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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RE: Everyone is wrong
by TM99 on Sat 3rd Aug 2013 07:39 UTC 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[3]: Everyone is wrong
by TM99 on Sun 4th Aug 2013 09:08 in reply to "RE[2]: Everyone is wrong"
TM99 Member since:
2012-08-26

Bluff? Because you do not understand what is happening hardly means it is a bluff. I provided a link that might explain it to you. Obviously, you do not understand it.

If you do not, then you need more education on the subject. The remainder of your reply is therefore going to be rather blustery bullshit, I suspect if you do not understand the actual facts of the situation with regards to publishing and distribution of printed and digital media.

Again, you need to re-read what was linked and understand it before you can draw conclusions. Your original post is about a legal case, and now you are attempting to move the goal posts so that it is an ethical case of right versus wrong. Sorry, no.

Currently, the customer is best served by the wholesale model and Amazon negotiating with publishers via the Robinson-Patman rules to lower prices on eBooks which cost far less to produce than what they are charged to the customer. Apple and the agency model were forcing eBooks up to $14.99 and above from the regular $9.99 and below prices via Amazon and other sites.

If Amazon negotiates with a publisher, let's say O'Reilly, for a particular price wholesale and for selling rights at retail, then O'Reilly themselves and any other third party distributor of O'Reilly titles must honor that price. That is very good for the consumer. Using the same example of O'Reilly under the Apple agency model deal, Apple would set the price, the publishers would have to raise it high enough to cover Apple's 30% off the top charge, and Amazon and other sites would have to charge the customer the same price as the Apple store - a higher price. With favored nation status, Apple could and would negotiate so that if you want that O'Reilly book, only the Apple iTunes store may be the only distributor of it digitally. Not only would it then not be available at Amazon or B&N, but it would also be higher priced to cover Apple's fees. Not only is this illegal colluding and the equivalent of a 'shake down', I would like you to explain to me how this model is better for customers. I know that it isn't and so does the DOJ and other industry experts, but no really, I would like to see you try and rationalize this.

No, no, and yet again no. You simply do not understand this correctly. Selling the Kindle that they produce at a loss has no direct legal relevance to the concept of dumping with regards to eBook prices that Amazon provides customers. They do not publish the eBooks. They sell them retail after negotiating wholesale pricing with the actual publishers.

It is like you didn't even read your own linked article. They even mention that this is similar to a gaming console. Microsoft sold the original Xbox at a loss on the hardware side. There revenues from that division came in from the games and added content via the Xbox Live program. As it was perfectly legal for Microsoft to do that with the Xbox, it is perfectly legal for Amazon to do that with the Kindle. They realize their profit on the Kindle division not from the hardware, but from the software, i.e. the digital eBooks. They can afford to take a loss on the hardware and lower the retail price of the book because they still realize a HUGE profit from the sale of all of their media from hard copy books to games to other digital downloads.

This is not dumping. This is not illegal. As my statement said, if and only if Amazon turns around and grossly raises prices plus if and only if Amazon is deemed a monopoly (the only source for eBooks which is laughable), then and only then could they begin to be investigated for violations of the anti-trust act. They have showed no such intention to do so. It is highly profitable for them to provide eBooks to customers at the $9.99 price point. So much so that they are unconcerned if the same co-op deal is provided to the Apple iTunes store, B&N, KOBO, the GooglePlay Store, or anywhere else. Apple and the publishers were not thinking about the customer. They wanted exclusivity as well as the ability to set 50% higher prices across the board for eBooks.

I suggested in the last post that you bone up on economic theory and anti-trust law. Obviously you did not. My linked articles provided facts when coupled with that to understand why this was a very 'good' ruling and that only Apple & the publishers involved were 'wrong'. I have now provided you even more facts. It seems apparent to me again from this last paragraph and your attempts to change the legal definition of 'conspired' to some other definition to fit your thesis, that you are not thinking about this case, you are reacting to it emotionally. Amazon did not use the DoJ. Period. Amazon was never involved with this case. That is simply factual wrong. The DoJ investigated Apple when they blantly admitted to what they were doing during the intial run up to a civil class action lawsuit brought by consumers against Apple.

http://betanews.com/2012/03/09/apple-admits-to-two-key-allegations-...

http://www.publishersweekly.com/pw/by-topic/digital/content-and-e-b...

And once more you are wrong. The DoJ completed this lawsuit because Apple and the publishers broke the damned law. For you to claim that the real price of an eBook is $14.99 to $20.99 versus $9.99 is ludicrous. Once a book is published in hard copy, the price for production to digital is negligible. Publishers then are already making one profit source on the print copy. Publishers typically pay between 5% and 8% of book sales to the authors. I know, because I have been published. On a $9.99 sale of a digital copy, the author makes $.50 to $.80 and the remaining $9.00 goes to the publisher on top of the print sale revenue. Apple & Publishers who wish to inflate eBook prices further will not change this at all really for the author. Let's say the eBook is now $20.00. The revenue to the author is still 5% to 8% so now he or she is making $1.00 to $1.60 and the remaining $18.00 is going back to the publisher. That is a win/win for Apple (who would have gotten their little fee) and the publishers involved (who would realize double the revenue on their digital sales). It is a lose/lose for the author who still gets an incredibly small percentage of the overall sale, and the consumer, who is expected to pay twice as much.

Right now there is a stable system that involves competition. With Apple's agency deal, we would have an iron-walled system that costs us as creators and consumers of the digital content but still nets Apple and select publishers high profits. Amazon would not have been hurt really due to their other sources of revenue in this scenario. They still would have sold eBooks and in fact, if you paid attention during this case, Amazon was forced to raise prices on eBooks from $9.99 to $14.99 and higher. Look up the annual revenues to see that they weren't hurting. No, the DoJ did its job and we the consumers have a stable system with better prices.

I suspect you work as a programmer and will retort that digital is somehow more expensive and should be specially exempt from how the rest of the world has and will continue to treat 'objects' of sale. But I am sorry the real price of digital if it was to be the absolutely best for the consumer and still realize a hell of a profit for the publishers and wholesalers is in the $2.00 to $3.00 range. Do the math. I have.

Reply Parent Score: 4