Linked by Thom Holwerda on Fri 2nd Aug 2013 15:30 UTC
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[6]: Everyone is wrong
by atsureki on Mon 5th Aug 2013 01:45 UTC in reply to "RE[5]: Everyone is wrong"
Member since:

B&N is suffering. I wonder why. Oh, wait, no I don't.

You keep either misunderstanding or willfully ignoring that Amazon is selling books not merely below MSRP, but below the wholesale price that they, and their competitors, paid. No negotiations were involved. Amazon simply ate the difference. And that is not a model their competitors can follow, because to their competitors, this is an actual business, one that sustains them, not simply a new crown jewel up for sale to the highest bidder. [YOUR LINK]

"As publishers began selling e-books, they retained this wholesale method. So when retailers such as Amazon wanted to sell e-books they established wholesale contracts with the publishers. But Amazon, as part of their move to promote the Kindle device they sold, began to sell new release and best selling e-books at $9.99. This price was below the wholesale price.

"Amazon was relentless in their push for $9.99 prices on virtually all new release and best seller titles. The publishers were still getting the full wholesale price, but customers were getting e-books for less than that price and Amazon was willing to take a loss on them. Amazon made those e-books a loss-leader, meaning that they priced them at below cost-price in order to entice new customers to purchase a Kindle or perhaps even to encourage them to purchase other goods from Amazon."

Emphasis original. You can't miss it.

Amazon's regular price (not sale price; cut it out with the red herrings) was not simply below MSRP (in the article, RRP), it was less than Amazon paid. It was less than wholesale.

Now, if we were talking about physical items here, Amazon's competitors could make up some of their difference by just buying their stock from Amazon. But these are not physical items. Amazon is cultivating a DRM garden. Amazon is creating dependence on their services, to the exclusion of competing services.

And as already established, the Kindle isn't a profit item, either, so obviously that's not the end goal. Neither hardware nor ebooks are selling for profit. Until... I don't know. But I do know why companies usually do this kind of thing. And I'm pretty sure I read somewhere that it's illegal, as it very well should be.

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.

Noted. I had heard dumping and predatory pricing used interchangeably, but if you insist dumping is something more specific, I can go along with that.

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.

That's not what MFN is. You probably mean to say publishers will refuse to sell the ebook anywhere that won't honor the agency price. Because that would actually be true. And I really hope against hope that we only mean to say things that are true.

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.

(Then rebut it with facts.)

"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."

And everyone agrees this outcome is great for Amazon. Because it allows Amazon to... continue selling books at a negative profit...? Why would they want to do that?

Ooh! Ooh! I know why! Pick me!

Reply Parent Score: 3

RE[7]: Everyone is wrong
by TM99 on Mon 5th Aug 2013 07:47 in reply to "RE[6]: Everyone is wrong"
TM99 Member since:

Yet again, you don't seem to be understanding this.

It is ok for Amazon to sell below RPP, MSRP, or whatever the hell you want to call it. They can sell below wholesale price IF they want to. They are NOT breaking any laws to do so. Many businesses do this including the examples I gave you in the previous posts - NewEgg and Tiger Direct. I can provide hundreds of others. As long as they are paying the wholesale price that the publishers ask for, then they are just fine. B&N are not paying one price from the publisher and Amazon another.

B&N is a bad choice for your argument because they sell many of the same items including this little eBook reader called the Nook. Perhaps you have heard of it?

MFN status in this case did mean exclusivity with the Apple store because Amazon, B&N, the GooglePlay Store, etc. all used the wholesale model. They were being pressured to change what has been done so that Apple and publishers involved could set the price higher. That is what is a direct violation of the Sherman Anti-Trust Act. Apple & these publishers acted like the Mafia. They made deals that others couldn't refuse. It is illegal. Period. Look it up if you need more 'facts'.

I provided links already that can get you going on looking up the actual DoJ lawsuit and the original class action lawsuit.

Finally, here is what you are just not understanding. There is absolutely no problem with Amazon doing what they are doing even if eventually leads to becoming a monopoly. That is considered a normal aspect of market place economics. The problem occurs if and only if the monopolist abuses their position. The Sherman Anti Trust Act among other laws defines what is ok and what is not ok for a monopolist to do. A cursory study of the Microsoft vs DoJ will educate you more on this area of business. There was never a problem with Microsoft becoming a monopoly. The problems began when they abused that monopoly.

Businesses in the capitalistic model of market place economics that we have in America are allowed to compete very aggressively. We have very few laws really to define what is not ok. In Apple's case with this lawsuit, they broke one of those few sets of rules. They did it arrogantly and abusively - much like Microsoft did in the 1990's. Once a business achieves monopoly status, then they must follow a much more strict set of rules on their business behavior. If Amazon achieves a monopoly in eBook sales, then they will be held to that standard. At this point in time, they are not a monopoly. There are literally hundreds of places online to purchase eBooks from.

Most importantly at this point, customers are still better served by the wholesale model. Customers are also getting a much better price for eBooks from Amazon given their production costs. And as long as Amazon, even if they become a monopolist, continue to provide eBooks at these types of prices which are good for consumers, they are not ethically or legally breaking any rules of 'good' or 'bad'.

Reply Parent Score: 4