Linked by Thom Holwerda on Fri 2nd Aug 2013 15:30 UTC
Apple
Apple Inc deserves a five-year ban from entering anti-competitive e-book distribution contracts and should end its business arrangements with five major publishers with which it conspired to raise e-book prices, federal and state regulators said on Friday.

The U.S. Department of Justice and 33 U.S. states and territories proposed those changes after U.S. District Judge Denise Cote in Manhattan last month found in a civil antitrust case that Apple played a "central role" in a conspiracy with the publishers to raise e-book prices.

The DoJ also requires that competitors such as Amazon and Barnes & Noble be allowed to include links to their own stores in their iOS applications, which Apple had prohibited.

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Everyone is wrong
by atsureki on Sat 3rd Aug 2013 05:02 UTC
atsureki
Member since:
2006-03-12

My comment title has become a kind of calming mantra to me, as I see it more and more all the time, at both individual and group levels and on all topics. It's strangely comforting to see wrongness as equilibrium rather than as conspiracy or "evil". Anyway:

Apple is wrong:
-Because Most Favored Nation clauses are scummy, lazy, and anticonsumer. (Usually.*)
-Because unrelated retaliations against parties that refuse to participate in their plans is patently unethical and illegal.
-Because the principles of neutrality should apply to natural monopolies (iPad) just as it should to legal ones (ISPs)
--Because they have no business deciding what other people's content business models should be, i.e., the right to forbid or to capitalize in-app content sales.
---Though allowing the likes of Amazon to give away a free app costs Apple money, which if Amazon then uses to compete against Apple for its own gain, is a very bad deal for Apple. But its current App Store terms of service is the wrong solution.

Amazon is wrong:
-Because it offers ebooks below cost, in violation of U.S. antitrust laws on "dumping"
--to put legitimate competitors, who have to turn a profit to stay in business, out of business
--to increase customer loyalty, thus increasing Kindle sales and public reliance on its own DRM garden while others wither away

The Department of Justice is wrong:
-Because it imagines Apple is a bigger player in the ebook market than is Amazon.
-Because it imagines Amazon's way involves "competition", while Apple's does not.
--(*)Because without Apple's agency model disruption, there is no competition in the ebook market. There is only Amazon, destroying specialized Barnes & Noble and ejecting generalized Sony and Apple by offering artificially low prices, subsidized by their natural online shopping monopoly.

The government has no mechanism for simultaneously dealing with both an unscrupulous market manipulator and their equally established, similarly wrongdoing vigilante rival, and arriving at a pro-consumer outcome. So they've come down on the vigilante at the behest of the original villain, but when's Amazon's trial? Before or after they flip the "profit switch" we've all known for years is coming? If it ever comes, I'm sure it'll be long after the Nook business is a distant memory.

Reply Score: 3

RE: Everyone is wrong
by Kochise on Sat 3rd Aug 2013 06:37 in reply to "Everyone is wrong"
Kochise Member since:
2006-03-03

Ebook below cost ? You should explain me how the price tag of a thin air based book is set, beside the author's fee and distribution (hrum, web hosting) margin.

Do you know what a author gets from a $50 paper edition ? You'll be surprised that like milk producing facilities, the one that do produce get the most little part. Something between $1 to $4 per book.

Ebook ? It's almost producer to consumer, no physical support (beside memory and mass media paid by the consumer) but it still costs a lot for what it is, and the author still gets only a tinny part of the price.

Until the author get the main part of the price, books will be too much expensive, period.

Kochise

Reply Parent Score: 4

RE: Everyone is wrong
by TM99 on Sat 3rd Aug 2013 07:39 in reply to "Everyone is wrong"
TM99 Member since:
2012-08-26

Apple alone is 'wrong', as you correctly have written.

However, Amazon in this case is not in the wrong. They have not violated anti-trust laws because selling below cost an item they paid for wholesale and did not themselves produce is not dumping. You might believe it is, but legally and economically it is not so.

Amazon follows the 'wholesale' model. Apple colluded with publishers to push the 'agency' model. There is a huge difference.

http://www.macstories.net/stories/understanding-the-agency-model-an...

This article explains why Amazon is NOT putting other online sellers of eBooks out of business.

http://scholarlykitchen.sspnet.org/2012/01/19/the-hidden-expense-of...

Your points on the DOJ are also wrong. I mean, even reading a basic Wikipedia summary on monopolies and anti-trust will show you exactly why Amazon is NOT in trouble legally with the government and Apple IS.

It had nothing to do with Apple being a big player. They broke the law. Amazon has not done so. Volumetric pricing is illegal under Robinson-Patman. Amazon was selling the ebooks for a loss to get to a $9.99 price point. Amazon can bend the Robinson-Patman rules by asking for a larger co-op which is what they have been doing. That larger co-op has to be offered to all other retailers which it has been. Therefore, under current wholesale agreements, it is ultimately up to the publisher to decide whether to offer content at a specific price. And once they offer it to Amazon at that price, then they have to honor it for all direct accounts. It will be the publishers then who bend the rules. What Apple and those publishers did, as outlined in the above links and the court documents, is beyond bending the rules. It was a full blown violation of the laws as they stand.

Now if Amazon uses predatory pricing to gain unfair market advantage, and then subsequently raises the cost, excessively, to consumers, then and only then will they have violated the law in the same fashion as Apple & those publishers did.

Your thesis falls into the false equivalency meme when the actual facts are elucidated as I have now shared. Sorry.

Reply Parent Score: 5

RE[2]: Everyone is wrong
by atsureki on Sun 4th Aug 2013 07:18 in reply to "RE: Everyone is wrong"
atsureki Member since:
2006-03-12

http://www.macstories.net/stories/understanding-the-agency-model-an...

