back to article Dead Steve Jobs is still a crook – and Apple must cough up $450m for over-pricing ebooks

Apple's long and stubborn efforts to avoid the sting of ebook price-fixing probe and an accompanying $450m fine have finally ended: the US Supreme Court has decided not to hear the iTunes giant's appeal. The Cupertino titan lost its case back in 2013 after it was found guilty of conspiring with publishers Macmillan, Hachette, …

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hubris

The best example I've seen in a long time.

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Re: hubris

My understanding is that, discovering that the book publishers were unhappy with being unable to control Amazon's pricing, Apple spoke to all at once — effectively mediating a group discussion — so as to propose the agency model (i.e. publishers set the price, Apple just takes its 30%), and that all the publishers then simultaneously demanded the agency model from Amazon. Since they wanted to switch to the agency model in order to increase prices, Apple had facilitated a group with a monopoly over the market to try to manipulate pricing in their favour.

All of which Apple appears to accept, except they say that they did it for the benefit of the market — that grabbing some power back from Amazon reduces the main monopoly seller, rather than artificially empowering the monopoly producers.

As a consumer, I'd rate that as hubris indeed. Supposedly competing parties acted together. So as to increase prices. How askew would the world need to be for that not to be a breach of anti-trust law?

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Re: hubris

Exactly. Amazon has/had a virtual monopoly on Ebooks expecially with B&N dropping the Nook.

Not saying that Apple did right but the anti-trust people need to look at Amazon's pricing. Why are they charging MORE for an eBook than a Dead Tree version.

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Re: hubris

Thats quite simple here in the UK and I'm guessing elsewhere in the EU. Only paper books are VAT exempt. VAT is payable on ebooks.

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Re: hubris

@Steve Davies 3: Depends whether you mean "now" or "then". One of the "now" factors is that Amazon has agreed to let some or many of the large publishers set the price; previously, Amazon did. This came about when Hachette took the lead-dog role in refusing to deal with Amazon.

The publisher's argument is the old record company argument: we Do Stuff so we need to take a large cut, and the punters will pay.

While there are many reasons to be suspicious of Amazon, if you're complaining about ebook pricing, look first to the publishers, because they are the ones that have spent years manipulating the market (e.g. by territorial boundaries, often accompanied with the questionable "for copyright reasons this edition is not for sale in the US & Canada" statement)!

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Re: hubris

"As a consumer, I'd rate that as hubris indeed. Supposedly competing parties acted together. So as to increase prices. How askew would the world need to be for that not to be a breach of anti-trust law?"

Apples biggest mistake IMHO was the "Most Favoured Nation" clause. If they'd not insisted on that they might have have garnered some sympathy and maybe even have a had a point, especially if they kept the various negotiations with publishers separate instead of blatantly engaging in cartel-like behaviour.

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Re: hubris

Almost certainly true. Any publisher has a monopoly on the books it publishes, and can set the price to be whatever it wants. Its books do not, in general, compete either with each other or those published by competig publishers. Any of the publishers can establish the agency model if it wishes, although I recall one of them had a dust-up with Amazon early on, before the Apple conspiracy.

The thing that made the "arrangement" an antitrust problem was Apple collaborating with the publishers to effectively set a minimum price.

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Re: hubris

What Apple did was wrong, and they deserve to be punished. But Amazon is also in the wrong, they're just playing the long game of waiting until they've killed off all alternate means of buying books like brick&mortar stores and e-book competitors before they exercise their monopoly powers.

Or are people foolish enough to think that Amazon will continue selling e-books at a loss forever?

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Re: hubris

"Why are they charging MORE for an eBook than a Dead Tree version."

That's easy, they don't.

Well, ok you may be able to find an example where they do, although I haven't seen it in years of buying ebooks on Amazon.

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Re: hubris

But is the cost of printing and distributing a paper book less than the 20% VAT on an e-book? I need convincing, especially at the low-cost end of the market.

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Re: hubris

Except that Indie books on Amazon sell well, and at much lower price-points than books from the "Big Five" publishers. Amazon merely provided a platform for sales and delivery. Indie authors have taken advantage of it, while the Big Five have cartel-ed up.. .

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@ThomH I had to read this bit from your post several times to get the full flavour......

........of Apple's excuse.

"All of which Apple appears to accept, except they say that they did it for the benefit of the market — that grabbing some power back from Amazon reduces the main monopoly seller, rather than artificially empowering the monopoly producers."

What they in practice appear to have argued is that "we were doing everyone a favour by breaking the law" - because there is no possible doubt that they were in breach of anti-trust laws. I wonder how far we mere mortals would get with that argument in court!

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Anonymous Coward

Re: hubris

This is not hubris. If you were American, you'd realize that this is American entitlement - if Capitalism is Good, then more Capitalism is Better.

