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Judge OKs Class Action Suit Against Apple For E-Book Price Fixing

timothy posted about 7 months ago | from the opening-the-books dept.

Books 88

An anonymous reader writes "Reuters reports: 'A federal judge in New York granted class certification on Friday to a group of consumers who sued Apple Inc for conspiring with five major publishers to fix e-book prices in violation of antitrust law....The plaintiffs are seeking more than $800 million in damages.' The trial will probably be in July or September. The judge who granted class certification, Denise Cote, ruled in 2013 that Apple was guilty of colluding with other publishers to raise the price of e-books and to force Amazon.com to do the same."

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Anybody should be able to open an e-book shop (2, Insightful)

Anonymous Coward | about 7 months ago | (#46608217)

The fact that anybody can't is quite disturbing. Obviously there is a major problem with the system and a class action lawsuit should go forward. The publishers who are forcing DRM and giving discriminatory pricing should be prohibited.

Re: Anybody should be able to open an e-book shop (2, Insightful)

Anonymous Coward | about 7 months ago | (#46608433)

What about the AUTHORS! Seems that greed and corporate collusion has forgotten the actual content creators. Why don't authors self publish, shouldn't be too diffucult with to days technology? Cut out the middle man altogether. But if too many start doing that it'll probably be outlawed.

Re: Anybody should be able to open an e-book shop (2)

Wootery (1087023) | about 7 months ago | (#46608845)

I agree that self-publication on the web would probably generally be a good thing for authors and readers, but I can think of a few obstacles:

  1. Marketing isn't easy or free
  2. Authors might be in favour of DRM, which means going with a big name publisher
  3. They might have sold their soul and be forced to publish through some company

Re: Anybody should be able to open an e-book shop (2, Informative)

Anonymous Coward | about 7 months ago | (#46608973)

As an author with more than 10 self published works for sale on Amazon, you can be sure that I have not sold my soul to the devil (a.k.a. Publishers).
Having tried to sell my works via my own site I can tell you that even with the amazon cut I make a lot more money using them than I did before.
As for the costs to the purchaser? Well two of my books are available at £0.99 anf the highest price is £5.99. Hardly breaking the bank for purchasers. If I printed the book and got it into book stores then the £5.99 (inc tax) would be £11.99 simply for me to get the same return per copy sold.

Re: Anybody should be able to open an e-book shop (1)

Plumpaquatsch (2701653) | about 7 months ago | (#46615641)

As an author with more than 10 self published works for sale on Amazon, you can be sure that I have not sold my soul to the devil (a.k.a. Publishers).

No, you sold your soul to Amazon. And without evil Apple they'd still take 65% of the selling price.

Re: Anybody should be able to open an e-book shop (0)

Anonymous Coward | about 7 months ago | (#46623629)

Amazon taking 65% of the selling price is still better than the retailer, distributor, and publisher taking 85-90% of the selling price, plus recovery of returned hardbacks and pulped paperbacks.

Re: Anybody should be able to open an e-book shop (1)

kelemvor4 (1980226) | about 7 months ago | (#46609787)

I agree that self-publication on the web would probably generally be a good thing for authors and readers, but I can think of a few obstacles:

  1. Marketing isn't easy or free

Nor is marketing necessary. I don't think I've seen a lot of marketing for books over the years. Sure, one or two here or there. You see more marketing for a single movie than you probably have in your entire life for books.

Re: Anybody should be able to open an e-book shop (1)

Wootery (1087023) | about 7 months ago | (#46610199)

Reasonable point, but I suspect there's a lot of value in simply being listed on Amazon.

Re: Anybody should be able to open an e-book shop (1)

s1sfx (1883880) | about 7 months ago | (#46616461)

Reasonable point, but I suspect there's a lot of value in simply being listed on Amazon.

No, not really. There is so much listed on Amazon that without marketing to get people to click on a link any book or ebook just goes under without a trace. Single celled organism in an ocean kind of a deal. The ability of people to self publish to Amazon has created this ocean.

Re: Anybody should be able to open an e-book shop (1)

Meski (774546) | about 7 months ago | (#46617581)

Amazon is good, but it could be a lot better. I buy a lot of books thru kindle app on Android (don't get me started on the cripple-ware apple forced amazon to do) - what could they do better?
-not recommend books I've already bout thru amazon
-allow me to flush existing recommended books and get a new set of recommendations (if its on the list for a month, and I haven't bought it, I'm not going to.
-tag and buy, rather than the atrocity that is one click buy
-multiple accounts per one device, and an easy way to switch
-an intelligent register device that doesn't assume each time I reregister a device, that it should create a new entry. -some way to catalog books in kindle, some way to tag/remove from device

And don't get me started on Amazon Payments, the cretins banned me for having an inward payment, and won't even discuss unlocking it. I've used the obvious workaround...

Re: Anybody should be able to open an e-book shop (1)

umafuckit (2980809) | about 7 months ago | (#46609163)

Umm... lulu [lulu.com] ?

Re: Anybody should be able to open an e-book shop (1)

Jason Goatcher (3498937) | about 7 months ago | (#46609697)

Nah, just get Google involved, you could have an e-book page to search on Google. Call it www.google.e-book.com

Re: Anybody should be able to open an e-book shop (2)

DerekLyons (302214) | about 7 months ago | (#46609991)

Why don't authors self publish, shouldn't be too diffucult with to days technology? Cut out the middle man altogether.

