DoJ files antitrust suit against Apple, 5 publishers over e-book prices

The US Department of Justice has moved forward with its plans to sue Apple and five e-book publishers for allegedly colluding to fix e-book prices.

<a href='http://meincmagazine.com/apple/news/2012/04/doj-files-antitrust-suit-against-apple-5-publishers-over-e-book-prices.ars'>Read the whole story</a>

 

[Z1ggy]

Come on DOJ. Maybe this will lower the price of an ebook to less than a paperback. Thats when ill actually buy an ereader.

 

[helel ben shachar]

Come on DOJ. Maybe this will lower the price of an ebook to less than a paperback. Thats when ill actually buy an ereader.

Never have figured that out myself. Nothing to physically manufacture, just send out copies and reap in profit. I'm yet to buy an ebook reader myself. Although I must admit I'm an avid fan of physical books over electronic texts.

 

[Trodamus]

I hope Apple and those publishers get their heads kicked in. Been infuriated to see ebooks on amazon priced higher than physical copies.

 

[mattclary]

I have an e-reader, and make use of Bittorrent. I just look at isohunt.com as the new public library. When content producers go back to respecting a reasonable length of copyright, I will also respect it.

 

[reflex-croft]

Great news! Saw a stat the other day that 40% of regular readers own an electronic reading device now. Hate to see them continue to get soaked by the publishers and Apple.

Hope the EU follows suit.

 

[somnia]

assuming all parties are indeed guilty of collusion, which the coverage here at Ars and on the Verge seems to indicate, I hope the DoJ imposes large enough fines so this sort of stunt will not be tried again by Apple or any others in another medium.

 

[ilovedawkins]

Time to start exorcising the ghost of Steve from the e-book market that he led the cartelisation of.

The power of competition compels you!

 

[SirOmega]

How is the agency model against antitrust for e-books, but not for apps? I mean its the same model, the creators of the content (book or app) get to set the price, and Apple gets 30% of the price.

 

[Deleted member 216601]

What I want to know is when the DOJ is going to sue the cellular companies for THEIR price fixing. When there is nationwide competition between Verizon, AT&T, Sprint and T-Mobile, why are our monthly bills still so much higher than they are overseas in other countries? The only obvious conclusion is collusion and price fixing among the major wireless carriers.

 

[mrstep]

The funny thing is that Apple didn't push for an agency model with songs... But then they already dominated music and could push the .69/.99/1.29 model on the publishers there.

Hopefully they force the wholesale model on them and let the re-sellers fight about end prices - and that we see ebooks that actually cost less than physical again.

 

[nickf]

I hope Apple and those publishers get their heads kicked in. Been infuriated to see ebooks on amazon priced higher than physical copies.

You'd be even more infuriated if you lived in the UK. Paper books are tax exempt, e-books aren't.

 

[deet]

So the fight is over whether the publishers or the sellers should collude to fix prices?

 

[foresmac108]

Hate to see them continue to get soaked by the publishers and Apple.

I fail to see how readers are "getting soaked" by Apple. The publishers set the price, so if it's too high then the e-books don't sell. Apple just takes its 30% cut like it does with apps and other media.

You could argue Apple was somehow trying to stick it to Amazon, maybe, and perhaps the DoJ has some proof of that. But look at it from the other side—Amazon was selling e-books well below wholesale, pushing prices down below what publishers considered sustainable levels in order to pump up its Kindle hardware business. Is that any more or less "fair" than what Apple did, which was to offer an alternative business model?

I'm not saying there wasn't some collusion—that's certainly possible—but to suggest it was done to "soak readers" just doesn't make sense.

 

[MonkeyT]

I really want to see a strong article comparing the Apple brouhaha with Amazon's practices. THEN, I'll make up my mind. I love how Apple is in antitrust problems while Amazon sells the vast percentage of all books/media sold online, and publishers are reportedly far more scared by Amazon than they are by Apple.