A "Free Market" economy allows and justifies all actions when said activity leads to eventual profits. This is the true meaning of "free"; if it were wrong, then the "market would punish them".

Since the market hasn't punished them, as Apple's stock is seen as coming from High Almighty in value and corporate worth, and seeing that Apple is well rated, then their actions are "right" and "proper".

Therefore, the government's prosecution of this case is "unjust", "biased", "without merit" and just about any other anti-legal PR campaign soundbite you wish to apply, because Might Makes Right and what could be more Right than Profit? Apple is the horrible and terrible victim of unfair persecutions as they were acting only as any good corporation should, paying attention to the Bottom Line and being concerned, exclusively, with Profit. Consumer concerns are to be pursued when said beliefs precisely align with corporate objectives, truly not before or at least not if it conflicts with this year's project goals.

-----------------------------------------------------------------------------------------------------

Simply wished to remind you of correct American corporatist political thinking, you apparently need a realignment of proper priorities.

This transmission ends.

We can still see you, everywhere (Big Brother icon redundant at this point)

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Re: hubris

...territorial boundaries...

Which are illegal cartell behaviour, but somehow still legal in this day and age.

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LDS
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While I never saw a Nook, I saw a lot of Kobo.

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It's the difference between the publisher selling the book to the punter (at a fixed price) and paying Apple, Amazon etc a percentage commission as agents, and the publisher selling the book to Apple or Amazon, who then sell it on at whatever price they like. Amazon likes to make a loss on ebooks while it doesn't have a monopoly.

We've seen Ocado caught out by a similar situation between Morrisons and Amazon. Simply by reversing the supplier customer relationship, the intent of an exclusive contract between Ocado and Morrisons has been defeated. Ocado and its lawyers were commercially naive.

Ever since fixed retail prices were outlawed, the procedure for fixing them has been to supply product to intermediaries at near zero discount to suggested retail price, but allow appointed retailers to invoice back for the "marketing support" that they provide. Those who advertise discounts find they aren't asked to provide marketing support any more.

All of these work by partially reversing the supplier/customer relationship for some part of a sale transaction.

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What surprises me most..

Is that it's run the mill in 5-ish years..

That's practically F1 pitstop speed for the US...

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Re: What surprises me most..

And during that short span the $450M earned how much in dividends? $50M? And I guess that just about covered their legal fees for that period.

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Re: What surprises me most..

What surprises me the most is Apple emailed TheReg and told them something other than fuck off.

When the hell did that happen? I thought Apple hated TheReg?

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Re: What surprises me most..

"I thought Apple hated TheReg?"

That was 2010. A different era. Pre "peak Apple" and all :)

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Refunds????

Ok so people that purchased a book in 2010 overpaid.

Refund people that overpaid ... ok I get that.

Refund the book companies that sold less books than they could have done.....tricky, so they were part of the problem.

Refund people for the loss of enjoyment that was caused because they could not afford the books....also tricky.

Refund the business that went out of business because of this.....mmmm

Apple win all the way.......they now have massive market share after crushing all competition.........so who cares about £450M.....look at the bigger prise.

Discuss......

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Half a billion dollars.. is that all they're getting fined, or does this exclude court costs?

Apple make that sort of profit every month or so (subs: needs checking), so that outlay is unlikely to hurt them in any significant way other than to encourage them to be a bit sneakier :(

(Note that Apple isn't the only corp to do this: most of the rest of the globals work in similar ways, regardless of their specialisation or country of origin)

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You don't base fines on trying to hurt the company, but on making up for the harm. Even when calculating the harm that $450 million was calculated in a pretty generous fashion. Should buyers of e-books during this time get a full refund for the purchase price of the e-book, rather than just a refund of the difference of what the price would have been under Amazon's "sell at a loss" strategy? Why do they deserve that? If they don't get that extra money, who should? The lawyers?

It isn't as though Apple makes its billions off e-books. Heck, I'm pretty sure they never made anywhere remotely close to $450 million off e-books.

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You precisely base fines to hurt the company - otherwise it isn't a deterrent.

Suppose the fine for a bank robbery was = the money stolen, less wear and tear on shotguns, stocking depreciation etc.

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Nah, it's offset against tax

The guns and stockings are legitimate business expenses

As is the fine... Hang on, are businesses really allowed to count fines as reducing profit for tax purposes?

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Re: Nah, it's offset against tax

Hang on, are businesses really allowed to count fines as reducing profit for tax purposes?

If they're a bank, they seem to get away with it. A number of banks reporting their numbers this year seem to have the equivalent of "Profits would have been higher but for the fines and the moneys set aside to cover mis-selling of <inset name of money making scheme with dubious legality>."

Thing is though - with the paltry sum that Apple pay in taxes - discounting the profit by $450million will not really make a noticeable dent of the tax cheque that they have to write.