This article explains why Amazon is NOT putting other online sellers of eBooks out of business.


Well, I called your bluff and read that whole article. It doesn't say anything to absolve Amazon of predatory pricing or explain how other retailers can compete by also dumping content below wholesale prices. If you were referring to the classic razor/blade loss leader example, comparing that to this case is ludicrous, because that model requires the higher volume item (content/blades) to be profitable, while the entry point item (hardware/razor) is the loss-leader. The more ebooks you sell at Amazon's prices, the more money you lose. That makes it impossible to be an ebook retailer in Amazon's world.

Amazon can bend the Robinson-Patman rules by asking for a larger co-op which is what they have been doing. That larger co-op has to be offered to all other retailers which it has been.


I have no idea what you mean by this.

Therefore, under current wholesale agreements, it is ultimately up to the publisher to decide whether to offer content at a specific price. And once they offer it to Amazon at that price, then they have to honor it for all direct accounts. It will be the publishers then who bend the rules. What Apple and those publishers did, as outlined in the above links and the court documents, is beyond bending the rules. It was a full blown violation of the laws as they stand.


Yeah, that's probably all true, except the notion that there's any such thing as merely "bending" rules in a pure legal sense. I chose the word 'wrong' rather than the word 'illegal' for a good reason: because I'm talking about what damages the market, what the DoJ "should" be protecting the consumers from, not about who had a better case in court given the letter of the law.

Now if Amazon uses predatory pricing to gain unfair market advantage, and then subsequently raises the cost, excessively, to consumers, then and only then will they have violated the law in the same fashion as Apple & those publishers did.


What other purpose could there possibly be? Maybe if Amazon would release numbers on Kindle profitability, we could be assured that, at the average attach rate, they're not dumping.

Oh, whoops: http://www.forbes.com/sites/kellyclay/2012/10/12/amazon-confirms-it...

They're dumping. And it's unfairly putting competitors out of business.

Your thesis falls into the false equivalency meme when the actual facts are elucidated as I have now shared. Sorry.


Sorry, which facts? Your link only explains the difference between wholesale and agency and how Apple went about getting the publishers to switch to agency, which admittedly includes a few shady moves. If we strip the word 'conspiracy' of its pejorative connotational baggage and pretend, for the sake of argument, that Apple 'conspired' with publishers to throw a surprise birthday party, we can look at the respective motives for what they really are. Apple needed the agency model to break Amazon's iron grip on the ebook market. Amazon used the DoJ to fight that strategy and maintain its own power over the market. Now we can actually talk about right and wrong. Or rather, wrong and wrong.

Somewhere in the course of all this, I noticed another one.
The DoJ is wrong because:
-It assumes artificially low prices in the short term are better for consumers than a stable system where we are presented with real prices from the beginning.

Reply Parent Score: 3

RE: Everyone is wrong
by TemporalBeing on Mon 5th Aug 2013 17:55 in reply to "Everyone is wrong"
TemporalBeing Member since:
2007-08-22

My comment title has become a kind of calming mantra to me, as I see it more and more all the time, at both individual and group levels and on all topics. It's strangely comforting to see wrongness as equilibrium rather than as conspiracy or "evil". Anyway:

Apple is wrong:
-Because Most Favored Nation clauses are scummy, lazy, and anticonsumer. (Usually.*)
-Because unrelated retaliations against parties that refuse to participate in their plans is patently unethical and illegal.
-Because the principles of neutrality should apply to natural monopolies (iPad) just as it should to legal ones (ISPs)
--Because they have no business deciding what other people's content business models should be, i.e., the right to forbid or to capitalize in-app content sales.
---Though allowing the likes of Amazon to give away a free app costs Apple money, which if Amazon then uses to compete against Apple for its own gain, is a very bad deal for Apple. But its current App Store terms of service is the wrong solution.


A pretty good list. But suffice it to say, Apple is wrong for one major reason: Price Fixing, which is not allowed monopoly or otherwise.

Amazon is wrong:
-Because it offers ebooks below cost, in violation of U.S. antitrust laws on "dumping"
--to put legitimate competitors, who have to turn a profit to stay in business, out of business
--to increase customer loyalty, thus increasing Kindle sales and public reliance on its own DRM garden while others wither away


As others have pointed out, Amazon is not selling eBooks below cost. They simply run a different model and therefore negotiated a difference price to sell things at. They have eBooks in a variety of price ranges, not simply one fixed price as Apple tried to do.

The Department of Justice is wrong:
-Because it imagines Apple is a bigger player in the ebook market than is Amazon.
-Because it imagines Amazon's way involves "competition", while Apple's does not.


DOJ in this case got nothing wrong because Apple did something illegal - price fixing.

--(*)Because without Apple's agency model disruption, there is no competition in the ebook market. There is only Amazon, destroying specialized Barnes & Noble and ejecting generalized Sony and Apple by offering artificially low prices, subsidized by their natural online shopping monopoly.


Apple's Agency Model is certainly allowed. What is not allowed is for them to also price fix in such a way as to push other business's with other models to charge more - which is exactly what they tried to do and got called on.

B&N's state has nothing to do with the sale of eBooks but their own inability to negotiate the changing businesses related to what they do due to the Internet. Even then, they have been embracing more of the Amazon method of doing things - they just haven't done it as well as Amazon has, and their Internet site was not as good for quite a while.

The government has no mechanism for simultaneously dealing with both an unscrupulous market manipulator and their equally established, similarly wrongdoing vigilante rival, and arriving at a pro-consumer outcome. So they've come down on the vigilante at the behest of the original villain, but when's Amazon's trial? Before or after they flip the "profit switch" we've all known for years is coming? If it ever comes, I'm sure it'll be long after the Nook business is a distant memory.


Again, you're way off base.

Reply Parent Score: 3