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[3]: Everyone is wrong
by TM99 on Sun 4th Aug 2013 09:08 UTC 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

RE[4]: Everyone is wrong
by atsureki on Sun 4th Aug 2013 12:00 in reply to "RE[3]: Everyone is wrong"
atsureki Member since:
2006-03-12

Bluff? Because you do not understand what is happening hardly means it is a bluff.


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

It did not. It's either a bluff or a blunder, take your pick.

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.


Fair enough, I'll simply say that I'm more interested in what's wrong than I am in what's illegal. In any case, you've still said nothing about predatory pricing laws that excludes Amazon from culpability there. Maybe you want to actually quote something, because I've already wasted enough time reading whole articles that don't contain the point you say they do.

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.


How long is "currently"?
When do we see the results of this "negotiating"?
How does costing "far less to produce" help other retailers keep up with Amazon's artificially low prices?
Since when is below wholesale "regular"?

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,


Not what the agency model is. Source: your link.

the publishers would have to raise it high enough to cover Apple's 30% off the top charge,


Industry standard book retail margin is 50%. Apple charges less. Source: your link.

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.


They charge less than wholesale. You keep ignoring the single most important part. They charge cost for the hardware, and below cost for the content. Their entire ebook business is a dumping operation.

You keep mentioning that Amazon isn't the publisher, but you've cited nothing that makes that relevant.
http://en.wikipedia.org/wiki/Predatory_pricing
Do you see anything on that page about having to be the manufacturer? Because I see a lot of retailer examples. Again, maybe quote something.

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.


It sounds like you're talking about a standard of evidence. Super. So if you're right, then the law is useless, because by the time that happens, B&N is already long out of business.

It is highly profitable for them to provide eBooks to customers at the $9.99 price point.


False. Source: your link.

Amazon did not use the DoJ. Period. Amazon was never involved with this case. That is simply factual wrong.


Apple says otherwise.

http://paidcontent.org/2012/08/15/apple-bashes-amazon-and-proposed-...

"For example, many expressed concerns about the possibility that the Government has unwittingly placed a thumb on the scales in favor of Amazon, the industry monopolist. Amazon was the driving force behind the Government’s investigation, and it told a story to the Government that has yet to be scrutinized. Amazon talked with the Government repeatedly throughout the investigation, even hosting a two-day meeting at its Seattle headquarters. In all, the Government met with at least fourteen Amazon employees—yet not once under oath. The Government required that Amazon turn over a mere 4,500 documents, a fraction of what was required of others."
-Footnote 6 of the embedded memo.

(See, now, that's how citing is done. My link is relevant, I told you where to look, and I even quoted the part that matters.)

For you to claim that the real price of an eBook is $14.99 to $20.99 versus $9.99 is ludicrous.


I never gave an example of a "real price", but I did use that term, and what I meant by it was either a publisher-dictated agency price or a profitable retail price. In other words, anything other than Amazon's system of charging below wholesale; anything that is tenable or sustainable for a legitimate retailer, not funneling profits from unrelated businesses, to charge.

That the publishers are being greedy as a general rule is irrelevant to whether Apple or Amazon or both are undermining retail competition.

(I did us both the favor of removing all your ad-hom static. Maybe you can take care of that yourself next time.)

Reply Parent Score: 3

RE[5]: Everyone is wrong
by TM99 on Sun 4th Aug 2013 16:23 in reply to "RE[4]: Everyone is wrong"
TM99 Member since:
2012-08-26

You still continue to be unable to provide any relevant proof that Amazon has or is currently putting other retailers of eBooks out of business. They are not. That is why I called your statement ludicrous.

I really wish you would read that article again on the Agency model more closely, because the questions you are asking of me and the points you are trying to debate with me are indeed covered there.

But I will reiterate if it helps.

No one can answer 'how long' only to acknowledge that under the wholesale model that Amazon follows, consumers pay less for the same eBook. That is good for consumers. Under the agency model and collusion practice that Apple & these publishers attempted to push through, consumers paid higher prices at all sources of purchase including Amazon. That is bad for consumers. If Apple and the other publishers are forced to stop these practices, because we all know Apple will not willingly settle this, then prices will return to their lower position, hopefully, and that is good for consumers.