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Re: Nah, it's offset against tax

Hang on, are businesses really allowed to count fines as reducing profit for tax purposes?

No, but suspect that given the way Apple took out a loan so it could pay a dividend without incurring US tax on profits, I'm sure they will perform a similar trick here.

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Anonymous Coward

Re: Nah, it's offset against tax

>Hang on, are businesses really allowed to count fines as reducing profit for tax purposes?

Not here at least:

http://www.hmrc.gov.uk/manuals/bimmanual/bim38525.htm

>"Profits would have been higher but for the fines and the moneys set aside to cover mis-selling

In theory that's mostly because of the refunds/interest not the fines/penalties themselves - although contrary to popular belief and political spin, banks in the UK pay very little tax (<10%) even when times are good.

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@ Yet Another Anonymous coward: I have to admit I chuckled very loudly at.....

"Suppose the fine for a bank robbery was = the money stolen, less wear and tear on shotguns, stocking depreciation etc."

See icon.

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"You don't base fines on trying to hurt the company, but on making up for the harm. "

Which is funny, because american court punishments for criminals are almost entirely based around retribution and not restoration.

One law for the living person and another for the artifice.

If they pulled that in the EU they could be fined 10% of annual turnover. That's gotta hurt.

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Facepalm

Monopoly pricing

Here's the result of publishers setting prices on Amazon.

Print List Price $27.00, Hardbound Price: $18.39, Kindle Price: $13.99

Sold by: Penguin Group (USA) LLC, This price was set by the publisher

Print List Price: $27.00, Hardbound: $16.07, Paperback: $7.23, Kindle Price: $13.99

Sold by: Random House LLC , This price was set by the publisher

I want both of these particular books but I'm going to wait for them in the library. The pricing is way out of line. Look at the difference in price between the kindle and paperback prices for example.

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Anonymous Coward

E-book pricing for libraries

I want both of these particular books but I'm going to wait for them in the library. The pricing is way out of line.

Depending on where you live and whether you want to borrow an e-book from the library, you may be doing your local ratepayers a disservice [and making the publisher considerably richer in the process]. At least in some jurisdictions, publishers charge libraries a lot more for e-books than they would charge you as an individual. Some publishers also set a self-destruct timer on the e-books they "sell" to the libraries. See:

http://www.cbc.ca/news/technology/e-book-prices-marked-up-too-high-libraries-protest-1.3123465

I think it is clear to most reasonable people by now that the copyright laws are no longer providing the intended balance between the public good and creator's rights, and need to be looked at again - preferably sooner rather than later.

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Re: E-book pricing for libraries

"I think it is clear to most reasonable people by now that the copyright laws are no longer providing the intended balance between the public good and creator's rights, and need to be looked at again - preferably sooner rather than later."

They have been looked at - just not necessarily with the outcome that we might like.

TPP has done its absolute damnedest to ensure that US copyright rules will cascade to all and sundry even to the extent that some works that are now out of copyright may be reabsorbed into the system

It's not clear whether or not TTIP will push for a similar model as the EU approach to copyright differs from that of the US - the Europeans feel that the author is the entity most deserving of protection under copyright law - rather than corporations.

The one thing that does seem clear - we the punters will be very bottom of the pile - paying for it regardless.

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Re: Monopoly pricing

"Look at the difference in price between the kindle and paperback prices for example."

If you find a wholesaler who's willing to deal with you, you can usually score 30-40% below retail pricing. The caveat is that you need to buy enough to make it worthwhile. Forming a Book club works well for this kind of thing.

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"We know we did nothing wrong"

Stellar example of not acknowledging any fault. Brilliant management stay-the-course dedication. Admirable start of judicial decision whitewashing in Apple history books. Reality Distortion Field functioning at 110%, Sir.

Outside of that field's influence, it's just a bunch of twats who have learned nothing and will obviously do it again first chance.

I'd say it's time to bring back public whippings.

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Re: I'd say it's time to bring back public whippings.

OK, big boy. Are you a whipper or a whippee?

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Trollface

Re: "We know we did nothing wrong"

You want a public whipping of 'Dead Steve Jobs'?

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Re: "We know we did nothing wrong"

Corporal punishment of a corpse will henceforth be known as a Steve-job.

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Dead Steve Jobs is still a crook

No - he isn't. He's dead. Anyway, court case was United States v. Apple Inc.

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Unhappy

The "Blame the dead guy" defense?

Yeah, see, he made us do it. We were completely under his spell. We had no will of our own. We didn't know what he was doing.

Popular with both the sons and the minions of Robert Maxwell.

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how old is that picture?

SJ has hair and isn't wearing a black turtleneck, That's a PPC G4 case, looks like Netscape Navigator on the CRT screen.

Apropos of nothing in particular.

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