US Justice Dept accuses Apple of eBook Price Fixing

[Prestidigitweeze]

Diatribes against
one lone monolithic corp
should name the rest, too.

All mistreat others;
none is fair to the rest; all
first steal and then sell.

[avantman42]

Originally Posted by calvin-c

Conviction, in a case like this, would more likely subject the company to oversight by the DOJ to insure they obey the law. If that 'wrecks' the company then I don't think it's a company that we want doing business in the US anyway. Settlement, OTOH, would likely mean the company would pay a monetary penalty & then continue with 'business as usual' to the detriment of its customers.

The settlement with the publishers involved more than just a fine, including DOJ oversight. I'd expect any settlement with Apple to be similar. For example, from this article at Digital Book World regarding the settlement with Macmillan:

“As a result of today’s settlement, Macmillan has agreed to immediately allow retailers to lower the prices consumers pay for Macmillan’s e-books,” said Jamillia Ferris, Chief of Staff and Counsel at the Department of Justice’s Antitrust Division. “Just as consumers are already paying lower prices for the e-book versions of many of Hachette’s, HarperCollins’ and Simon & Schuster’s new releases and best sellers, we expect the prices of many of Macmillan’s e-books will also decline.”

and

Under the proposed settlement agreement, Macmillan will immediately lift restrictions it has imposed on discounting and other promotions by e-book retailers and will be prohibited until December 2014 from entering into new agreements with similar restrictions. The proposed settlement agreement also will impose a strong antitrust compliance program on Macmillan, including requirements that it provide advance notification to the department of any e-book ventures it plans to undertake jointly with other publishers and regularly report to the department on any communications it has with other publishers. Also for five years, Macmillan will be forbidden from agreeing to any kind of most favored nation (MFN) provision that could undermine the effectiveness of the settlement.

[fjtorres]

Originally Posted by frahse

I don't think much will happen.

Apple is too big, too rich, too egoistical.

They have too many lawyers.

Microsoft Circa 1996.

When the government chooses to set an example, nobody is too rich/too big. If anything, "too egotistical" and "too many lawyers" is what put them on the DOJ's radar.

[fjtorres]

Originally Posted by avantman42

The settlement with the publishers involved more than just a fine, including DOJ oversight. I'd expect any settlement with Apple to be similar. For example, from this article at Digital Book World regarding the settlement with Macmillan:

Indeed.
More, when the DOJ was explaining the settlement terms last fall they talked of restoring the competitive environment that existed before collusion.

the government explained that the terms of the proposed consent decree are designed to accomplish three things:
(1) end the current collusion;
(2) restore competition eliminated by that collusion;
and
(3) ensure compliance.

http://traderegulation.blogspot.com/...o-critics.html

Apple only got into ebooks because under the price fix they wouldn't have to compete on price. They might choose to throw a tantrum after the fact and close down iBooks instead of competing fairly, under constant oversight.

Worse, the feds might ask them to get out of ebooks altogether, either through a spinoff or sale.

In the worst case, since there appears to be evidence that Apple used its appstore market power to force Random House to join the conspiracy, the DOJ could extend the "remedies" to iTunes and/or the appstore itself.

Antitrust is a broad-reaching tool and once a company is targetted by the feds things get very bad very fast. Apple just might be egotistical enough not to have taken notice of the Microsoft lynching and if that is the case they may be in for some bitter times ahead.

[SteveEisenberg]

Originally Posted by fjtorres

Apple just might be egotistical enough not to have taken notice of the Microsoft lynching and if that is the case they may be in for some bitter times ahead.

Warning: Grumpy post ahead

I believe that Microsoft has been one of the world's top ten corporations, by market capitalization, every year since 1998. The anti-trust case was filed in 2001. So I'm not quite sure where the bitterness comes in. Because they weren't in the top 5 every year? I think that would be unrealistic.

There probably are/were egotistical Apple executives. But when a company gets as big and profitable as Apple, they are going to get antitrust attention regardless. And a tech company is going to have ups and downs regaredless of antitrust.