Self publishing *is* difficult - and a lot more work than you think because now the author has to do all the marketing, all the site maintenance, all the accounting, all the everything that isn't writing. Assuming a middle man is nothing but a leech is foolish, in many cases they actually do provide valuable services. Middle men didn't arise just by chance or malfeasance, nor do they persist solely by inertia.

Re: Anybody should be able to open an e-book shop (1)

ZorglubZ (3530445) | about 7 months ago | (#46616539)

Oh, it may be easy, but it's not cheap, in either time or in money... if you want a good book to be the result of your efforts. Charles Stross, http://www.antipope.org/charli... [antipope.org] , had a series of posts about this a couple years ago (can't find the specific posts, sorry). First, there's proofreading - you're unlikely to spot your own errors in a 40,000-word novel, because you know what you meant and will be blind to typos. Then there's editoring, checking for continuity errors and/or anachronisms? Same as above. Both of could be done by crowdsourcing, but then your book would be in the wild before it's released and would be torrented or on IRC (I know, right? But it's still very much alive!) within hours. Getting those tasks (and others) done is what publishing houses are for, and those tasks are not cheap to get done well by freelancers.

Re: Anybody should be able to open an e-book shop (1)

Meski (774546) | about 7 months ago | (#46617595)

I'd happily tag and submit errors I spot back to them, if there was a trivially easy way of doing it.

Re:Anybody should be able to open an e-book shop (1)

Karmashock (2415832) | about 7 months ago | (#46608493)

Bingo.

And it wouldn't be hard to deploy ebooks like that either.

Have an open DRM standard for ebooks. Publishers license the ebook shops to distribute those open standard ebooks. Have the standard be something that works on the Nook and the Kindle and whatever else. Its not a big deal.

There after, the publishers won't just be dealing with Amazon. So if some book seller is giving them a hard time they can simply refuse to sell to them and instead be comfortable that enough of their books will sell elsewhere that it won't matter.

As it stands, if the couple big ebook publishers push an author or a publisher... the ebook publisher wins. That's wrong. They should be able to sell books via all mediums.

Re:Anybody should be able to open an e-book shop (1)

Oligonicella (659917) | about 7 months ago | (#46609253)

Not sure what you mean by "push an author". They may entice an author, but there's not one thing they can do to to "push" an author in any direction except the enticements the publisher (e or otherwise) can offer.

Re:Anybody should be able to open an e-book shop (1)

Karmashock (2415832) | about 7 months ago | (#46609361)

if they're price fixing books then what does that mean? Are you suggesting they did it in collusion with the publishers?

If so, then the publishers are party to the conspiracy but they're not named so they weren't.

Which means apple was setting prices for books which is not something they should have a role in doing.

They should instead set their percentage or fee for listing a book and perhaps a per transaction fee per download.

Short of that, they have no reason to care what price publishers or authors charge for books.

Re:Anybody should be able to open an e-book shop (0)

Anonymous Coward | about 7 months ago | (#46610147)

if they're price fixing books then what does that mean? Are you suggesting they did it in collusion with the publishers?

No, it's the article and the summary which make that claim: "...who sued Apple Inc for conspiring with five major publishers to..."

If so, then the publishers are party to the conspiracy but they're not named so they weren't.

The five publishers aren't named (by "named" I assume you mean as defendant) in the suit because they have already chosen to settle.

Re:Anybody should be able to open an e-book shop (1)

ZombieBraintrust (1685608) | about 7 months ago | (#46611685)

The publishers were named in the conspiracy. They settled out of court.

Re:Anybody should be able to open an e-book shop (1)

Charliemopps (1157495) | about 7 months ago | (#46608893)

Content distributers rip off the artist and the consumer at the same time. They destroy creativity and resist innovation. Where have I heard this before?

I happened to know a small time author and he distributes through amazon. The price of his ebooks is the same as the price of a real book. Yet amazon pays him less for an ebook sale than a real book. He has no choice in the matter. So he tells everyone to buy the paper copy if they can. Seems like bullshit to me.

Re:Anybody should be able to open an e-book shop (2)

Oligonicella (659917) | about 7 months ago | (#46609293)

If your friend is pricing his ebook the same as a paper book (his decision alone), he's doing it wrong. You also neglect details. Who's doing the actual publishing, putting the ink to paper? They naturally exert expense and delay.

As for your first paragraph, it's simply bias on your part and not at all supported by fact. If they "resist innovation" please tell me how the whole ebook thing took off? It wasn't the indies that spurred it.

Re:Anybody should be able to open an e-book shop (1)

umafuckit (2980809) | about 7 months ago | (#46609203)

There are precious few markets in which "anybody" can open a store and compete successfully against the big established players. Go out on the high street and you mostly see franchises and big-name stores. E-books are little different, but I do agree that there seems to be too much collusion between distributors like Amazon and the publishers. Diesel has just gone out of business and Sony are pulling out of e-readers: it's a tough market. Nonetheless, there are e-book distributors out there who aren't Amazon, Apple, or Google. e.g. BAM [booksamillion.com] , ebooks.com [ebooks.com] , and Kobo [kobobooks.com] . Of course there's also B&N. Plus there's a bunch of smaller outfits, such as Lulu, Smashwords, and Baen, which deal with indie or non-DRM books. So it's not quite true that the little guy is out of e-books. Of course the big 3 or 4 on-line companies are squeezing the little guys, but they're doing this in a range of markets, not just books. We have a general problem in this regard.

