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back to article Publishers fork out $52m in Apple ebook pricing settlement

Publishers Hachette and HarperCollins have forked out $52m to settle a lawsuit that alleged the pair had been involved in price-fixing in the ebook market. Just as the ink was drying on the US Department of Justice's suit against Apple and five publishing houses over alleged price-fixing, 15 State Attorneys General and the …

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Pirate

Clearly Apple et al were in the wrong and their contracts were anti-competitive (especially the favoured nation bit).

But so that I don't appear antifanbois, the DoJ MUST now also look at regulating how Amazon prices ebooks (and other goods, and other etailers).

We are living in a new era where markets change in days instead of years, and it is therefore imperative that national and international laws are in tune to prevent monopolies. Blink and someone has cornered the market. Lawyers might be the scourge of the earth, but when we need them, we really really do need them.

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antifanboi??

why must the doj look at amazon et el? The article even states currently amazon are not a monopoly (yet) and unlike the 2 that have basically admitted to doing wrong, have not been involved in price-fixing.

geezzz it sounds like you have been watching too much minority report!

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Re: antifanboi??

Amazon not involved in price fixing? Are you smoking crack? Amazon tell the publishers how much they are going to pay for a book, not the other way around.

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Anonymous Coward

Re: antifanboi??

And any publisher who does not want to sell at the price Amazon asks, is able to do so. Then their product will only be available to competitors of Amazon.

Amazon having a say in the price they pay to suppliers is no different to any other company, the only difference is due to the amount they buy from suppliers and sell.

This is all totally different from a bunch of companies price fixing to block competition.

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Thumb Up

finaly some good reporting

n/t

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questions??

I don't really understand how one party in a contract can settle in a case like this without falling foul of the other party if both don't effectively agree to settle...

As I understand it they are under contract to apple to have a favoured nation clause to be part of the toy book shop, however they can't have one as they have agreed not to in the settlement, so do they have to pay off apple and be in breach of contract, withdraw from the toy book shop, or try to negotiate new contracts without the clause in them and hope apple will agree?

Presumably Amazon are now free to renegotiate their contracts and set their prices with those publishers who have settled?

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Re: questions??

A lot will depends on Apple's actions. If Apple settles or loses in court, then BOTH parties would be in the wrong and the contracts would be mutually abandoned and legally null-and-void with no restitution due to either side. If Apple wins, however, meaning the contracts are legal, then there MAY be recourse for Apple to countersue (most likely the DoJ, though--since the publishers were settling with the government, odds are the agreement will include an umbrella, meaning the DoJ would take the rap if something goes wrong).

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Anonymous Coward

Re: questions??

"I don't really understand how one party in a contract can settle in a case like this without falling foul of the other party "

Easy ... you cannot contract for an activity which is illegal. The little I remember about contract law is that once any clause of the contract is for something illegal the entire contract is voided under the law.

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What is Apple (supposedly) guilty of?

Publishers were selling ebooks to Amazon and others. Then Apple comes along and offers to let the publishers set the price on iTMS and Apple will take 30% of the sales revenue on condition the merchandise not be sold to others for less. Publishers accept this offer and a deal is made.

A couple of days later a similar deal is made between publishers and Amazon. Apple has no part of the Amazon deal other than having set precedent.

If Apple had acted to control the prices Amazon charges then the DoJ would have case.

I think Amazon is playing the DoJ, and having a good laugh having their cake and eating it too.

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Facepalm

Re: What is Apple (supposedly) guilty of?

"If Apple had acted to control the prices Amazon charges then the DoJ would have case."

They did, by colluding with publishers and by their "most favoured nation" clause.

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Anonymous Coward

Re: What is Apple (supposedly) guilty of?

It hasn't been proven yet

The DOJ is gonna have a tough time proving it's case

http://news.cnet.com/8301-13578_3-57412861-38/doj-is-likely-to-lose-e-book-antitrust-suit-targeting-apple/

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Bronze badge

Re: What is Apple (supposedly) guilty of?