Apple was, at least in part, trying to protect itself from loss-leader pricing. Isn't that just what the US and EU governments do when they impose anti-dumping duties? So what Apple allegedly did is more a legal violation than an ethical one. Apple and those publishers tried something, and it worked for a couple years, and now they are going to have to try something else.

If companies conspire to raise the price of grain eaten by the world's poor, I will be as outraged as anyone. But I fail to see why the US government should be spending taxpayer money to protect eBook purchasers from there being a monopoly on a book price. Actually, at wholesale, there already is a legal monopoly -- AKA copyright. One great thing about books is that if you don't like the price set by the copyright holder, there are legal alternatives.

I realize that if I bought many newish eBooks, I might have a totally different attitude.

[fjtorres]

The bitter times line wasn't referring to Microsoft but rather to the rude awakening that Apple faces if they do end up under federal oversight.

One effect of the Microsoft lawsuit is that MS staff--from top to bottom--spent years embedding antitrust awareness into their internal processes at a time the computing industry started to pivot towards low-cost/low-cpu power devices. It divided their attention between serving the enterprise (their bread-and-butter), pleasing the federal overseers, and still trying to address emerging markets.
In the tug-of-war that resulted they were late in updating XP, over-reacted on security in crafting XP, failed to respond to Apple's product libel Ad campaign, and were late in updating their gadget/telephony OS.

The issue isn't whether they did well or poorly, financially, but that they were underperforming their demonstrated capability. Financially, the 30% rise in Window pricing provided the funds for the payoffs to the roadkill and politicians so they haven't been hurting and when you factor in the the Office/Sharepoint powerhouse, which is simply unstoppable in the enterprise, and their quiet launch of Azure they have ensured their relevance for the next generation, come what may, but the stock price has been stagnant. The federal oversight effectively turned MS from a fast moving growing tech company into more of a computing utility and their stock is treated as one. Safe and stable, but not a growth stock.
Things started to improve around 2007 but the first half of the decade left them trying to play catchup in several markets. They certainly blew the tablet market, deprecated ebooks, were slow to read the music market's disdain for interoperable DRM, and were late to adapt to netbooks and webcentric computing. Those were all growth markets they underserved because they were playing defense on the enterprise.

Apple is already being accused of moving slowly today and that is without including a federal overseer to check off on future actions at a time when their opponents are putting pressure on their current cash cows and preempting their possible growth market (the mythical Apple iTV). Making them slower to react to outside forces is not going to help them get their mystique back.

We'll know what the feds have in mind eventually but Apple is clearly not eager to submit to oversight of their internal processes. Probably with good reason; there's no telling what else might pop up.

[DrNefario]

Originally Posted by cfrizz

Consumers if they so wish can make their displeasure very clear very quickly simply by no longer making Apple purchases.

In this case, though, Apple allegedly conspired to screw other people's customers. I've never bought an iBook, but I was (and am) affected by agency pricing just like everyone else.

[DiapDealer]

Actually, of all the tax payer money being spent by the US government, expenditures investigating issues of antitrust are the ones I begrudge them the LEAST. Nobody else has the legal authority TO investigate. And while waiting until antitrust violations cause poor people to go hungry before goverment intervention may FEEL more righteous, it also sends the message that anything short of human cruelty is fair game in the business world. Why even HAVE the antitrust rules if the authorities mandated to ensure their compliance can't investigate?

[tubemonkey]

Originally Posted by DiapDealer

Actually, of all the tax payer money being spent by the US government, expenditures investigating issues of antitrust are the ones I begrudge them the LEAST. Nobody else has the legal authority TO investigate. And while waiting until antitrust violations cause poor people to go hungry before goverment intervention may FEEL more righteous, it also sends the message that anything short of human cruelty is fair game in the business world. Why even HAVE the antitrust rules if the authorities mandated to ensure their compliance can't investigate?

