Cheers from the Apple haters will drown out all reasoned and rational discourse in this thread.
Apple is back in court this Friday to contest the punishment it received in the US ebooks pricing trial. The government has tried to show how serious it is in several ways. Firstly, it ruled that Apple had to end its contracts with the five publishers and be prevented for five years from entering contracts that the Justice …
It's not so much the Apple haters, of which I can reasonably be numbered. It's the freetards who are quite certain they are getting ripped off if the price of an ebook is anything much above zero.
What Apple did in this instance is quite reasonable from a vertically integrated, previously uninvolved competitor standpoint: We want to get into this market. We don't know what the right price is. We want margin X, when everything is said and done. If you'll agree to give us that percentage, we'll charge the price you set. And to protect ourselves, if you offer a competitor a better price, you have to offer it to us as well.
It all came down to the Agency model being legal, but one company asking for it to be applied and co-ordinating suppliers into its' application being tantamount to price fixing.
Interestingly, as much as many like to see Apple and the American govt as in bed with each other, the reverse is the truth. Apple's political lobbying budget is minuscule. Due, historically, to Steve Jobs being notoriously tight on the purse strings. Amazon's lobbying budget by contrast is colossal. It's interesting that the proposed solution is highly proscriptive of a lasting business solution that is much to the advantage of Amazon and deeply affects businesses beyond Apple and beyond the remit of this case, massively strengthening Amazon's hand. Especially since Amazon is already a monopoly steamrollering the publishing industry. There were other solutions (such as a straightforward and significantly large fine such as the EU levied on MS for their anti-trust case) or, since Apple has huge cash reserves, some other remedy that doesn't specifically grant Amazon such an advantage.
Of course many will weigh in pointing out the Presidential veto over the Samsung patent win, but there you are talking about an foreign multinational versus a US multinational. So to my eye, this does rather seem to bear out the message Lawrence Lessig gives in his seminal book, Republic Lost.
You forgot the part about the CEO saying he wanted to raise prices.
In the end there is nothing illegal about being a monopolist, provided you get there by normal competition, and don't harm the consumer. What is Illegal is colluding to fix prices.
Other then PROPER innuendo, I've not seen anyone accuse amazon of violating any real law.
"But Apple is a vertical player, one which had zero market share in the ebook business when the alleged horizontal conspiracy was hatched."
Similar to how a bank robber has zero cash in their pocket before a robbery. Pointing out the obvious here isn't helping Apple's defense.
At least the anti-Apple rants/articles attempt to obscure the obvious.
When the government comes knocking on the door of a marginal business and says "nice business you got here, shame if anything were to happen to it. Now sign these papers admitting your guilt and we'll let you off easy." it's not a confession. It's extortion under guise of law. So yes, it is thin and it flies in the face of established legal precedent.
THe judge told if Apple thought Amazon was not playing fair it should have taken Amazon into court, not adopt another monopolistic behaviour. Apple was not trying to break Amazon monopoly, was trying to build its own. So the problem is not to allow also Apple to behave bad because Amazon does, it's to break any monopoly - including Amazon and Apple ones.
Besides, it wasn't the agency pricing model that caught Apple's hand in the cookie jar. It was (and note it wasn't mentioned in the article) the "most favoured nation" clauses in ALL of Apple's publisher contracts. In return for Apple posting the stuff for sale in its iTunes store, the publishers agreed they would NEVER let their stuff sell their stuff for less than Apple's price (at retail), allowing them to force Amazon to raise their prices lest the publishers get nailed for Breach of Contract.
It was the judge who basically pointed out (pretty explicitly), "You can't use price fixing to fix a dumping problem."
The real problem with Apple's price-fixing case was with the MFN clauses. The publishers could claim they had to jack up their prices because Apple was "forcing" them to up 'em via the MFN clause. And they did. The prices did go up across the board for the involved publishers, they didn't go up for non-involved publishers.
"Apple merely promised publishers it would not sell at a loss. Publishers maintained their wholesale agreements with Amazon. Retail prices briefly flickered from just over $8 to just under $10, and were more widely dispersed after Apple's unsuccessful entry. "
This is a joke right? on what planet do ebook costs remotely approach what amazon charge never mind apples fantasy. Don't forget most of the costs would have to be borne by the dead tree release anyway.
...It's plainly not the same one as the rest of us.
"If Apple's agency model briefly raised the prices of a few digital bestsellers – blink and you'll have missed it – Amazon nevertheless continued to discount the vast majority of ebooks heavily across the line."
When Amazon are forced to sell EVERY bestseller Kindle edition for MORE than the hardback, you know something is wrong somewhere.
