quoi consitait cette DRM un peu spéciale. [...Elle] embarque également une couche software qui active les fonctionnalités de l’ecosystème Amazon. La liste est variée mais passe du “Text to Speech” au “Facebook Connect” et toutes les prochaines évolutions d’Amazon. Et croyez moi, elle vont être nombreuses dans les mois à venir."
Quick translation: we (the publisher bragelonne) have met with amazon to understand why they added DRM to our books without our consent and what purpose this DRM served. [...] It contains a software part that enables various amazon features such as Text-to-speech or facebook connect as well as the many future evolutions.
Except for all the mergers and acquisitions that are stopped by the government because the government feels the result would be too monopolistic.
The government certainly doesn't like monopolies, but as long as they are achieved in the prescribed ways and not abused, they are perfectly legal.
It is illegal to take certain acts that would form a monopoly (which is why the government blocks or puts terms on, e.g., some mergers) and it is illegal to use monopolies in certain ways to advance market power in other markets (one of the remedies for which may be breaking up the monopoly which was illegal leveraged.)
But simply gaining and maintaining a monopoly is not illegal, so long as you don't gain it by illegal methods or do illegal things with it.
The DOJ only opposes mergers and acquisitions which would substantially alter market conditions to increase prices faced by consumers in a way that market forces would not normally support. For example--Verizon and AT&T could never merge, because their combined market power would effectively let them set whatever price they wanted for nationwide cell+data plans. On the other hand--Sprint and TMobile could merge, because without the merger both companies are in danger of failing but as a result of a merger could theoretically compete with Verizon and AT&T.
Sorry, but this isn't the "Think Different" approach the customers deserve.
"With a digital book discount, Amazon’s $9.99 price point roughly matched the wholesale price of many of its e-books. " ... "One of the strategies that they [publishers] employed was the elimination of the existing discount on wholesale prices of e-books. This meant that the wholesale price for e-books would equal the wholesale price for physical books, and as a result, the wholesale price that Amazon paid for an e-book would be set at several dollars above Amazon’s $9.99 price point. This tactic, however, failed to convince Amazon to change its pricing policies and it continued to sell many NYT Bestsellers as loss leaders at $9.99.9"
The point is that Publishers weren't losing.
But, Amazon is not notorious for making profits, and I can understand how them dominating a market may be a bad thing. Doesn't justify Apple's tactic though.
No, the fact that the laws which make it illegal are ridiculous is what makes it excusable.
And I wouldn't hold my breath waiting for that ebook monopoly. Even if Microsoft/B&N and Apple both decide to bow out (not at all likely they both care too much about content for mobile devices to do that), Amazon still would have Google and Kobo/buy.com/Rakuten (aka "the Amazon of Japan") to contend with both of which are more than capable of fighting a price war.
No matter what, price-fixing or not, Amazon can do just fine. The only way they don't completely win is if they're forced to keep prices on e-books high and at identical level to dead tree ware and the glitzier Apple brand. And that's just what happened, thanks to collusion between Apple and the publishers.
Amazon sells ebooks for the sake of selling ebooks - to make a profit. Apple sells music as a tie-in for its hardware offerings - it has no reason to "squeeze out" competitors in this space.
On a turnover of around $60bn it makes a profit of about $90m. Given that it's nearly 20 years old and beyond the point where it should be struggling to break even either it's doing a very bad job of being profitable or being profitable isn't the companies primary goal right now.
To me it looks like they're managing profit to zero to continue the land grab.
Now that may be legal and fair and in the short term it's good for consumers, but in the longer term I'm not sure it's good for the market (and therefore for consumers) given that most of it's competitors have shareholders who probably do expect profits.
That they make razor thin margins now, is just evidence they are still undercutting the smaller competition until they're the only player and can set prices to what they want.
Similarly, there are still options outside of Amazon when it comes to eBooks. There's Nook, Kobo, iBooks, Google Books, Sony, and others. So Amazon's desire to make profit hasn't completely wiped out the market.
So this argument does not really hold in either direction...