As an Amazon customer you have already seen the results of the negotiating. This is how it has been done for almost a decade now with them with regards to the wholesale model. The publishers agree to this because while they may bitch that they are losing money, in fact they are not. It is simple math. If I sell volume x at a higher price at one location (iTunes store) but fewer buy because of the higher price, and if I sell volume x at a lower price at another location (Amazon) and more buy because of the lower price, not only does Amazon realize a profitable success but so does the publisher. They want more of the pie. Fair enough. But they allowed Apple to suggest a means to do this which is illegal. That is why they got their hands slapped.

I don't think you understand the wholesale model and what has occurred. Amazon negotiates a wholesale price with the publisher. The publisher can suggest that Amazon charge more for the book, but they can not force Amazon to do so. They are quite free to sell it below MSRP. Companies do this all the time. Have you bought computer parts at NewEgg or Tiger Direct? Did you pay MSRP for that 1TB hard drive on Black Friday? How about a new car deal from the car lot down the street? Are these companies putting other ones out of business? If so, is it done illegally? No, and here is why.

You are mixing concepts and that is why there seems to be a misunderstanding. From your Wiki link:

In economics, "dumping" is a kind of predatory pricing, especially in the context of international trade. It occurs when manufacturers export a product to another country at a price either below the price charged in its home market or below its cost of production.

Amazon does not create the eBooks. Therefore, they can not be 'dumping' them. Read the examples sited. Your other link is to predatory pricing. Some might attempt to argue that Amazon does that but they do not. They are engaged in price competition.

...price competition, which is where a company tries to distinguish its product or service from competing products on the basis of low price.

Amazon distinguishes themselves in their sale of eBooks by negotiating with publishers under the wholesale model so that they can sell eBooks at below MSRP for $9.99 or less. That is not dumping. That is not predatory. They do not have any sort of favored nation status exclusion which is exactly what Apple attempted to do here - Apple gets the better deal (as you quoted) in exchange for exclusivity to having that eBook ONLY at the iTunes store and not on Amazon. Amazon does not do that. They may sell the same eBook for less than Kobo, iTunes, GooglePlay Store, or B&N, but, they do not force or attempt to force publishers from making deals with those other stores. You may not like how they are competing, but the how is not illegal nor is it even unethical. For now, yes, it does provide us, the consumer, with lower prices for a product that already has a very high market up given its actual production costs.

Finally, though, you believe that I am making 'ad-hom static' as you call it but it is not. You are trying to base your argument that Amazon was the instigator of the lawsuit (which is factually wrong!) based on Apple's very, very recent appeals filing with the DoJ.

Please read the comments. There are a few intelligent and accurate responses. Just because Apple says so, does not make it so. The Supreme Court has already determined that settlements such as this by the DoJ are allowable and do not violate the due process of the companies involved. They have been found guilty of an illegal act. Due process was served in the trial. Apple is trying to argue that they are immune to such settlements. Forcing them to break an illegal contract is not a violation of due process. Their contracts are based, on court determined guilty illegal practices

Apple wanted to enter the eBook market. They did so illegally and prices across the board on eBooks rose because of their collusion and anti-competitive practices with their chosen publishers. You want to argue that Amazon is bad for the market and for consumers. Yet, Apple is the one who is now proven to have been something truly bad for the market and for consumers. I yet again ask you how do you rationally defend this? Can you deny that they broke the anti-trust laws? Can you deny that eBook prices have risen and remain high(even at Amazon) due to their illegal practices?

Snark all you want. I provided links. I will not hold your hand for you with regards to having a better foundation of economic understanding when reading those links. You may not intend this to be so, but you sound like a 'fan' who is trying to rationalize why Apple is not wrong and Amazon is. I have no great love for the corporation Amazon. Their warehouse anti-labor practices are atrocious and need seriously correcting. However, that is irrelevant to this case and this situation. Amazon is not wrong. The DoJ is not wrong. Apple is wrong.

Reply Parent Score: 4