back to article Apple wants ebook price class action suit thrown out

Apple may be keeping quiet publically about allegations of antitrust violations in ebook pricing, but a court filing in a class action lawsuit last week shows that Cupertino doesn't think too much of the claims. The motion to dismiss the case, filed in a New York court, gave a particularly scathing view of the argument against …

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Bad logic

To rephrase Apple's legal argument (at least as I understand it):

You can't convict me for this particular wrong thing I did because I *could have been* doing much worse things but I didn't.

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Anonymous Coward

A few little deals here and there

The problem will go away.

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Devil

Re: Bad logic

Also a bit f***** rich from a company that chases others for copyright infringement as their fondleslab is a rectangle with a touch screen. Or that they swipe to unlock their phone and all the other shit that there's prior art for. Looks like trying to stifle or destroy competition is in their DNA.

Hope Apple gets taken to the cleaners on this one as by their standards, they've nicked someone else's idea.

evil evil evil

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Non sequitur

As Apple pointeed out, how exactly is this strategy of charging more for ebooks supposed to eliminate the competition?

I strongly suspect that you did not read the article.

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Boffin

Re: Non sequitur

The real issue, at least from a US legal viewpoint, is that Apple instigated a price fixing model for the eBook industry. That little bit about publishers couldn't set one price for it and then turn around and sell the book more cheaply to Apple's rivals. While that is not strictly price fixing (Apple will claim the publishers can drop the price for everyone), it still has the same effect of artificially raising prices and stifling price competition between different eBook sellers.

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it is price fixing

When Apple requires that the item can not be sold for a lessor price elsewhere it does fix the price.

Combine that with the required 30% cut (for doing nothing on Apple's part), it does mean higher prices for eBooks regardless of source.

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Re: Non sequitur

"As Apple pointeed out, how exactly is this strategy of charging more for ebooks supposed to eliminate the competition?"

That's not the issue - the issue is that Apple demand control over pricing by any competitors (via the "cannot sell for lower than the Apple price" clause) PLUS this has increased the cost of books (as publishers would have to stop Amazon from discounting to avoid breaking that clause).

It seems pretty obvious price fixing from the info provided here...

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@The Man Who Fell To Earth

That guaranteed lowest price clause everybody is complaining about is actually standard contractual language for many commercial operations in the US, including discount distribution centers and manufacturers.

For example, lets say I run a small manufacturing plant that specializes in precision machining. And one day I come up with an idea for a new heating mechanism for experimental equipment. But I need some cash to be able to spin up the new manufacturing line. And the best way for me to get that cash is to get a loan from the bank. But the bank wants some proof that I'll be able to pay it back, so I go sign a contract with a well known big industry player, like HP back when H and P were still running it. Now, HP actually like my new design and want to buy enough units so 75% of my new manufacturing line is running full tilt. But they don't want to get screwed by either a competitor or even me offering it at a substantial discount from what they can sell it at given the price I gave them on the initial contract. So they include a clause that says if I sell it to someone else cheaper, I have to give the same price to them. Apple did the same thing.*

In point of fact, what actually is illegal in the US would have been for Apple to engage in the sort of coordinated discussions that would have enabled them to follow the "accepted norm" for the suit.

*a lot of actual events in there, with a few outright fabrications (although possible) and misdirects so it doesn't match up to reality, and hopefully enough obfuscation to protect the OEM, who was and probably still is a small but important player in the market.

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FAIL

Pots and Kettles

While we're on the subject of artificially lifting the price of ebooks, HM Revenue & Customs decision to levy VAT on ebooks didn't help here either.

The European Commission should maybe take some action nearer at home before having a go at Apple. Or ideally at the same time as.

(Although I fear the "solution" found would be to levy VAT on dead-tree books too.)

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Re: Pots and Kettles

HMRC have specifically said they have to impose VAT on ebooks, as it's covered by European legislation. To get an exemption, it has to go through the EU first and then be enacted in the UK. Chances that they are going to spend that kind of money in order to lower revenues?