800MM seems impossibly low (5, Insightful)

kramerd (1227006) | about 7 months ago | (#46608227)

Anyone you accuse of participating in a cartel should be sued for dissolution, not monetary damages.

Re:800MM seems impossibly low (0)

uofitorn (804157) | about 7 months ago | (#46608239)

Not when you're the plaintiffs. Do you think they have the public interest in mind or their wallets?

Re:800MM seems impossibly low (2)

Luthair (847766) | about 7 months ago | (#46608277)

Or the executives should get jailtime - why should white collar crime be treated differently?

Re:800MM seems impossibly low (1)

Anonymous Coward | about 7 months ago | (#46608313)

Because they pay judges and politicians a lot of money to make it different.

Re:800MM seems impossibly low (2, Funny)

Alan Warrick (3422939) | about 7 months ago | (#46608327)

This should be thrown out of court. Apple is too big to fine. It would shake consumer confidence. If anything I think they need a bailout so that they do not have to resort to these unfair and unethical practices. I think that also Apple should be declared a official State to offer sovereign immunity to protect against any further lawsuits.. I also think they should rescind any legislature that allows for oversight of apple's finances and tax havens. Please vote for me I'm running for Congress 2k16. I please donate towards my campaign, I will guarantee a ROI of 20:1 for all contributions above 1mil.

Re:800MM seems impossibly low (4, Insightful)

rtb61 (674572) | about 7 months ago | (#46608421)

It is a real shame that in the US, your comment is not satire but a reflection of reality. So who will be the Apple political stooges, I guess we will just have to wait and see.

Re:800MM seems impossibly low (1)

fustakrakich (1673220) | about 7 months ago | (#46609459)

Because you don't imprison non-violent offenders. They present no real danger. Just confiscate their key to the executive bathroom and take away their parking space. That will put the fear of god into their heathen souls.

Re:800MM seems impossibly low (1)

MouseTheLuckyDog (2752443) | about 7 months ago | (#46611275)

Bernie Maddoff, Jeff Skilling.

Re:800MM seems impossibly low (1)

fustakrakich (1673220) | about 7 months ago | (#46611561)

What about 'em? I'd rather see them outside facing the glare of angry eyes. What benefit do we derive from locking them up? It's much better to have have them working at McDonalds so we can garnish their wages.

Re:800MM seems impossibly low (1)

chromaexcursion (2047080) | about 7 months ago | (#46608297)

yeah, small change. but they have to sue for demonstrable loss.
perhaps if more join the amount could go up.

The serious problems for Apple will be the conditions of the settlement.

Re:800MM seems impossibly low (1)

dk20 (914954) | about 7 months ago | (#46609003)

Funny, RIAA doesn't have to use "demonstrable losses" when it sues. Perhaps they could have a $250,000 per ebook overcharged "set fine" similar to music?

Pain and Suffering (1)

MakubeX (1708572) | about 7 months ago | (#46608253)

So how do I sign up for my $1.00 iTunes credit?

Re:Pain and Suffering (4, Funny)

symbolset (646467) | about 7 months ago | (#46608299)

After legal fees it will be $0.32. You will need to send a 35 page class member certification form letter to the plaintiff's attorney via registered mail. It must be notarized and include a printed invoice for each applicable etext.

Re:Pain and Suffering (0)

Anonymous Coward | about 7 months ago | (#46610679)

And on appeal it will be reduced to $0.50, but the law firm will keep their $0.68, leaving you in the hole...

Re:Pain and Suffering (1)

Mashiki (184564) | about 7 months ago | (#46608497)

Maybe your class action law suits need to be fixed? I still get my $110 refund for every Fujitsu HDD I return here in Canada.

Legal Action Hasn't Worked (1)

Luthair (847766) | about 7 months ago | (#46608269)

Despite the legal action (and victories) by the DoJ it doesn't seem to me like we've had any price drops to reurn us to the pre-cartel pricing. So apparently these guys get a slap on the wrist and will get to keep the fruits of their bad behaviour?

Re:Legal Action Hasn't Worked (1)

click2005 (921437) | about 7 months ago | (#46608323)

Slap on the wrist? I bet any settlement includes the text "Apple admits no wrongdoing".

Re:Legal Action Hasn't Worked (-1, Troll)

Anonymous Coward | about 7 months ago | (#46608337)

There was no "pre-cartel" pricing. There was only Amazon selling at a loss to drive every other ebook store out of business. They failed to do that, though they have been successful at getting the courts to go after everyone else in retribution.