 

[killing_time]

How is the agency model against antitrust for e-books, but not for apps? I mean its the same model, the creators of the content (book or app) get to set the price, and Apple gets 30% of the price.

the model is fine, the question is about collusion between all the publishers and apple.

 

[mrstep]

How is the agency model against antitrust for e-books, but not for apps? I mean its the same model, the creators of the content (book or app) get to set the price, and Apple gets 30% of the price.

The difference is that it's a specific contract between an app developer and Apple - if you want to publish on THEIR device, you go through THEIR store with those conditions. There's nothing in that agreement preventing you from publishing the same app (aside from API / SDK differences, so some reworking unless you're HTML5 or Unity or something) on other devices at whatever price you want.

If you want to sell in the App Store for $100, on Windows Phone for $6.66 and on Android for $1, go for it. Hard to argue price fixing there, it's just a publishing contract. If the book publishers hadn't gone and changed the sales model for other book sellers, there wouldn't have been an issue - it's because they're trying to set a industry-wide fixed price, i.e. price fixing.

Though I do find it curious that a publisher can't say 'look, set the price at $10 and you get 30%' to everyone who wants to sell their content - price fixing usually applied to collusion between companies to sell at certain prices, which isn't clear from this. Did all these sellers agree to price their books at certain prices (let's sell all best-seller hardcover timeframe ebooks at $15, for example), or just that re-sellers couldn't set their own end prices.

But it sounds like the government definition - looking at whether consumer prices have gone up - looks at it differently then?

 

[ReductiMat]

I can't believe they didn't set up a Super PAC to get the requisite number of politicians in their back pocket before colluding.

Must be rookies or something.

 

[Demani]

I've said this elsewhere, but clearly Jeff Bezos was pissed, and he has big enough guns to kick off the investigation.

But the music publishers have similar rules in place to prevent cheap tracks, and clearly the cellular companies do as well. But they didn't put a big fly in the ointment of an existing very large competitor, so there wasn't anyone to light a fire under the DoJ about it. Because consumer complaints just don't amount to much, but company complaints about competition do (after all, corporations are just more-equal people).

 

[Rene Gollent]

You could argue Apple was somehow trying to stick it to Amazon, maybe, and perhaps the DoJ has some proof of that. But look at it from the other side—Amazon was selling e-books well below wholesale, pushing prices down below what publishers considered sustainable levels in order to pump up its Kindle hardware business. Is that any more or less "fair" than what Apple did, which was to offer an alternative business model?

The problem is the part where the agreement had the further stipulation that nobody is allowed to offer it at a lower price than Apple. Ergo, Apple didn't just offer an alternative business model, they forced it onto all their competitors as well whether they liked it or not.

 

[foresmac108]

The funny thing is that Apple didn't push for an agency model with songs... But then they already dominated music and could push the .69/.99/1.29 model on the publishers there.

The labels forced tiered pricing on Apple, not the other way around. Jobs wanted 99¢ per song, period. You can actually partially thank Amazon's MP3 store for the fact that you pay an extra 30¢ for the latest Katy Perry hit. http://arst.ch/4

 

[crmarvin42]

Hate to see them continue to get soaked by the publishers and Apple.

I fail to see how readers are "getting soaked" by Apple. The publishers set the price, so if it's too high then the e-books don't sell. Apple just takes its 30% cut like it does with apps and other media.

You could argue Apple was somehow trying to stick it to Amazon, maybe, and perhaps the DoJ has some proof of that. But look at it from the other side—Amazon was selling e-books well below wholesale, pushing prices down below what publishers considered sustainable levels in order to pump up its Kindle hardware business. Is that any more or less "fair" than what Apple did, which was to offer an alternative business model?

I'm not saying there wasn't some collusion—that's certainly possible—but to suggest it was done to "soak readers" just doesn't make sense.

So then the issue isn't that the Agency Model is inherently bad, but there are indications that the publishers/Apple colluded to foist the Agency Model on Amazon through that weird "Favored Nation" clause? The one that says the publishers can't sell the book cheaper somewhere else, only at the same or higher prices?