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Did Apple not effectively ban Kindle from the app store by demanding all payments for books used in iOS went through it not Apples own store something it knew Amazon would never stomach?

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@James Cooke

No. Or rather, it's a very ineffective ban as I'm still using it daily.

The only change is that to buy books, you must go to your browser and go to www.amazon.co{m,.uk}, where as before there was a button in the kindle app that took you to www.amazon.com (so it didn't put you on the right store if you were a UK user).

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Anonymous Coward

Re: Apple wants

The problem with your argument is that no other e-bookstore was selling for less than a 30% commission.

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@ Metavisor - Re: Apple wants

The article states very clearly that Amazon was selling at a loss, which is considerably less.

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Anonymous Coward

Re: @ dogged - Apple wants

That's only because Amazon was - by their own choice - using their entire commission to sell books at a lower price than everyone else and kill competition!

The game before Apple was:

1) Publisher set a list price e.g. £20.

2) Amazon would take 70% of that and give the remaining 30% back to the publisher. So Amazon would get £14 while the publisher got £6.

3) Amazon then promoted some books at 50-70% off the list price, paying for the discount with their own commission - sometimes even selling at a loss. For example a £20 book would sell for £6. This was entirely decided at Amazon's discretion, using Amazon's commission.

Now what happened if you were a publisher and didn't bend over to Amazon and their secret backroom agreements? BOOM, your book would not be on "sale" and would be sold at list price - the full £20 (but still get the same £6)

Punters would never buy your books, when others were at crazy discounts, and you were finished as a publisher. So no wonder the publishers were bending over ( and you can be sure the bending over included Amazon dictating some of the pricing)

Apple's alternative wrestled some control back to the publishers and, sure enough, after years of being told what they could or not do by Amazon, they loved this.

It's all about who really has the power: the retailer or the publisher.

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Anonymous Coward

Re: @ dogged - Apple wants

I forgot to add that Amazon wasn't using their commission out of the goodness of their heart so you could get cheap books. Their only goal is to kill any competition by selling books cheaper than anyone else could - and then raise the prices when that competition vanished.

Like when the Book Depository started selling cheaper books, Amazon just bought them altogether.

It's purely predatory action. Not sure if I want any retailer with that kind of power.

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Anonymous Coward

Except Amazon...

who were often selling at a loss. Whether that's anticompetitive is another question, but one that doesn't seem to be on the regulators' table.

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WTF?

Re: @ dogged - Apple wants

I think you have the wrong people in Secret backroom agreements.

The way it really happened was Amazon bought the books from the publisher for a wholesale price. Amazon then set their own price. High or low, it was Amazons choice. The publisher already had their money and it made no difference to them what price a book was sold at.

Now Apple lets the publisher decide the price and split the proceeds. It is in both parties interest to keep the prices high. More cash is a hell of an incentive to do a deal with Apple. More so when you can then force other retailers into the same deal or face being cut off from new books.

Bending over for Amazon? The only people bending over for anybody are the general public.

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Apple racketeering

Dear Metavisor, you seem to ignore this:

"rule 1) You must not let anyone else sell something for less than we sell it."

That's even more of a competitor-killing practice than the supposed price-setting Amazon was supposed to be doing (if you believe the iFans). Apple and their fanboi army made a point of deflecting all attention to the 30% comission being lower, while conveniently hiding the fact that:

- Apple was forcing publishers to give them the best price,

- Apple was forcing other platforms (like Kindle) to pay 30% of purchases made from iDevices,

- Apple was forcing other platforms to *offer in-app iDevice purchases* which were subjected to the 30% shave-off.

One of these policies got axed, but I don't remember which one. Any of these things remaining is pretty much anti-competitive anyway.

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Competition

That is what is known as most favored nations, no other agent gets a better deal than us.

The other agent could lower its commission, allowing the publisher to make as much at a lower price. Or, the other agent could start a rewards program, with points for ebook purchases that can be redeemed for other goods. This lowers the price and leverages the diversity of product Amazon sells. Amazon could have a 9.99 special, but pay the commission as though it was at the publisher's price. In short Amazon could compete with Apple via lower prices. But, I suspect Amazon doesn't really lose sleep over iBooks and were happy to go with the agency model.