Compete on Price (5, Informative)

tuppe666 (904118) | about 7 months ago | (#46608415)

There was no "pre-cartel" pricing. There was only Amazon selling at a loss to drive every other ebook store out of business. They failed to do that, though they have been successful at getting the courts to go after everyone else in retribution.

from http://www.justice.gov/atr/cas... [justice.gov] "On January 27, Jobs launched the iPad. As part of a beautifully orchestrated presentation, he also introduced the iPad’s e-reader capability and the iBookstore. He proudly displayed the names and logos of each Publisher Defendant whose books would populate the iBookstore. To show the ease with which an iTunes customer could buy a book, standing in front of a giant screen displaying his own iPad’s screen, Jobs browsed through his iBooks “bookshelf,” clicked on the “store” button in the upper corner of his e-book shelf display, watched the shelf seamlessly flip to the iBookstore, and purchased one of Hachette’s NYT Bestsellers, Edward M. Kennedy’s memoir, True Compass, for $14.99. With one tap, the e-book was downloaded, and its cover appeared on Jobs’s bookshelf, ready to be opened and read.

        When asked by a reporter later that day why people would pay $14.99 in the iBookstore to purchase an e-book that was selling at Amazon for $9.99, Jobs told a reporter, “Well, that won’t be the case.” When the reporter sought to clarify, “You mean you won’t be 14.99 or they won’t be 9.99?” Jobs paused, and with a knowing nod responded, “The price will be the same,” and explained that “Publishers are actually withholding their books from Amazon because they are not happy.” With that statement, Jobs acknowledged his understanding that the Publisher Defendants would now wrest control of pricing from Amazon and raise e-book prices, and that Apple would not have to face any competition from Amazon on price."

Re:Compete on Price (0)

Vitriol+Angst (458300) | about 7 months ago | (#46609369)

This is a clear example of Fascism in action.

The #1 Bookseller uses the Justice System to guarantee it's success when the marketplace alone does not. I wonder if the Justice Department had an impulse to step in and preserve competition in the marketplace -- or if it went away when money changed hands.

Re:Compete on Price (1)

Maritz (1829006) | about 7 months ago | (#46611789)

Apple conspired to fix prices. Simple as.

Re:Compete on Price (0)

Anonymous Coward | about 7 months ago | (#46611887)

Knowing that the publishers were moving to the (perfectly legal) agency model versus the wholesale model they had been using != price fixing. There is no evidence of any price fixing in tuppe's quote. Moreover, the stuff he quotes in another post below clearly admits Amazon's (illegal) dumping.

Re:Compete on Price (1)

davecb (6526) | about 7 months ago | (#46612577)

We're seeing a natural result of a lack of refactoring (;-))

The law in this area is now complex enough that one can easily hold two mutually contradictory opinions with decent precedent for both. That calls for a superior court to disambiguate them, and/or a legislature to set a legislative intent and test.

And yes, this means that antitrust law is suffering from technical debt.

--dave

Re:Compete on Price (1)

Plumpaquatsch (2701653) | about 6 months ago | (#46705081)

Amazon killed the competition by selling massively below cost. It's as simple as you.

Re: Legal Action Hasn't Worked (0)

Anonymous Coward | about 7 months ago | (#46608429)

Liar. Ebooks go back before the days when PDAs were popular, in other words they predate Amazon. Your comment is invalid(much like you brain.)

Re: Legal Action Hasn't Worked (0)

Anonymous Coward | about 7 months ago | (#46610529)

Yeah... it was truly a huge market back then. And that has a lot of bearing on Amazon's eventual domination of the market. Fucking dipshit.

Re:Legal Action Hasn't Worked (3, Informative)

Rosyna (80334) | about 7 months ago | (#46608395)

Amazon, using its monopoly power in ebooks, kept prices artificially low. When Apple entered the market, Amazon lost some of its monopoly power and publishers used this event to increase eBook prices across the board.

Pricing Artifically Low (4, Informative)

tuppe666 (904118) | about 7 months ago | (#46608427)

Amazon, using its monopoly power in ebooks, kept prices artificially low. When Apple entered the market, Amazon lost some of its monopoly power and publishers used this event to increase eBook prices across the board.

From http://www.justice.gov/atr/cas... [justice.gov] Page 160 "Amazon screwed it up. It paid the wholesale price for some books, but started selling them below cost at $9.99. The publishers hated that — they thought it would trash their ability to sell hardcover books at $28. So before Apple even got on the scene, some booksellers were starting to withhold books from Amazon. So we told the publishers, “We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway.” But we also asked for a guarantee that if anybody else is selling the books cheaper than we are, then we can sell them at the lower price too. So they went to Amazon and said, “You’re going to sign an agency contract or we’re not going to give you the books.”"

Re:Pricing Artifically Low (1)

Rosyna (80334) | about 7 months ago | (#46608459)

Thanks for finding the reference for my comment.

Re:Legal Action Hasn't Worked (1)

Vitriol+Angst (458300) | about 7 months ago | (#46609355)

So in this case, the Justice department swoops in to punish the one group preventing Amazon from owning the ebook market as a monopoly.

I love WalMart prices folks, but Amazon was going to own this whole game. WalMart prices go up, you'll notice, in areas where there are no other big competitors. If the #1 Bookseller has cheaper books and doesn't have the Agency Model -- then how the Hell is Apple price fixing?

Apple's prices sucked and most people were not going to buy from them unless they had plenty of money and liked the convenience. They had no other "retailer" they were fixing prices with. Now, you could say the Agency Model itself is price fixing (it is, in a way) but that would mean it would be the booksellers setting prices for all the outlets.