 

[Grimby]

Hate to see them continue to get soaked by the publishers and Apple.

I fail to see how readers are "getting soaked" by Apple. The publishers set the price, so if it's too high then the e-books don't sell. Apple just takes its 30% cut like it does with apps and other media.

You could argue Apple was somehow trying to stick it to Amazon, maybe, and perhaps the DoJ has some proof of that. But look at it from the other side—Amazon was selling e-books well below wholesale, pushing prices down below what publishers considered sustainable levels in order to pump up its Kindle hardware business. Is that any more or less "fair" than what Apple did, which was to offer an alternative business model?

I'm not saying there wasn't some collusion—that's certainly possible—but to suggest it was done to "soak readers" just doesn't make sense.

Amazon was still paying the publishers what they wanted and taking a loss. The publishers were still getting their money. Apple didn't just offer another business model, they included a clause that made sure no one else could get ebooks cheaper than they did. That's the difference.

 

[DNick]

Hate to see them continue to get soaked by the publishers and Apple.

I fail to see how readers are "getting soaked" by Apple. The publishers set the price, so if it's too high then the e-books don't sell. Apple just takes its 30% cut like it does with apps and other media.

You could argue Apple was somehow trying to stick it to Amazon, maybe, and perhaps the DoJ has some proof of that. But look at it from the other side—Amazon was selling e-books well below wholesale, pushing prices down below what publishers considered sustainable levels in order to pump up its Kindle hardware business. Is that any more or less "fair" than what Apple did, which was to offer an alternative business model?

I'm not saying there wasn't some collusion—that's certainly possible—but to suggest it was done to "soak readers" just doesn't make sense.

How can you put any spin on this other than "soak the readers?" The whole thing came about so Apple could get their 30% cut. Before the "agency model," there was never anything stopping Apple from competing with Amazon on their own terms, by selling at a lower price. However, in the interest of protecting Apple's profits, they used their market power to enforce the only situation in which they could compete with Amazon and still make money.

Regardless of the politics or marketing spin used to justify this, the effect is the same. E-book readers now pay substantially more than they were before Apple and the publishers implemented the agency model, full stop. Spin it any way you like, I'm paying ~$15 for books that used to cost $10.

 

[somnia]

I really want to see a strong article comparing the Apple brouhaha with Amazon's practices. THEN, I'll make up my mind. I love how Apple is in antitrust problems while Amazon sells the vast percentage of all books/media sold online, and publishers are reportedly far more scared by Amazon than they are by Apple.

there are no US laws against a natural monopoly. After all, the DoJ is not suing Apple over their "monopolistic" position in the tablet market. There are, however, rules against abuse of a monopolistic position. Microsoft was fined for their abuse of their monopolistic position.

Amazon wasn't abusing any "monopolistic" position. they were not dumping (that's only applicable in international trade, if I remember correctly). they were simply trying to grow a market by selling at a loss. same thing the game console makers do when they release new gaming systems.

in this case, we are not talking about antitrust or anything like that, but collusion. the charge is that Apple and the publishers jointly decided to adopt an agency-based model for e-books across the board, and then went to Amazon (as a group) and told it to adopt the agency model too.

if Apple had said "we'll allow you to use the agency model" and the publishers individually accepted that, and then individually went to Amazon and demanded a change, then we probably wouldn't see this suit today. the issue is the collusion.

its not about the high e-book prices in and of themselves, its because they are the result of collusion.

 

[MidgardDragon]

hey now maybe some time soon I will be able to but the Game of Thrones series for less than the cost of the f'ing physical books instead of MORE!

 

[Shnitz]

I also just BitTorrent. It is ridiculous to have to pay more or even close to the same price for something that I can't lend out, resell, and am limited in how I consume it.

If I really enjoy the book after reading it, I'll go buy it and put it on the bookshelf.