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Re: Apple racketeering

"rule 1) You must not let anyone else sell something for less than we sell it."

Obviously you had conveniently left out the part that any retailer selling below the set price, iBooks should also be allowed to sell at that price point.

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Anonymous Coward

Re: @ dogged - Apple wants

> Bending over for Amazon?

Yes publishers do indeed bend over for Amazon. Amazon dictate the wholesale prices for the books they buy, not the publisher. That's called "purchasing power" - Amazon as such a huge seller if you want to shift volume you need to sell through Amazon (or supermarkets, but they are even worse to negotiate with).

If the publisher doesn't play ball with Amazons suggested price Amazon just remove _all_ of your books from sale until you capitulate to their pricing "proposal". This has happened more than once in the last 5 years.

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Re: Apple wants

Amazon was selling for negative comission.

e.g. they were frequently selling the books to the customer for less than they were paying the publisher.

Apple definitely got rid of an notion of the store competing on how fat their margins are.

In a normal market, Bookstore B could say 'I'll cut my 30% to 15% and pass the saving on to the customer' Apple have made that impossible.

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Re: Except Amazon...

In the US, selling at a loss to drive out the competition is expressly defined actionable anti-trust behavior. It's what the whole "rail ticket across the country at less cost that a trip across Chicago" trust-busting movement back in the dark ages was all about.

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Plaintiffs contend Apple acted as a coordinating hub even though they explicitly acknowledge Apple was a new entrant (not a dominant distributor),

Regardless of whether I agree or disagree, I was under the impression that the point was more about leveraging a monopoly in one area (tablets), to enter a new market? Given the number of iDevices out there, a publisher would be foolish to say no to the idea?

I could be wrong, but to me the case seems to be more about the end result and whether Apple abused a position in other markets?

Am I misinterpreting?

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FAIL

Huh? Apple are new to the phone business, yet still think they rule the roost with their "we innovated everything" rounded corner shite. Go Motorola (first mobile call 1973), give Apple (founded 1976) a taste of their own medicine!

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I'll huh straight back if you don't mind.

Where did I mention phones? A what's the motorola case got to do with this?

I'm no fan of Apple, but do try to keep it relevant (yeah, wrong forum I know!)

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There are multiple avenues for anti-trust.

The one you are outlining is NOT the one which was filed against Apple. What has been contended is that Apple effectively colluded with publishers and distributors to set prices in an existing market. The mechanisms described are faulty and therefore that case is faulty.

The one you describe might be feasible, but even at that I think it has a steep climb to make. In order to get there, you have to give Apple monopoly control of the e-reader market. Given Kindle's dominance, and Android's growing market share in the phone market (which I expect will soon extend to fondleslabs as well) I think Apple wins that with a "we aren;t the dominant market size player, just the dominant high quality segment" argument.

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Devil

The big problem is the "can't be cheaper elsewhere" clause

I think the 30% model makes *a lot* of sense for all of the new forms of electronic media, whether its software, books, or movies. You can argue it should be less, but I think the model itself makes sense. It really makes them more of a distribution platform than a retailer. This opens the doors for self publishing the same way it has paved the way for independent game developers.

With the addition of "can't be cheaper somewhere else" though, it becomes a stickier problem, and makes the price fixing suit seem more plausible. If the books can't be sold cheaper, and publishers are setting the price, it sounds like price fixing to me.

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Anonymous Coward

Re: The big problem is the "can't be cheaper elsewhere" clause

If there was price fixing would we see this?