The judgement in this case is exactly opposite of what was threatening the marketplace. It's either Amazon's capturing the market with low prices or the book publishers forcing the price higher -- so they blamed Apple who colluded with nobody but the publishers own pricing model???

Re:Legal Action Hasn't Worked (3, Informative)

organgtool (966989) | about 7 months ago | (#46609715)

There is so much wrong with that statement, I hardly know where to begin. First of all, monopolies take advantage of the lack of competition to keep prices artificially high, not low. Secondly, even if Amazon was keeping prices artificially low, what they were doing was completely legal. On the other side, Apple was found guilty of conspiring with publishers to make it absolutely impossible for other resellers to sell their books cheaper than Apple. If Apple had just demanded that they got the same or lower price on ebooks as other resellers, then they would have likely escaped litigation. Instead, they conspired with publisher to fix the prices that other resellers could actually sell their products and that is classic price fixing. The publishers knew that and promptly pled guilty, but Apple thought they could get one by the legal system and got a sudden dose of reality. This isn't just another typical case of Slashdot hating on Apple - in this case there is legal justification for it and mountains of legal precedence.

Re:Legal Action Hasn't Worked (0)

Anonymous Coward | about 7 months ago | (#46609881)

You are an idiot. "Dumping" is an illegal practice where a company sells product below cost, using their size and ability to absorb the losses to drive all their competitors out of business and create a monopoly - THEN they have control over the market and can do whatever they like to the pricing to recoup their previous losses. It's a well-known scheme and is expressly illegal in the US. However, despite the fact that *everyone* agrees Amazon was selling at a loss to gain marketshare, somehow it became a legal problem only for the other publishers and booksellers who tried to put an end to it. Apple couldn't have "just demanded that they got the same or lower price on ebooks as other resellers" because they *already did* get that pricing - Amazon was simply undercutting everyone else by taking a loss. The solution for the publishers was to switch to the Agency model, so that all their resellers had a chance to thrive by being required to sell at the same price (the price the publishers were already releasing their books at - this simply cut out Amazon's ability to illegally dump).

Re:Legal Action Hasn't Worked (1)

Maritz (1829006) | about 7 months ago | (#46611813)

Amazon weren't dumping or selling at a loss. Apart from that, great points.

Re:Legal Action Hasn't Worked (0)

Anonymous Coward | about 7 months ago | (#46611927)

They most definitely were, and NOBODY (except apparently you) even denies that fact. Every article about the DOJ lawsuit discusses it. Amazon was selling books below wholesale cost - the publishers' wholesale costs were $11 to $14, and Amazon sold most of these at $9.99. That was the whole impetus for the publishers to switch to the agency model to begin with! (As Tuppe's quote above demonstrates.)

Apple bashing (0)

Anonymous Coward | about 7 months ago | (#46612367)

I'm normally the first up for Apple bashing but I actually find myself defending Apple in this case.

I think Apple would have to do more than some back-room deals to ensure that it's "absolutely impossible" for other resellers to sell their books cheaper than Apple. You'd need a pretty potent police state to effectively block the act of creating and selling a book for a low price.

If Apple and several big publishers want to form a cartel then let them. Higher than necessary book prices will be an incentive for small/new publishers to enter the space and bring books to people at lower prices. If an author is unhappy with their publisher, they'll publish new books with a better company.

Sueing Apple for price fixing is, in my opinion, unethical.

The whole issue is largely moot anyway. Many of the most popular books can be downloaded for free with a very low probability of legal reprecussions.

Re:Legal Action Hasn't Worked (1)

Anubis IV (1279820) | about 7 months ago | (#46617757)

On the other side, Apple was found guilty of conspiring with publishers to make it absolutely impossible for other resellers to sell their books cheaper than Apple. If Apple had just demanded that they got the same or lower price on ebooks as other resellers, then they would have likely escaped litigation.

The situation is quite a bit more nuanced than that, and you've got your basic facts surrounding the case slightly wrong, since what you've stated Apple should have done is exactly what Apple did do. But, strangely, they also did what you said in your first sentence too. The illegal collusion and price fixing that's happened here revolves primarily around the interplay of two otherwise-perfectly-legal ideas: the agency model and most favored nation (MFN) clauses.

Agency Model: The agency model allows the publishers to set their own prices at the cost of giving the seller's a higher cut, whereas the wholesale model that is more common provides the publishers with a bigger cut at the cost of letting the sellers set the price. Given a perfect world, the wholesale model is more appealing to publishers, since they generally get a larger overall cut.

MFN Clause: An MFN clause is exactly the concept you described at the end of the quote I pulled above. They simply stipulate that they'll give you the same or better prices than they give anyone else. As you said, there's nothing wrong with that, in and of itself.