Why then, exactly, Amazon was (and still is, in some cases) selling ebooks at price set by publisher?

Quite obvious it's a condition requested by publishers, as a result of "favoured nation" clause set in contract with Apple.

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Re: What is Apple (supposedly) guilty of?

> It hasn't been proven yet

Err, yes it has - there's nothing top prove as all you have to do is read the contract where Apple require that the goods (and it applies to Apps as well as books etc) are not sold anywhere else for less. That means, if someone else thinks they can sell an ebook on 5% margin, they cannot discount the retail price - because the publisher will have contracted with them on an agency model as well in order to comply with Apple's contract.

This is sufficient in it's own right I believe since it prevents competition. SInce it prevents any seller setting their own price, there can be no price competition, and that means prices are highly likely to rise - and guess what, they did.

Incidentally, Amazon do the same thing. If you sell "stuff" on Amazon, under the T&Cs you aren't allowed to sell it cheaper elsewhere.

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selling it cheaper

Amazon may not be doing the same thing at all.

The Amazon T&Cs may restrict a seller from offering a lower wholesale price elsewhere (not sure what the actual language says) but that is very different than Apple's attempt to control the retail price to consumers. Apple's policy is to prevent price competition across all channels. The Amazon policy may not.

The second point is that if Amazon is cheap enough, no one else may have much an incentive to sell it cheaper anyway.

Generally, it is fair for a wholesaler to set their wholesale price. But, even they can get into trouble when they try to control the retail price. And in almost all markets the wholesaler can not control or limit the retail price of their products. Apple clearly demanded the right to control the retail price through all channels including direct sales. Or, wholesales forgo the Apple marketplace.

It is combination of this attempt plus the 30% cut that forces high prices to all consumers (Apple and others). That is what is harmful about the policy. And very likely illegal because it does set a high fixed price for products for all consumers.

Many retail sellers might be willing to accept a lessor cut than 30%. But, Apple illegally precludes it via their favored nation policy and high markup.

What does Apple do for it's 30% cut. Practically nothing. Brink and motar stores actually buy inventory, stock it, advertise it, give it shelf space, promote it and handle the merchandise. Apple does none of that. Only the electronic delivery. Yet they demand a high market AND preclude other perhaps more efficient channels from offering price competition.

If you can not buy it cheaper somewhere else, you are paying too high a price. And that harms all consumers simply because Apple wants a 30% cut and wants to preclude price competition. So you get high retail prices fixed by agreement between Apple and some distributors. What's not to like, unless you are a consumer being screwed.

Jerkheads run Apple. And they have been caught out.

Of course, any wholesaler wants a high price too. And Apple wants a high 30% cut. (Did not Google suggest 10% was more appropriate?). And Google is not trying to control the retail price through other channels. And it sounds like the Amazon deal only affects the wholesale price not the retail price. Apple wants to illegally control both the wholesale and retail price across the industry. That way it can collect 30% for doing nothing.

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Re: What is Apple (supposedly) guilty of?

Err no, Apple did not fixed the price of the books the publishers are selling neither did it forbid the publishers to sell below a certain price. What Apple stipulate was if the publishers allow a retailer to sell at a low price point Apple too should be allowed to sell those ebooks at that price point.

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Anonymous Coward

Cartel behaviours

There are a number of variables at play for example the fact that allegedly the publishers wanted to keep prices above $9 - obviously some price point that concerned them - they saw that Amazon was using the wholesale model to sell below this price in effect selling books at a loss for their own business plans. This in effect was believed to be reducing the "value" of books and the entire supply chain of e-books and physical books by setting readers unrealistic expectations; this in turn could damage the entire publishing industry profitability.