Book Title | Amazon Kindle | Apple iBookstore

Thinking, Fast and Slow | Amazon: $15.00 | Apple: $12.99

Free Range Learning: How Homeschooling Changes Everything | Amazon: $16.30 | Apple: $8.99

Turning Learning Right Side Up: Putting Education Back on Track | Amazon: $25.54 | Apple: $23.99

Unschooling Rules: 55 Ways to Unlearn What We Know About Schools and Rediscover Education | Amazon: $9.95 | Apple: $2.99

Colleges That Change Lives: 40 Schools That Will Change the Way You Think About Colleges | Amazon: $10.88 | Apple: $12.99

The Willpower Instinct: How Self-Control Works, Why It Matters, and What You Can Do To Get More of It | Amazon: $14.94 | Apple: $12.99

Willpower: Rediscovering the Greatest Human Strength | Amazon: $16.06 | Apple: $14.99

Are You Smart Enough to Work at Google? | Amazon: $11.85 | Apple: $9.99

Civilization: The West and the Rest | Amazon: $21.50 | Apple: $16.99

Too Big to Know: Rethinking Knowledge Now That the Facts Aren't the Facts, Experts Are Everywhere, and the Smartest Person in the Room Is the Room | Amazon: $17.15 | Apple: $12.99

Born to Rise: A Story of Children and Teachers Reaching Their Highest Potential (Preorder) | Amazon: $16.97 | Apple: $12.99

Most of these titles are actually cheaper on Apple's store.

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Re: The big problem is the "can't be cheaper elsewhere" clause

Well, yes.

Price fixing is more about ensuring the cost of things stay high.

A better route would be to look at prices before Apple entered the market and then compare afterwards. If prices are higher then it's possible (but not a dead cert) that there's fixing.

There's more to price fixing than saying "We'll all charge 99p for a can of beans" it's more a case of "None of us will charge less than 99p for a can of beans"

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FAIL

Re: The big problem is the "can't be cheaper elsewhere" clause

Yes, most of those titles are cheaper on Apple's store, but that's the point - the allegation is that Apple are mandating the same book* can't be cheaper elsewhere, not that it can't be more expensive elsewhere.

* I'd guess that means the same edition, which might (or might not) explain the one that's cheaper on Amazon in your list. Or there might be another explanation.

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Anonymous Coward

Re: The big problem is the "can't be cheaper elsewhere" clause

I'm sorry but:

"Price fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand."

That's clearly not what's happening when the stores have books at different prices.

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Anonymous Coward

Re: The big problem is the "can't be cheaper elsewhere" clause

If you read what you wrote, it is clearly price fixing.

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Meh

Re: The big problem is the "can't be cheaper elsewhere" clause

Your post - downrated to -10, is the perfect example of just where the readers on this site stand which seems to be somewhere between personal greed and 'must never let real facts get in the way' of my irrational self-loathing and hatred of Apple. The idiots have taken over this asylum....I know, I know, it is El Reg, but really...what's in it for all these fruitcakes?

Thanks for the comparisons by the way.

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FAIL

missed the point

Apple put a set 30% margin on eBooks in order to remove any other eBook publishers from its in app payment system. As 30% margin is also exactly what apple takes for every transaction that goes though its systems...

So as an iDevice eBook publisher using iTunes payment system you have 0 margin...

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Anonymous Coward

Re: missed the point

You don't need to use iTunes payment system, as the Kindle app and others prove.

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With Amazon controlling 90% of the ebook market at the time the iPad launched, I wonder just why they're not being investigated too.

Or maybe they are, and you haven't reported it.

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They didn't use Agency Pricing

They worked like just about everything else. You sell me the book, and I sell it for what ever price I want.

But the publishers want Agency Pricing. That's price fixing by definition.

It's not SRP it's YOU MUST SELL AT THE PRICE WE TELL YOU.

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Thumb Down

Re: They didn't use Agency Pricing

"But the publishers want Agency Pricing. That's price fixing by definition."

No it's not! It just means they pay an agency commission.

The publisher sets the price and Apple takes their commission.

The publisher can set whatever price they like. It makes no difference to Apple.

For example. Publisher A decides it wants to sell Book A for £10. That's fine, Apple takes their 30% as the retail outlet - a mere £3.

Publisher B decides to sell its Book B at £15.00. That's fine, Apple takes their 30% as the retailer - this time it's £4.50.