Background: Prior to Apple's arrival, Amazon had wholesale agreements with all of the publishers. The problem for the publishers, however, was that Amazon controlled over 90% of the eBooks market at the time. As you correctly pointed out, the fact that they had a monopoly wasn't actually an issue, since Amazon's interests (i.e. driving Kindle adoption and buy-in to their ecosystem) were better-served by keeping prices low, meaning that they were not using their monopoly in an anti-competitive manner. That said, they were using their monopsony [wikipedia.org] in an anti-competitive manner, by forcing the publishers to sell their books at unreasonable prices while preserving their own margins, simply because the publishers had no one else they could sell to. In fact, there were several dramatic examples of Amazon using its monopsonistic bargaining position to strong-arm [theguardian.com] the publishers [nytimes.com] for better wholesale prices. Amazon was unwilling to discuss switching to an agency model, so the publishers were rather concerned that they may be forced to price themselves out of business.

With Apple—a big player— entering the market, Amazon was forced to negotiate terms that were more favorable to the publishers, namely, switching to an agency model. Such a change would naturally result in prices going up, even without any sort of illegal price fixing or collusion taking place, since the sellers are getting a larger cut with the agency model, which means that the publishers need to raise the prices to preserve their cut. Again, there's nothing illegal about that (in fact, it's what they're all doing now after what they were doing before was ruled illegal); it's simply a costlier way of doing business.

The Illegality: According to the judge, what was illegal in all of this was combining the agency model with the MFN clause. By combining the two, the MFN clause that says "you must give me the lowest price" in effect means "you'll raise the prices customers are paying at competing stores to match mine" (hence why both of your sentences that I quoted were what happened). Had they stuck with the wholesale model, the publishers could only have abided by the MFN clause by changing wholesale prices, so it would have still been up to Amazon and Apple to compete on price by deciding how much of a margin they'd (not) keep. Had they dropped the MFN clause, you'd have what the judge is forcing them to do now, since she's barred them from using MFN clauses with the agency model that the industry has now entirely switched to.

Moreover, court documents indicate that Apple and the publishers knew full well what they were doing and were indeed colluding in ensuring that prices went up in such a way that both the publishers and Apple would get what they wanted, with Amazon unwillingly being dragged along. That's why the judge is also forcing Apple to stagger its renegotiations with the publishers in six-month intervals, that way it's more difficult for them to collude with one another.

My Take: As for my opinion on all of it, I think that there's no one entirely innocent here. Apple and the publishers clearly engaged in illegal activity, and for that there should be consequences, though I think that the amount the judge has suggested in the original (DoJ) suit is unreasonable, since she's placing the burden for the entire increase in price on them, completely disregarding the fact that there were perfectly legal factors that also contributed to price increases during that time. Likewise, I'm wholly in favor of the class action suit against them, since consumers deserve to have a chance to collect what was taken from them illegally. That said, I also wish someone would take Amazon to task over their role in it prior to Apple's arrival. They had artificially pushed prices down through anticompetitive, strong-arm tactics, which is part of why the increase in price seemed so significant.

And as a closing thought, I hate to be put in a position where I'm defending the publishers. I feel filthy doing so, but I still think that the judge has been too harsh on them, even though they deserve to be punished.

Books vs Apps (1)

checkitout (546879) | about 7 months ago | (#46608281)

How is setting the minimum price of books different than setting the minimum price of apps?

Re:Books vs Apps (1)

chromaexcursion (2047080) | about 7 months ago | (#46608321)

good point, but!
apps are platform specific, books aren't
when you buy an iphone you buy into the platform. why I won't buy an iphone.

It costs more up front, I've only bought unlocked phones.
actually cheaper in the long run.

Re:Books vs Apps (1, Insightful)

wiredlogic (135348) | about 7 months ago | (#46608351)

Minimum price agreements were widely used in the heyday of CDs. The practice was upheld by courts.

"Minimum Advertised Pricing" not "Miniumum Price" (4, Informative)

tuppe666 (904118) | about 7 months ago | (#46608439)

Minimum price agreements were widely used in the heyday of CDs. The practice was upheld by courts.

I noticed this gets modded up as fact...the truth is a little more interesting http://www.stereophile.com/new... [stereophile.com] this is an article from 2000 where the Big Five got in trouble with the Federal Trade Commission for "Minimum Advertised Pricing on CDs" where retailers were forbidden to *advertise* CDs below an established minimum. Unlike Apple they had heard of Sherman Antitrust Act

Re:"Minimum Advertised Pricing" not "Miniumum Pric (1)

cryptoluddite (658517) | about 7 months ago | (#46609507)

Unlike CDs, Apple only set a *maximum* price. The eBook publishers were free to set any price they wanted, even $1 a book. The reason prices went up to that maximum is because eBooks were more valuable than the wholesale or lower price Amazon was selling them for.

Re:"Minimum Advertised Pricing" not "Miniumum Pric (1)

ZombieBraintrust (1685608) | about 7 months ago | (#46611833)

No Apple did more than that. They told them what prices to sell at and that all their competators would sell at that price.

