Ebook pricing under scrutiny

[HansTWN]

http://www.ft.com/cms/s/0/f9ebd2d6-9...o1&segid=03058

Amazon, Apple, and the Big Five are finally taking the spot light. Although, didn't Amazon only go along after being forced to? Let us hope those price fixers are finally getting what they deserve.

[jgaiser]

Ummm... He's asking the wrong people. He should be asking the Big Five. They're the one setting prices.

[kjk]

“I fully understand that MFN’s are not per se illegal under our antitrust last,” Blumenthal wrote in a letter to Apple. “Yet, as I am sure you are aware, MFN’s are not per se legal either. MFN clauses — especially when they are offered to two of the largest e-book retail competitors in the United States — have the potential to impair horizontal competition by encouraging coordinated pricing and discouraging discounting.

well, one of the largest e-book retail competitors in the US...how does he know if Apple is even in the top 3 at this point?

[carld]

Originally Posted by jgaiser

Ummm... He's asking the wrong people. He should be asking the Big Five. They're the one setting prices.

I agree, if anyone's done anything wrong it's the Price Fix Five (and they have as far as I'm concerned). Amazon fought against their price fixing, so I think they're blameless in this mess.

[Worldwalker]

Is there a public version of this article available anywhere?

[carld]

Hmm linking didn't work. But if you Google "eBook pricing under scrutiny" a working link should come up right near the top.

[HansTWN]

Originally Posted by kjk

well, one of the largest e-book retail competitors in the US...how does he know if Apple is even in the top 3 at this point?

Apple definitely was instrumental in giving the Big 5 a chance to install the agency model.

[GA Russell]

Here's the link to the Yahoo Finance article:

http://finance.yahoo.com/news/Connec....html?x=0&.v=2

[HansTWN]

Originally Posted by Worldwalker

Is there a public version of this article available anywhere?

Quite strange. I accessed this link from a Yahoo news website. Apparently you can freely access this article with the Yahoo referral without registration. So please see below:


"The attorney-general’s office in the US state of Connecticut said on Monday that it was examining the pricing of digital books by Amazon and Apple, the e-reader rivals, citing competition concerns over their deals with leading *publishers.

Richard Blumenthal, the state’s most senior legal official, has written to both Apple and Amazon expressing concern that their pricing agreements with publishers “threaten to encourage co-ordinated pricing and discourage discounting”.
EDITOR’S CHOICE
Wylie threatens broad digital expansion - Jul-29
John Gapper: Publishers need to be creative - Jul-28
E-books overtake hardcover sales at Amazon - Jul-20
Sony moves to standardise e-books - Aug-13
Sony launches low-cost book readers - Aug-04
Springer leaps ahead in academic e-book market - Jul-05

The move represents a potential threat to publishers’ efforts to take control of e-book pricing amid the rapid growth in demand for digital titles for reading devices such as Amazon’s Kindle and Apple’s iPad.

Both Amazon and Apple, which dominate the rapidly growing e-book market, now have agreements with leading publishers that give the publisher of an e-book the right to set its list price, in exchange for granting the seller a 30 per cent share of the revenues.

The Connecticut inquiry focuses on unconfirmed reports that Amazon and Apple have secured guarantees they will receive the same pricing terms from the publishers of an e-book as any rival, which would allow them to match the lowest price in the market.

In his letters to the two companies, Mr Blumenthal said a so-called “most favoured nation” deal would lead to “the establishment of a price floor for e-books offered by the publisher”.

He also said that an initial survey of bestsellers by his office on Amazon, Apple, Borders and Barnes & Noble’s digital bookstores found that “almost uniformly, prices were identical between all four sellers”, which could be “to the ultimate detriment to the consumer”.

Amazon and Apple offer most bestsellers in e-book form for $9.99, significantly below the publishers’ listed prices for new hardbacks, which are often more than $20.

The publishers’ support for the agency pricing model is based on their fears that aggressive discounting of e-books will play havoc with their traditional business model.

Mr Blumenthal said that he wanted both retailers to discuss the issues further with his office.

Apple declined to comment on Monday, while Amazon could not be contacted.

Traditional books are sold at a wholesale price negotiated between the publisher and the retailer, which then decides the final retail price – a model initially adopted for e-books by Amazon, but abandoned in favour of the “agency model” established by Apple following pressure from publishers this year.

In 2007, the US Supreme Court ruled that manufacturers could set minimum resale prices in some circumstances.

But laws in several states, including California, New York and Connecticut, still consider setting minimum prices *illegal."

[GA Russell]

The publishers' demanding the agency model is a retail price issue. The most favored nation status is a wholesale price issue.

I don't see the connection between the most favored nation status and the price setting with the agency model that the CT govt is apparently objecting to.

[ficbot]

I think the connection is this: if everyone could set their own price, it would not matter so much if Retailer Y had the 'favoured nation' deal because I, as Retailer X, could still compete in the marketplace by offering by making the book a loss leader and taking my own hit on it to draw in other business. But if the publisher fixes the price AND gives someone a favoured nation status, nobody else can compete in the marketplace, and that is a monopoly/price-fixing situation.

[kjk]

Originally Posted by HansTWN

Apple definitely was instrumental in giving the Big 5 a chance to install the agency model.

How does that make Apple one of the two largest E-book retail competitors?

[HansTWN]

Originally Posted by kjk

How does that make Apple one of the two largest E-book retail competitors?

I never said that. Point being that Apple was an enabler in this price fixing scheme. No idea where they are in the ranking now, but Steve Jobs was harping on about 25% market share or something a while ago. My guess is that Amazon is far ahead of them, even worldwide.

[simplyparticular]

Although I think the CT AG is approaching this from the wrong angle, I'm happy to se any investigation in this situation. Anything that makes the Agency 5 rethink this mess could be a good thing.

[Graham]

I'm confused here. If this ruling is upheld does it prevent eBooks from the Big 5 being sold to customers in California, New York and Connecticut? How exactly are they going to enforce that?

Graham