 

[Trodamus]

Hate to see them continue to get soaked by the publishers and Apple.

I fail to see how readers are "getting soaked" by Apple. The publishers set the price, so if it's too high then the e-books don't sell. Apple just takes its 30% cut like it does with apps and other media.

You could argue Apple was somehow trying to stick it to Amazon, maybe, and perhaps the DoJ has some proof of that. But look at it from the other side—Amazon was selling e-books well below wholesale, pushing prices down below what publishers considered sustainable levels in order to pump up its Kindle hardware business. Is that any more or less "fair" than what Apple did, which was to offer an alternative business model?

I'm not saying there wasn't some collusion—that's certainly possible—but to suggest it was done to "soak readers" just doesn't make sense.

As it has been mentioned before, Apple also included a clause that disallows publishers from offering their wares at lower prices elsewhere. So this plus the agency model basically removed anything resembling a free market system and suddenly everyone had the same (high) prices everywhere.

 

[gowreck]

I purchase 10+ books a month for my Kindle account. I love reading - mainly science fiction in all its genres.

When the publishers started setting the price I freaked; but then started purchasing self-published books. Its been a gold mine of great reading. I may not get the big names - but honestly in most cases, who cares?

Reading is not the same as music or films where production values and artist skill levels are large factors. I tell everyone to ignore who publishes, best seller lists, and just look for highly rated books. The prices are cheaper, the stories can be better, and you can support the little guy.

Occasionally, I'll purchase a full price book -- but thats because the author is so good I don't care.

edit: oh, yeah - and apple was completely underhanded.

 

[somnia]

I've said this elsewhere, but clearly Jeff Bezos was pissed, and he has big enough guns to kick off the investigation.

But the music publishers have similar rules in place to prevent cheap tracks, and clearly the cellular companies do as well. But they didn't put a big fly in the ointment of an existing very large competitor, so there wasn't anyone to light a fire under the DoJ about it. Because consumer complaints just don't amount to much, but company complaints about competition do (after all, corporations are just more-equal people).

consumer complaints in a free-market economy won't amount to much if no laws are being broken because its a free-market economy. for example, the DoJ under both Presidents Bush & Obama investigated "oil speculators" and determined that there was nothing illegal in the oil market, so the government could not do anything about high prices.

its the same with wireless providers and the other markets you mentioned, under the current laws they are doing nothing wrong.

the reason why the gov't is attacking the high prices here is because of how they came about: via alleged collusion. the other markets you cited didn't come about via collusion, otherwise the gov't would have something to stand on.

and before you cry SuperPACs, I would counter that Obama would love the positive press he'd receive for "trust-busting" more than money. (same with Bush when his popularity was lower than he wanted)

 

[jukes_]

Hate to see them continue to get soaked by the publishers and Apple.

I fail to see how readers are "getting soaked" by Apple. The publishers set the price, so if it's too high then the e-books don't sell. Apple just takes its 30% cut like it does with apps and other media.

You could argue Apple was somehow trying to stick it to Amazon, maybe, and perhaps the DoJ has some proof of that. But look at it from the other side—Amazon was selling e-books well below wholesale, pushing prices down below what publishers considered sustainable levels in order to pump up its Kindle hardware business. Is that any more or less "fair" than what Apple did, which was to offer an alternative business model?[/quote[

Retailers sell at a loss all the time for lots of different reasons. It's a problem when they do it to put competitors out of business with the ultimate goal of increasing prices for the customer. It's not clear that was Amazon's intent, although if you want to lump e-books in with hardcopy books then there might be something to look at.

I'm not saying there wasn't some collusion—that's certainly possible—but to suggest it was done to "soak readers" just doesn't make sense.

It does from the publishers' perspective. They were protecting their hardcopy business because they fear the open marketplace for e-book pricing, which amounts to soaking the readers by inflating prices. Apple gave them a great opportunity to do this. I'm not sure that Apple is liable for anything here though, other than taking advantage of the pubishers' weak position with Amazon.