To dramatize the immediate increase in the price of e-books that the Publishers could achieve under the Apple agency agreement, and to assure each Publisher Defendant that it was being treated no differently than its competitors, Moerer sent a table of proposed book prices to them in identical e-mails on The Draft Agreement capped e-book prices at $12.99 for New Release titles with hardcover list prices of $30 or under, and set a $14.99 price tier cap for New Release titles with hardcover list prices above $30, with incremental price tier increases for every $5 increase in the hardcover list price above $30. For books other than New Releases, the price cap was set at $9.99. The January 4 term sheet had set a price cap at $14.99 for any book with a hardcover list price above $35, and $12.99 for any hardcover book listed below $35. The Draft Agreement, by contrast, set the demarcation between $12.99 and $14.99 at $30, allowing for higher e-book prices in relation to a title’s hardcover list price. the same day Apple sent out the Draft Agreements. The table showed fiction NYT Bestsellers from every member of the Big Six. It listed the book’s title, author, and publisher. It showed each title’s hardcover list price, followed by its retail prices when sold as an Amazon hardcover book; Amazon e-book; Barnes & Noble e-book; and finally, as a proposed iTunes e-book. The proposed prices under the iTunes column were always either $12.99 or $14.99, and were always several dollars higher than the then-existing e-book price at Amazon and Barnes & Noble. In some cases, the iTunes e-book price was even higher than the Amazon hardcover price.31 Sensitive to the fact that the table looked like an Apple retail price list, Moerer clarified in a follow-up email to Shanks that the prices in the table’s final column designating the “iTunes eBook Retail Price” are the “top price tier we’ve proposed” and that “[i]n the agency model, Penguin would set retail prices at its sole discretion, at this price or any lower price, with Apple acting as your agent.” While the final column would only display Apple’s e-book prices for titles published by the particular Publisher receiving that version of the table, the layout made it easy for the Publishers to see that they were all being treated identically

Re:"Minimum Advertised Pricing" not "Miniumum Pric (0)

Anonymous Coward | about 7 months ago | (#46612001)

You disagreed with a claim that Apple was only setting a *maximum* price by posting a long quote that boiled down to: "[i]n the agency model, Penguin would set retail prices at its sole discretion, at this price or any lower price." Umm, yeah. Each individual publisher got to set its own price, with Apple saying "If you want us to sell your books, they can't cost more than X. And if you give someone else a deal, you agree to give us the same deal." In no way does that drive up the price of ebooks with the exception that it stopped Amazon from selling at a loss (illegal dumping that was screwing with the market).

Re:Books vs Apps (1)

Farmer Tim (530755) | about 7 months ago | (#46608385)

The difference is "price fixing” (a specific legal term) only applies when multiple vendors collude to set a price and effectively stifle competition. In the case of a sole vendor there is no competition, so they can legally set whatever price they want; this isn’t “price fixing”.

Re:Books vs Apps (1)

MrBigInThePants (624986) | about 7 months ago | (#46608719)

So in this case it is apple and multiple publishers colluding?

I failed to see how this is different?

Perhaps I am missing something?

Re:Books vs Apps (1)

gnasher719 (869701) | about 7 months ago | (#46609051)

So in this case it is apple and multiple publishers colluding?

Well, that is the question. The judge (the same one as in this case) declared that they were before the court case even started. Publishers who were willing to declare in the court that Apple wasn't part of any collusion were not allowed to testify in court. There is no actual evidence of collusion other than the judge's strong belief.

And it would be perfectly legal for Apple to offer the same contract to all publishers and all publishers accepting it, unless they all discuss that between themselves and agree. The publishers were basically threatened with bankruptcy unless they settled in court. Apple is just threatened with a fine that is ridiculous compared to the size of their eBook business and is fighting on since it doesn't threaten the company; the publishers just couldn't afford to do that.

This is similar to you getting an RIAA extortion letter and caving in because you can't afford to fight it, and your neighbour who happens to be rich getting the same letter and fighting it. Here the judge is doing the extorting, the publishers gave in and Apple didn't.

Re:Books vs Apps (1)

MrBigInThePants (624986) | about 7 months ago | (#46611349)

So it is FORCED coercion (aka blackmail) but coercion nonetheless.

So again, what is he difference on the colluding point?

If someone deals drugs on pain of death it is still a drug deal. The courts may decide to only prosecute the person doing the blackmailing but it does not mean that the charge of dealing drugs is not applicable.

In this case the weight of law for colluding++ should come crashing down atop Apple's head and not a moment too soon. Anti-competitive practices should not be allowed in a free market; and doubly so from the hypocritical mega-corps who push for it (and "buy" it) at every turn, avoid their taxes and cry foul every time anyone else does anything remotely the same which effects them.

NB: I know that in a legal sense there may be 1000's of technical differences but then the legal system is a complex nightmare of bureaucracy.

Re:Books vs Apps (1)

ZombieBraintrust (1685608) | about 7 months ago | (#46609655)

The minimum price for books was set above the market price. The cartel set the minimum to 15 when books were selling at 10. The minimum price for apps in the USA is a dollar. You can't go much lower than a dollar before you hit hard limits from credit card fees and server costs.

Re:Books vs Apps (0)

Anonymous Coward | about 7 months ago | (#46609925)

The publishers were ALREADY selling their books to resellers at that price - that was the price the publishers chose to sell their goods at, without any need for collusion. What happened then is that Amazon started selling the books cheaper - taking a loss with each sale - in order to corner the ebook market (aka "dumping"). $10 wasn't the "market price" in any standard sense of the word. If I buy up a million Ferraris with my Facebook stock earnings and then start selling them at $1 apiece, does that make the fair market value of a high-end sports car $1? Hell no. The whole automotive market would collapse if it tried to keep up with that pricing. That is one of the reasons dumping is illegal (the other being that it results in a monopoly for the company doing the dumping, and then the lack of competition will allow said company to eventually recoup their losses through price increases). So the publishers simply switched to the Agency model, which required their resellers, Amazon included, to not sell at a loss. How anyone got in trouble over moving to the Agency model (which is perfectly legal) while Amazon got off scott free for doing what everyone acknowledges was dumping (and to top it off, getting the courts to claim the *dumping* price to be the fair cost of goods) is a fucking travesty.