Prices are often set by the publisher. I know a few who believe that a) they can charge more for digital versions because they are more convenient and b) because its the early days of the market. A few also want to dissuade people from buying digital versions strangely enough...
The planet where Amazon controls 90% of the e-book market. He forgets, however, that most of that stuff is hardly more than slush-pile method-writing. The real good stuff is increasingly self-published, as authors and their agents realise they don't need the old publishers and retail chain anymore unless they want dead-tree format out. And even dead-tree does not require the publishers anymore..
Seen from the point of the Industry, he may have a point, but publishing itself is changing fast and the old behemoths, like in the music industry, are unable and/or unwilling to adapt.
"The lasting "harm" to the public by Apple and the five publishers – who were bullied into private settlements by the DoJ – is even harder to discern."
Just go and look at what happened to the average price of an e-book once the arrangement came into place. I would suggest that people having to pay 50% more for their e-books after the cosy relationship started counts as "harm" to the public? If all the makers of TV's got together and came up with an arrangement that made the cost of all new TV's to go up by 50% how would you describe that?
I dunno, I found this quite amusing
Apple's proposed punishment goes far beyond that of the publishers, who had begun to meet to discuss Amazon's dominance months before Apple made contact with them.
Not a single mention of the fact that it might just be because the publishers had the good sense to settle, whilst Apple, in it's arrogance, decided it could win.
Look at the top of the Reg page - see that masthead, the bright red masthead.
Mr Orlowski is extremely good at writing articles to gain a reaction - it's his job, as it is the job of every editor of every journal - and looking at the the responses here, he's done his job well.
It does come across as an Apple biased article, but he has also done Android, WinPhone, and various other articles, the primary purpose of which is to get us commentards frothing at the mouth and raging in the comments.
Back on topic - the DoJ has a fairly long track record of shafting folk on anti-trust issues, have a look here:-
Personally, I don't think that this is too extreme.
No-one's stopping Apple selling anything at whatever price they like. At least, they _weren't_, anyway.
If there'd been no collusion this wouldn't have happened. The penalty for Apple is not because it sold books how it fancied, but because it was shown to have _colluded_ to seriously harm a competitor, regardless of the size of that competitor.
That is why they got their arse kicked, not for trying to run an honest business as they deemed fit.
> No-one's stopping Apple selling anything at whatever price they like. At least, they _weren't_, anyway.
You're forgetting Apple's God given right to take a straight 30% cut in all transactions.
Without a most favoured nation status that guarantees no one will under cut Apple, they would face the heretical prospect of not being able to make this profit.
So yes Amazon are stopping Apple selling things at the price they like.
While Amazon are allowed to compete, Apple's profit margin will be tiny. For some reason customers notice when you're prices are nearly 30% higher than your competitor and then they have the total audacity to buy stuff from the competitor instead of paying the price that you want to charge
Its not fair
> I doubt if "dumping" was illegal.
Many, if not most, major retailers sell things at a lost. Lots of the supermarket prices you see in the ads will be loss leaders, to get you through the door. No ones ever stopped people doing this.
I remember years ago doing some work with a holiday travel company and they explained that everything they sold they sold at a loss, but their customers had to pay them in advance and they paid their suppliers in arrears and so their business worked on profiting from the cash in the middle, I understood this was a common business model in lots of areas.
I guess the law only gets interested when a company sells things at a loss to put its competitors out of business and then when it feels sufficiently confident that it owns the market it hikes its price. I certainly hope this sort of behaviour get monitored.
> don't they all take some cut or other??
Sure that is what business is all about. But this case is about a most favoured nation clause in the contract that means that there can not be any competition on price. If someone feels they can make a living on less than 30%, then they should be allowed, but Apples contract with the publishers was aimed to stop there being competition on price. Which is why they've got the slapping they did.
'Apple merely promised publishers it would not sell at a loss.'
It also forced a minimum price on other sellers by putting a most favoured nation clause into their contracts with the publisher. In other words they were basically saying that they would force others not to sell at a loss too, which is why they were dragged through the courts in the first place. It's rather convenient that this doesn't get a mention.
As for publishers they might get more sympathy if they actually put more effort into their digital offerings. I've often found typos and other errors in e-books purchased off both Apple and Amazon that I simply would not expect to see in anything that has been professionally published. Since this problem is not specific to Amazon I can only assume that the publishers are the ones that are responsible for this.
It's as if they lacked a digital copy of the older books so they just scanned a copy and then dumped the results online without bothering to get a proof reader in to check the results first.