The allegation also plays into pricing cartels because several parties allegedly colluded to artificially inflate the market pricing (keep above $9) collusion is at the heart of this case. Did Apple collude with the industry to change the pricing model from wholesale to agent and set a minimum price? Did Apple make themself the most favoured nation - this is a monopolistic behaviour if there was no fair market tender process - where the publishers could not sell e-books to anyone else any cheaper. The publishers - again allegedly - after signing the new agent model with Apple take it to Amazon and say sign or get no e-books; and all e-book prices went up several dollars pretty much overnight and have remained high ever since.

The case hinges on collusion, minimum price fixing (cartel), and monopoly (favoured nation). Some of the publishers have folded because if they lose it will cost them a lot more than the $52M stumped up so far. If this case kicks off in Europe and they lose they will be fined 10% annual revenue - NOTE REVENUE not earnings. Publishing houses can ill afford this. Apple will take a one year right down or use their $100m warchest to pay the fine and move on so for them it will have a short term impact. For apple it is probably its worth the fight to try to keep their agency model whole across their "eco system"

CNET had an article yesterday alleging companies were "double deleting emails".. this could be hiding the collusion aspect.

Did I say allegedly often enough in there?

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FAIL

Re: Cartel behaviours

"The case hinges on collusion, minimum price fixing (cartel), and monopoly (favoured nation)."

I'll grant you that book publishers, music publishers, film publishers and television networks are anticompetitive cartels, but how is "a most favored nation" contract monopolistic when Apple has 0% of the ebook market?

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Re: Cartel behaviours

"Did I say allegedly often enough in there?"

Possibly.

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Re: Cartel behaviours

They're trying to break in. This "favored nation" clause acts as a market leveler. With it, Amazon can't force Apple back out by undercutting them (as most incumbents would try to do when a new competitor enters the market). Apple can't play Amazon's wholesale game because Amazon loss-leads: a tactic Apple can't handle since their reach isn't as broad (To give a B&M example, compared to an Apple Store, Amazon is more like a big-box store, selling just about everything including e-books).

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Pint

Right or wrong,

for Apple , this will simply be a cost of doing business. I'm sure, legally & financially, contingencies have been made for scenarios such as this, budgets & resources apportioned, risks assessed and procedures planned. Whichever way this goes, Apple will be able to afford it & simply move on to the next thing. It's corporate business today, like it or not.

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bep

Not just a pricing issue

The thing that most concerns me about this is that it is not just a pricing issue, it is also a format issue. In the old world, a book was a book was a book. In the ebook world, the different outlets use different, competing formats, most with DRM, some without. Unless the format issue is also dealt with, an effective monopoly situation could develop since you'll need a particular kind of reader as well as a particular format of ebook.

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Re: Not just a pricing issue

That particular was is close to being settled. Most are settling on the ePub format which is XML-based with publicized specs. Most of the eReaders out there support it already including the Sony Readers, the Kindles, the Nooks, and (through appropriate apps) iPads and Android devices. There are still some quirks to work out, but what's available right now is enough to handle nearly any book you can throw at it, complete with illustrations and ToCs.

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Trollface

Yes, and Amazon has an effective monopoly on their kindle format. What's you're point?

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What about formats?

If I buy an e-book through Amazon, can I only read it on a Kindle, or can I transfer it to a PC or tablet and read it there? And if I buy an e-book through Apple, can I only read it on an iPad?

I think this issue of controlled formats is more important than the price wars. If I buy a physical book, doesn't matter if it's from Amazon, Play or a physical bookstore, it's the same book and I can read it anywhere, so I'll go where I can get it cheapest. If an e-book vendor is tying me to their platform, I don't care how cheap it is, I'm not buying it.

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Re: What about formats?

KIndle formats are reasonably well documented and if not DRMed easily converted to ePub or whatever your reader/reading software can use.

Even DRMed Kindle files can be transferred to the Kindle app on a myriad devices including Apple ones and Windows PCs.

So it's less the format per se, more the DRM which is the problem.

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Holmes

follow DoJ suit, but they're looking for cash !

For the November election campaign to keep their jobs

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