Then Publsher C sells cheap books at £5.00. Apple still take their 30% - a pathetic £1.50

So where's the price fixing there?

And your final comment "It's not SRP it's YOU MUST SELL AT THE PRICE WE TELL YOU."

Please explain who telling who in your scenario. Because in my scenario I only see a publisher setting prices as it wishes. - I don't see anyone telling it what price to sell at.

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Anonymous Coward

Net book agreement....

We've been here before in the EU and the "Agency Pricing" model is clearly illegal. They'll get hit with a fine of a few hundred million euros, none of which will go to the people the publishers ripped off.

For as long as those publishers choose to ignore the law, I choose to ignore their copyright. I've gone so far as to tell authors that in recent times.

Its easy enough to find ebooks online for free. I'd prefer that the authors actually got some royalties but I'm fucked if I'm paying a publisher who is clearly breaking EU anti-competition regulations.

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Anonymous Coward

Re: Net book agreement....

Be honest to yourself, you're just selfish.

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Anonymous Coward

Re: Net book agreement....

I buy plenty of (e)books but (to give an example) I no longer buy any of Terry Pratchett's books due to his publisher. I'm equally sure Mr Pratchett is well aware of people's attitude to his publisher too. Some authors give a fuck and some don't, not sure where Terry stands on it.

However I give you a 2/10 for trolling - just because I replied to you ;)

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Anonymous Coward

Re: Net book agreement....

I recommend reading this quote from the Guardian (on the raids to publishers):

"The agency model is, in effect, a return to the net book agreement in electronic form. Publishers let that go in 1997 – and bitter experience has taught them to regret it. Losing the net book agreement did not lead to greater variety, customer choice, a better deal for producers or for shops (as those on the right claim unfettered competition should). It led to a three-way carve up of the trade between Waterstones, supermarkets and Amazon. Hundreds of viable publishers servicing thousands of shops were swapped for just over a dozen bloated giants with only a small number of effective outlet options.

The stakes are even higher in the new ebook wars, at a time when even Waterstones branches are beginning disappear from our streets. The unspoken purpose of the agency model is to stop Amazon getting a monopoly and becoming pretty much the only effective ebook publisher around.

Without the agency model, Amazon could easily discount everyone else out of contention. With it, publishers and other outlets stand a chance"

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Anonymous Coward

Re: Net book agreement....

I know the history thanks. I'm not going to listen to a whole load of Guardianista bullshit about how inflating book prices and publisher profits means more choice.

It may well do for the well-heeled metrosexual wankers that read the Guardian but the death of the net book agreement meant (at the time) I could buy two books a week instead of one.

So with the greatest respect, fuck off.

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Anonymous Coward

Re: Net book agreement....

Thank you for clarifying your - and fuck respect, as you don't deserve any - idiotic position.

In essence you just want dirt cheap or, even better, an excuse to pirate books so you can get them for free. Good for you.

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Anonymous Coward

Re: Net book agreement....

Must be real hard for the 150+ books/authors who have got my money in the last year. There's one guy who wrote a cookbook who's made a fortune in the last year due to the evil (according to you*) that is Amazon. The real book was published via a niche printer and that's what ebooks can do fo CHOICE.

I said I don't buy Terry Pratchett books anymore - I have enough respect for the man that I don't pirate them either.

People like you make me sick - everythings fine as long as YOU can afford the books. You neglect to mention the adverse effects the net book agreement had on libraries too.

With no respect at all - do fuck off and take your middle class bullshit with you.

*I notice that Apple is good and Amazon is bad for you. Fanbois 4tw :(

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Anonymous Coward

Re: Net book agreement....

> You neglect to mention the adverse effects the net book agreement had on libraries too.

You have to be fucking kidding me. Have a look around to see how public libraries turned out over the past 15 years WITHOUT the net books agreement.

But yeah go back to sucking the dick of Amazon, Tescos and all the large companies that fucked up honest shops, farmers, the high street and a lot more to come. They pay you in discounted books made in China, so you like it.

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