I do not understand why the DoJ judgement is so controversial. Surely a free market should allow sellers of products to sell them at whatever price they see fit. Whether they make a loss or not is their problem. What Apple tried to do is manipulate the entire market by colluding with publishers to prevent any other sellers of books from selling them at a lower price than Apple. Whether Amazon is the dominant player or not is to me irrelevant, its the over-arching manipulation of prices that is the problem here. Amazon is only the dominant player because is sells books cheaper than the other players. Last time I checked, Apple had more cash stashed away than the US government, it could always use some of that cash to compete with Amazon. But instead (and very similar to its tactics with patent battles with Samsung) it prefers to try and shut down competition rather than compete.
Another week, another objectionable mess the courts get to play legal whack-a-mole with. With the courts themselves being a rather stinky mole too.
The whole digital media distribution thing is a nasty mess it makes me weep. Established copyright holders meets web seems to be such a sales opportunity that continually fails.
Rather than accept their fate it seems Apple had to honour their unbreakable strength of never giving sway,
or 'a sucker a dime' depending on how you want to view it.
Whilst they no doubt expected to lose, by putting up a good show they hoped to garner stronger identity thus increasing the tribalistic support they are well known for.
On that aspect just maybe it is still a win situation..
If Amazon want to sell some books below cost (if indeed that is what they are doing, I wager you haven't seen their accounting system to tell if that is true or not) that is their prerogative. They are still making money across their business overall and how they do that is their own choice. Its called a free market, and in this case the customer gets a better deal - that's one of the points of capitalism.
Have you never seen a "Bargain Bin" at a book store? Hint: those books are all being sold at a huge loss. That practice has been going on for decades and hasn't caused monopolies.
Apple tried to fix the minimum prices of their competitors at levels higher than we are currently paying and effectively eliminate price competition - why on earth are you defending that?
PS - Amazon is not a monopoly by definition - perhaps you should actually learn what a monopoly IS before using quotes like "allowing a monopoly seller to sell at a loss" as a central argument.
The publishers don't have a problem with Amazon selling e-books at a loss, they have a problem with e-books being cheaper than physical books. If that continues, the publishers' empires will shrivel to a fraction of their former size (as with music).
There can't be "bargain bins" of ebooks because there is no physical inventory. And anyway bargain bin books are not really sold at a loss in any meaningful sense. If bargain bins lost money, there wouldn't be any bargain bins; retailers aren't that stupid.
Apple did not fix any prices; they entered into a contract that ensured Apple could price match any competitor without selling below cost. The two questions in this case that are interesting are 1. should the agency model for sales (which has been a spectacular success for small App developers) be legal, and 2. should "most favoured nation" clauses be legal. They have been up to now.
Interestingly, iBooks only exist inside Apple's "walled garden". They can't be read on anyone else's e-reader or on any PC, so it would seem they barely ever competed with Amazon e-books. And strictly speaking, the publishers cannot collude to fix prices because each book is only available from one publisher, and the others cannot set a price for it.
Why does anyone care what Apple does inside its walled garden? If it's worthwhile then others are free to create their own walled gardens, and if not, it's totally irrelevant. The Apple haters mock the walled garden as inferior and exploitative, but what they actually resent is its success in attracting paying customers.
"nd anyway bargain bin books are not really sold at a loss in any meaningful sense. If bargain bins lost money, there wouldn't be any bargain bins; retailers aren't that stupid."
No, bargain bins exist because the products in the bins can't be returned to the supplier. Either the sales agreement is one-way-only (quite possible in an "assume all liability" agreement) or otherwise restricts returns (perishable goods, for example), or the company who provided the goods no longer exists (a supplier liquidation, similar to what happened in the North American console crash of 1983).
Either way, the bargain bin exists as the "last chance" to get SOME return on the initial investment before the product is either fire-saled to a closeout seller or considered a complete write-off and either disposed or donated.
There's a real lesson in this case though, that most seem to have missed: Contribute mightily and heavily to the favoured one's party and re-election funding, and you market dominance will be enforced by the DOJ and the courts. If you think politics didn't play a major part in this you are either remarkable gullible or an Obamabot.
The DoJ haven't created a monopolistic company in this market - Amazon have. It's this simple:
Amazon cut prices to boost sales and increase brand loyalty (so if that's a crime practically every business that is in business should be in court) - Amazon loses money.
Apple increased prices and put clauses in it's publishers contracts to make sure they couldn't be bought cheaper anywhere else. The consumer loses money.
The DoJs job in this instance was to decide if consumers were being ripped off by Apple's practices. They plainly were, and now Apple are being rightly shafted for the attempt. The publishers weren't "Bullied into settling with the DoJ", they settled because it would have cost them far more to have gone to court and lost, as Apple have so wonderfully validated.
You're obviously an Apple fan Mr Orwloski, but I think you've bitten of more than you can chew attempting to justify this one.
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