 

[fitten]

More actual details here: http://online.wsj.com/article/SB1000142 ... 15152.html

 

[Travis Butler]

So then the issue isn't that the Agency Model is inherently bad, but there are indications that the publishers/Apple colluded to foist the Agency Model on Amazon through that weird "Favored Nation" clause? The one that says the publishers can't sell the book cheaper somewhere else, only at the same or higher prices?

You mean the same clause that Amazon includes in their own contracts? As I noted last week (viewtopic.php?p=22735547#p22735547), from Amazon's own publishing guidelines:

You must set your Digital Book's List Price (and change it from time-to-time if necessary) so that it is no higher than the list price in any sales channel for any digital or physical edition of the Digital Book.

If this clause is the reason Apple is being sued, then Amazon should also be sued.

 

[spittingangels]

How is the agency model against antitrust for e-books, but not for apps? I mean its the same model, the creators of the content (book or app) get to set the price, and Apple gets 30% of the price.

I'm confused about this, too. Presumably, nothing about the agency model works against low cost books other than publisher greed. Publishers could still price books under $10 via the agency model.

I also wonder how people can't get so up in arms about the 30% Apple and Amazon take when that percentage is far lower than what has been standard for distribution costs for several years.

Going back to the wholesale model gives Amazon a huge advantage in eBooks as they deal in so many goods, they can price the books below wholesale prices as a loss leader and make up that money elsewhere. That's essentially what they were doing before. This tactic guarantees that no e-book competitor can compete on price without taking a loss or dealing in other goods (i.e, B&N forced to raise prices on physical books and accessories, etc) and allows Amazon to continue to dominate the market until they are the only game in town. From some stories that have leaked out over how Amazon deals with publishers and authors, I'm not sure that this is the best idea. When a market is artificially depressed, the first thing to go is quality. I don't know about everyone else but I like copy-editing in a book.

It seems this scenario will play out as a lesser of two evils kinda of thing.

I personally think the Agency model should stay but the part of the contract with Apple that stipulates that the same content can't be priced less elsewhere needs to go and also removed from contracts with other marketplaces, if present. I also think that within the agency model, the marketplace; i.e Amazon, Apple, or B&N, etc; should be allowed to temporarily reduce the price via a sale to drive competition, within certain limits.

I'm not sure the wholesale model makes sense with a digital product.

I know Apple will take a lot of heat here because, well, this is Ars but the real issue at work here is publisher greed. It would be nice if the DoJ demanded that publishers price e-book versions at a lower price than cost of the cheapest version in print (i.e. the paperback for items other than new releases) but I doubt the DoJ will do so. They will probably fine everyone involved and invalidate the contracts.

 

[ChrisH]

I have an e-reader, and make use of Bittorrent. I just look at isohunt.com as the new public library. When content producers go back to respecting a reasonable length of copyright, I will also respect it.

Absolutely, I love my kindle so much, but there is no way I'm paying $15 for an ebook, which is what most new ones are priced at. I can buy nearly any paperback at our local used book store for less than $5. So that's my threshold, If they price them around half the price of paperbacks, I'll be buying 2 or 3 books a week for life. But at the present prices, I have literally only ever bought one ebook from Amazon and that was one of my favorite authors on sale for $4.

The should study the Steam model. I don't remember the specific numbers right now, but they found the more they reduced prices, the more they sold, to the point where it was something crazy like, if they reduced prices to 25% they sold 1500% more copies, thereby making much, much more money. If I could buy older novels, and series for 1 or 2 buck a pop, I'd be buying hundreds of books a year of the titles that are probably not selling much anymore. Seems like that would be a win for everyone. For example, one of my favorite authors wrote a book in 1974 that Amazons kindle edition sells for $8. That's a crazy price for a book that's almost 40 years old.

 

[fenris_uy]

Hate to see them continue to get soaked by the publishers and Apple.