I can support that sentiment

[fjtorres]

Originally Posted by DiapDealer

Actually, of all the tax payer money being spent by the US government, expenditures investigating issues of antitrust are the ones I begrudge them the LEAST. Nobody else has the legal authority TO investigate. And while waiting until antitrust violations cause poor people to go hungry before goverment intervention may FEEL more righteous, it also sends the message that anything short of human cruelty is fair game in the business world. Why even HAVE the antitrust rules if the authorities mandated to ensure their compliance can't investigate?

Exactly.
Plus, US Antitrust is about *consumer* protection, not "protecting" one company from another.
And considering how bad the legal system is about restitution, early action is a must.

"Thou shall not get away with it."
No excuses or fingerpointing allowed.

Edit:
BTW, there *is* a government agency tasked with monitoring and acting on company versus company competition issues--The FTC. And it should be noted that, despite all the whining about Amazon practices, nothing actionable has emerged from the FTC. A good sign of the merit of all those "predatory" loss-leader pricing accusations.

[fjtorres]

C has a nice summary and analysis of the case:

http://news.cnet.com/8301-13579_3-57...ok-prices-faq/

The biggest risk for Apple in the DOJ trial isn't money; it's oversight into the company's other operations. The Justice Department isn't asking for monetary damages but wants Apple to admit wrongdoing and change its procedures to make sure that wrongdoing doesn't happen again. The publishers already have ended their pacts with Apple as part of their settlements, but Apple could pursue similar deals in its other businesses, such as music and TV. If the antitrust case sets a precedent that Apple's business dealings are illegal, it could have a sort of chilling effect on its other operations.

This is the model they want to use throughout their ecosystem," James Grimmelmann, a professor at New York Law School. "They don't want to have their fixed commission model undermined when it comes to apps, movies, and music.... To them it's a much larger issue than books."

Also, the government could seek more oversight into Apple's affairs, much as it did during Microsoft's antitrust suit more than a decade ago. In that instance, the DOJ set up a "technical committee" of three people who were based at Microsoft's headquarters and had full access to Microsoft's staff, documents, system, and facilities for five years to make sure the software company complied with its settlement.

[rkw]

Originally Posted by elcreative

Good idea RKW... wreck the company so they can't recover, up the unemployment and shift even more business to other countries... and how does having a sale make a "gaff to show how manipulated the pricing was." So all sales show price manipulation and... what?

Love your worldview...

Personally, I'd rather Apple settled so the taxpayer doesn't enrich the lawyers even more and then lets move on, perhaps looking at a few others with dominant market positions...

A bit more depth to your analytical look at my comment would aid in understanding the meaning of my comment. Sans that read pretty much every comment after yours.

[Blue Tyson]

Short crime novel will be an old school scanning and uploading project for someone. Well, likely multiple someones!

[Elfwreck]

Originally Posted by curtw

That "handful" was all New York Times bestsellers. The number of titles might have been a small fraction of available ebooks, but they did represent a significant plurality of all of Amazon's sales.

I own an Amazon device. We have a Prime account. I'm not against them, but they were well on their way to establishing a monopoly in this market. And because legal action wouldn't have been feasible until *after* the monopoly was established, Apple and others took this approach. It was a bad approach, but obviously the PR angle wasn't working.

Publishers had an easy way to stop Amazon from getting market control: Stop selling to Amazon. Or give other ebook stores--like Fictionwise, BoB, Diesel, AllRomanceEbooks--good enough terms to let them solidly compete, instead of picking a method that drove smaller stores out of business in the aftermath of the new pricing scheme.

The publishers are the supplier. If they don't like a retailer's action, they have *absolute* control over that retailer's success... they can pull their products.

This wasn't about "preventing a monopoly;" it was about "getting all the money we can from Amazon *and* controlling public opinion at the same time." And they picked an illegal method to accomplish that, and they got caught and slapped down for it.

[fjtorres]

Originally Posted by Elfwreck

And they picked an illegal method to accomplish that, and they got caught and slapped down for it.

All they had to do was do it the way the airlines do it: one goes first and the rest follow suit days or weeks later. As long as there is no clearly concerted action they usually get away with it.
Besides, dealing with illegal competitive situations (when and if they arise) is the government's job, not something for wannabe vigilante lynch mobs.