Re:Books vs Apps (1)

Maritz (1829006) | about 7 months ago | (#46613327)

How anyone got in trouble over moving to the Agency model (which is perfectly legal) while Amazon got off scott free for doing what everyone acknowledges was dumping (and to top it off, getting the courts to claim the *dumping* price to be the fair cost of goods) is a fucking travesty.

The judgement showed that Amazon's ebook division was profitable. Ergo, it's not dumping despite what you think "everyone" agrees.

Re:Books vs Apps (1)

ZombieBraintrust (1685608) | about 7 months ago | (#46609699)

Apple did not meet with a cartel of App publishers and coordinate prices. The App market does not contain huge players that control access to 90% best selling applications. To be clear I don't think Apple created the ebook cartel. It clearly existed for awhile. I think they got involved with it too closely and got a little dirty.

Cote should have recused herself. (0)

jcr (53032) | about 7 months ago | (#46608451)

She went into the first trial having announced her prejudice, and now she's just doubling down on her abuse of power because she's in a snit over Apple pushing back on the shakedown.

-jcr

Re:Cote should have recused herself. (0)

Anonymous Coward | about 7 months ago | (#46608731)

You mean she went into the first trial, examined the evidence, and came to some kind of conclusion? Oh, but that means she's biased, because she didn't do what Apple fanbois want!

- ac

Re:Cote should have recused herself. (0)

jcr (53032) | about 7 months ago | (#46609045)

You mean she went into the first trial, examined the evidence, and came to some kind of conclusion?

No, that's what she was supposed to do. What she actually did was make up her mind before hearing any of the evidence.

-jcr

Re:Cote should have recused herself. (0)

Anonymous Coward | about 7 months ago | (#46609357)

Don't worry, Saint Jobs won't go to jail.

Re:Cote did her job (1)

ZombieBraintrust (1685608) | about 7 months ago | (#46611601)

At the time she made her statement she had seen all documented evidense. She had all the depositions, paperwork, phone records, and emails. Based on that she warned Apple that there was actual evidense against it. The only extra evidense that occured during the trail was witness testimony and cross examinations. The witnesses stated the same things in their depositions. Your just demonizing a judge for disagreeing with you.

Re:Cote should have recused herself. (0)

Anonymous Coward | about 7 months ago | (#46608753)

Do you even know how to read, dung fart?

Re:Cote should have recused herself. (1)

Pinky's Brain (1158667) | about 7 months ago | (#46608999)

Lets see what happens on appeal then ... of course if Apple loses it you'll just declare the next judge prejudiced as well.

Re:Cote should have recused herself. (1)

gnasher719 (869701) | about 7 months ago | (#46609011)

Lets see what happens on appeal then ... of course if Apple loses it you'll just declare the next judge prejudiced as well.

Which just makes sense, because it is the same judge again. And this time, the judge would have to either judge against Apple or against her own previous judgement, so she effectively has to be prejudiced.

Re:Cote should have recused herself. (1)

Oligonicella (659917) | about 7 months ago | (#46609341)

An appeal goes to a higher court. IOW, a different judge.

Re:Cote should have recused herself. (0)

Anonymous Coward | about 7 months ago | (#46617875)

You idiot fanbois really are in denial aren't you?

No, appeals are generally heard by a higher court. And no, the original judge didn't rule before the evidence - she was commenting on the pretrial evidence and warning Apple about the task ahead.

If she actually had done what that idiot fantroll jcr claimed, don't you think Apple's appeal would have, you know, addressed that very issue, maybe with a complaint demanding the judge be struck off?

Re:Cote should have recused herself. (1)

organgtool (966989) | about 7 months ago | (#46609785)

That wasn't prejudice the judge was showing. She saw a mountain of evidence during the pretrial that clearly showed Apple conspiring with publishers to fix prices. Her statement was not bias against Apple, it was a warning that based on the currently evidence in front of her, the law was not on Apple's side and unless they had overwhelming evidence to the contrary, it would be in Apple's best interest to plead guilty like all of the publishers in the case did. Apple, drunk on its own Kool-Aid, forged ahead with their not guilty plea. Since they failed to provide overwhelming evidence that contradicted the prosecution's evidence, the case ended exactly as the judge had warned in pretrial.

Re:Cote should have recused herself. (0)

Anonymous Coward | about 7 months ago | (#46610287)

She saw a mountain of evidence during the pretrial that clearly showed Apple conspiring with publishers to fix prices.

'a mountain of evidence'? You actually believe that?

OK, in that case(!), I call a similar 'mountain of evidence' on your implied claim to have read and/or listened to any of the evidence.

Sympathy (0)

Redmancometh (2676319) | about 7 months ago | (#46608881)

I don't have any.

Litigation hurting them is a positive in my mind. However, they probably won't get fined enough money to really hurt them.

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