I fail to see how readers are "getting soaked" by Apple. The publishers set the price, so if it's too high then the e-books don't sell. Apple just takes its 30% cut like it does with apps and other media.

You could argue Apple was somehow trying to stick it to Amazon, maybe, and perhaps the DoJ has some proof of that. But look at it from the other side—Amazon was selling e-books well below wholesale, pushing prices down below what publishers considered sustainable levels in order to pump up its Kindle hardware business. Is that any more or less "fair" than what Apple did, which was to offer an alternative business model?

I'm not saying there wasn't some collusion—that's certainly possible—but to suggest it was done to "soak readers" just doesn't make sense.

If Amazon was selling at a loss then sue them for dumping, but you don't have to force them to make a 30% profit on books if they want to make less just because Apple wants to make a 30% profit, the editors just need to set their price and let the sellers sell at what ever price they want. They are going to end getting the same amount of money for each book sold either way.

 

[Z1ggy]

So then the issue isn't that the Agency Model is inherently bad, but there are indications that the publishers/Apple colluded to foist the Agency Model on Amazon through that weird "Favored Nation" clause? The one that says the publishers can't sell the book cheaper somewhere else, only at the same or higher prices?

You mean the same clause that Amazon includes in their own contracts? As I noted last week (viewtopic.php?p=22735547#p22735547), from Amazon's own publishing guidelines:

You must set your Digital Book's List Price (and change it from time-to-time if necessary) so that it is no higher than the list price in any sales channel for any digital or physical edition of the Digital Book.

If this clause is the reason Apple is being sued, then Amazon should also be sued.

Pretty sure apples clause says you may not sell for lower. Amazon says you cant have us charge more than anyone, apple says you cant let anyone else charge lower. two different statements.

 

[Grimby]

So then the issue isn't that the Agency Model is inherently bad, but there are indications that the publishers/Apple colluded to foist the Agency Model on Amazon through that weird "Favored Nation" clause? The one that says the publishers can't sell the book cheaper somewhere else, only at the same or higher prices?

You mean the same clause that Amazon includes in their own contracts? As I noted last week (viewtopic.php?p=22735547#p22735547), from Amazon's own publishing guidelines:

You must set your Digital Book's List Price (and change it from time-to-time if necessary) so that it is no higher than the list price in any sales channel for any digital or physical edition of the Digital Book.

If this clause is the reason Apple is being sued, then Amazon should also be sued.

The user can reject the contract and go with a different publisher. Publishing is different than reselling you know.

 

[jukes_]

How is the agency model against antitrust for e-books, but not for apps? I mean its the same model, the creators of the content (book or app) get to set the price, and Apple gets 30% of the price.

I'm confused about this, too. Presumably, nothing about the agency model works against low cost books other than publisher greed. Publishers could still price books under $10 via the agency model.

But they would then lose money relative to the wholesale price they were getting from Amazon.

I'm not sure the wholesale model makes sense with a digital product.

I agree, but it seems bad for the consumer to go to the agency model because there isn't any obvious direct downward pressure on pricing.

 

[TheGreenMonkey]

You could argue Apple was somehow trying to stick it to Amazon, maybe, and perhaps the DoJ has some proof of that. But look at it from the other side—Amazon was selling e-books well below wholesale, pushing prices down below what publishers considered sustainable levels in order to pump up its Kindle hardware business. Is that any more or less "fair" than what Apple did, which was to offer an alternative business model?

The problem is the part where the agreement had the further stipulation that nobody is allowed to offer it at a lower price than Apple. Ergo, Apple didn't just offer an alternative business model, they forced it onto all their competitors as well whether they liked it or not.

Came to say this. The agency model is fine, however Apple stipulated through their contracts that no publisher can sell the same ebook to other vendors for less than what they sell to Apple. And that is price fixing. If Apple wants their 30% cut then the price of the book costs $x.xx, if Amazon only takes 20% then the book does not need to be priced as high for the publisher to make a profit. That's the business of competition, something that Apple is very much afraid of in my opinion.