No, Amazon sells ebooks for the sake of selling Kindles first and foremost (or did, before the launch of the iPad). Before the switch to the agency model, Amazon sold many ebooks at a loss. They sold ebooks at $9.99, less than what they paid publishers per copy for popular books.
And while pushing competitors off of iOS technically might not be squeezing them out of the space, it is still awfully damaging - especially when backed up by something like agency ebook pricing.
I wonder what would have happened if Apple never mentioned or alluded to Amazon in licensing discussions. It seems like mentions of Amazon are included in all of the damning evidence.
[1] I don't know about TV shows and movies, but I imagine it is the same for them as well.
What I wonder is if they could have achieved the same result with less explicit talk about what the other publishers were doing and without discussing it as an opportunity to raise prices but to set whatever prices they wanted.
Does anyone know if this just applies to ebooks? Or might this ruling impact their ability to apply agency model and "most favored nation" contracts across all their content marketplaces?
Random House, the largest publisher, resisted Apple's call to adopt the agency model in 2010. But the company capitulated a year later in order to get its books on the iPad.
"Apple decided to pressure Random House to join the iBookstore," Cote wrote. "As Cue wrote to Apple CEO Tim Cook, 'When we get Random House, it will be over for everyone.' Apple had its opportunity in the Fall of 2010, when Random House submitted some e-book apps to Apple’s App Store. Cue advised Random House that Apple was only interested in doing 'an overall deal' with Random House. By December, they had begun negotiations, and Random House executed an agency agreement with Apple in mid-January 2011. In an e-mail to [Steve] Jobs, Cue attributed Random House’s capitulation in part to 'the fact that I prevented an app from Random House from going live in the app store this week.'"
For a second I thought I was reading about Bill's Microsoft not Steve's Apple.
I'm gonna play armchair legal analyst here and say this is a smack down by the government because Apple didn't want to settle and pay the fine. Because they thought they were in the right. I tend to agree.
Let me clarify since people are already down voting because they disagree: What if Walmart told Hasbro that it could sell its GI Joe action figures for $5 more than K-Mart could? Then they went to negotiate an agreement to purchase as many as possible. Would it not be in Hasbro's best interest to sell as many as possible through Walmart? When K-Mart comes to negotiate it will have to make a justification for why it can't charge more, that's how markets work. K-Mart will either convince Hasbro to still sell the items for cheaper or it will have to renegotiate.
Now throw in the fact that these were not real-life items. There is no limitation on how many items each retailer can acquire. The number is infinite.
Does it really seem so terrible now? Try not to appeal to emotion when making the decision.
Edit: To address your added analogy, I agree. Your proposed example does not seem terrible. It is also not at all close to what happened with Apple and the book publishers. It wasn't one company increasing prices successfully at one store and then shopping the new deal to other stores. It was nearly the entire industry swiftly pushing new deals designed to increase prices and break Amazon's position of power in the industry. The increased prices weren't due to the success of the prices in the iBookstore, but the legally binding clauses and assurances from Apple and the other publishers that they would present a united front. If Hasbro, Mattel, and every other major toy manufacturer raised prices to K-Mart at the same time due to suggestions from Walmart, I would object on intellectual and emotional levels. And I am sure the DoJ would too.
Hasbro then threatens to withdraw all GI Joes from Kmart. KMart can no longer sell any GI Joes--even if acquired from third party resellers. Walmart knows this, and indeed suggested this negotiation strategy to Hasbro.
Of course, this has happened before. This is why the MSRP is now only a "suggested" price and why a retailer is free to sell at whatever price it chooses, however such price affects its own margins.
It's generally acceptable to describe Microsoft as a "convicted monopolist" (despite there not having been a criminal case). One wonders if people will also accept the labelling of Apple in such a manner when the dust finally settles.
Here, Apple: convicted monopolist. Done. That was easy. I own a mac mini, macbook pro, ipad, iphone5, 4s, etc.. and I'm a member of the developer program to demonstrate my bias and proclivity to the platform. Doesn't mean I'm pathologically tied to it (pathos in the debate sense).
Google 2010 Apple 2013