U.S. Justice Dept. to Sue Publishers, Apple, for Price Collusion?

[vaughnmr]

Originally Posted by stonetools

What's misleading about the whole agency pricing debate is that the issue for most posters here is not that the publishers acted illegally, rather it's that they acted to raise prices. It's the price raising, not the price fixing that's the problem.

Speak for yourself, Stonetools. For me, it was the collusion between Apple and the Agency 5 before the release of the iPad to establish agency pricing for ebooks. Along with fixed-prices, no discounting, and the effort of the cartel to kill off smaller distributors (some didn't have agency books for almost a year afterwards).

[TimW]

Originally Posted by DiapDealer

That's because nobody ever colludes to make less money.

No, corporations are good people, they never (allegedly)commit illegal acts. Andrys (A Kindle World) posted this Steve Jobs' quote from the Isaacson biography on her blog:

' "We told the publishers, 'We'll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that's what you want anyway." They went to Amazon and said, 'You're going to sign an agency contract or we're not going to give you the books.' " '

Nah, that doesn't sound like collusion. The video (thanks Andrys) showing Jobs at the January 27, 2010 Ipad rollout:

Mossberg asks (and this videoclip is part of the lawsuits) if Jobs meant Apple's wouldn't be $14.99 ... or that Amazon's wouldn't be $9.99.

Jobs paused and said "The prices will be the same."

Clearly, SJ was having a genuine psychic moment. It was almost as though he had met with them to discuss joining the Agency instead of the far more plausible likelihood that the BPHs all simultaneously decided that they would enact the same scheme with the same 30% commission, going into effect at the same time, all without having any discussions with SJ or any of the other publishers. Apparently, they're all psychic.

[sabredog]

Originally Posted by vaughnmr

Speak for yourself, Stonetools. For me, it was the collusion between Apple and the Agency 5 before the release of the iPad to establish agency pricing for ebooks. Along with fixed-prices, no discounting, and the effort of the cartel to kill off smaller distributors (some didn't have agency books for almost a year afterwards).

Pretty much.

After agency price fixing came into being. I was locked out of over 70% of my previously purchased books due to newly imposed geo restrictions. Ebook prices increased as well, not that I could buy them any more.

When I first started buying ebooks, newly released titles were over $30, in line with hardcover prices. Amazon took that rip off price regime away for a while, offering ebooks much more attractively priced.

Enter Mr Jobs and his desire to have everything. Of course the publishers would fall into his way of thinking as it benefited them. Screw the customers.

[JoeD]

Originally Posted by vaughnmr

Speak for yourself, Stonetools. For me, it was the collusion between Apple and the Agency 5 before the release of the iPad to establish agency pricing for ebooks. Along with fixed-prices, no discounting, and the effort of the cartel to kill off smaller distributors (some didn't have agency books for almost a year afterwards).

Likewise, my issue is the price fixing agreement if it actually happened.

Had a single publisher decided to go to the agency model and/or raise their prices, I'd have moaned about it sure, but no more so than I moan about pricing in general Even if the rest of the publishers then followed that example in time.

No complaints then. But if it was done as an overall agreement then they've most likely broken the law and deserve slapping for it with hefty fines.

[Rob Lister]

Originally Posted by JoeD

Likewise, my issue is the price fixing agreement if it actually happened.

Had a single publisher decided to go to the agency model and/or raise their prices, I'd have moaned about it sure, but no more so than I moan about pricing in general Even if the rest of the publishers then followed that example in time.

No complaints then. But if it was done as an overall agreement then they've most likely broken the law and deserve slapping for it with hefty fines.

What if the collusion was quiet? Jobs openly broadcasts the concept and the individual players independently decide to take that road. Is that illegal?

What if the collusion did not refer to price? They collude, but only in terms of business strategy, not price. Is that illegal?

Is Jobs culpable? From the grave? He isn't a publisher. He has only an opinion, not a vote.

Is Apple?

[John F]

Originally Posted by Rob Lister

What if the collusion was quiet? Jobs openly broadcasts the concept and the individual players independently decide to take that road. Is that illegal?

What if the collusion did not refer to price? They collude, but only in terms of business strategy, not price. Is that illegal?

Is Jobs culpable? From the grave? He isn't a publisher. He has only an opinion, not a vote.

Is Apple?

Wasn't there an investigation phase (by the DOJ)? Since the DOJ plans on suing, isn't it likely that they found some monkey business going on?

[Elfwreck]

Originally Posted by Rob Lister

What if the collusion was quiet? Jobs openly broadcasts the concept and the individual players independently decide to take that road. Is that illegal?

Jobs didn't broadcast the concept; he said the prices *would* be the same, and higher at the iBookstore than they were at Amazon at the time of the announcement.

What if the collusion did not refer to price? They collude, but only in terms of business strategy, not price. Is that illegal?

That'll no doubt be one of the details the case investigates--how many books of what kind switched to what prices?

Is Jobs culpable? From the grave? He isn't a publisher. He has only an opinion, not a vote.

Is Apple?

CEO of Apple, or possible their board of directors, is liable. The only way for them to maybe *not* be liable is to claim they had no idea this happened, that Jobs pushed it on everyone, and now that they've been made aware of it, they'll dismantle that structure as fast as they can: allow non-agency priced books in the Apple bookstore and get rid of the price-matching demand that's attached to their current contracts.

Since they won't be doing that, they'll have to cope with being part of whatever ruling results from the case.

[DiapDealer]

What if the collusion was quiet? Jobs openly broadcasts the concept and the individual players independently decide to take that road. Is that illegal?

No. Probably not. But it defies logic that five different companies could independently come up with—and adopt—a new system that was identical in its details (exact same prices, commissions, etc.), wouldn't you say? The collusion is obvious. Anyone that thinks otherwise is delusional. Proving it legally may of course prove more difficult, but nobody really believes Jobs and the five publishers didn't act in concert... if they're being honest with themselves. The effect/intent/success (or lack thereof) of the collusion is fairly irrelevant. You're not supposed to be able to legally do business they way they did.

[stonetools]

Originally Posted by TimW

No, corporations are good people, they never (allegedly)commit illegal acts. Andrys (A Kindle World) posted this Steve Jobs' quote from the Isaacson biography on her blog:


Nah, that doesn't sound like collusion. The video (thanks Andrys) showing Jobs at the January 27, 2010 Ipad rollout:

Clearly, SJ was having a genuine psychic moment. It was almost as though he had met with them to discuss joining the Agency instead of the far more plausible likelihood that the BPHs all simultaneously decided that they would enact the same scheme with the same 30% commission, going into effect at the same time, all without having any discussions with SJ or any of the other publishers. Apparently, they're all psychic.

If this was conclusive evidence that the publishers were and acting together to fix prices on particular books , the DOJ wouldn't be in settlement negotiations. Its the ONLY piece of evidence that indicates collusion.
There are lots of industry wide agreements out there in countless industries. Are they all evidence of collusion?

[Elfwreck]

Originally Posted by stonetools

If this was conclusive eviodence thatthe publishers were and acting together to fix prices on particuklar books , the DOJ wouldnt be in settlement negotiations. Its the ONLY piece of evidence that indicates collusion.

Yes they would. Settlements save time & taxpayer money, and are *often* used in cases of "we know we have you pinned; would you like to cut down on the expense of a trial and the randomness of a judge's assigned penalties, and make a deal with us for reasonable penalties?"

There are lots of industry wide agreements out there in countless industies. Are they asll evidencve of collusion?

No. But agreements all entered at the same time, among supposed competitors, who made public statements that the public was getting things too cheap--not too cheap for them to make a profit, just too cheap for them to be comfortable with the sales--is evidence of collusion. The combination of "we want to raise prices for the end user" (which was publicly stated, more than once) and the change of an entire business model to support the forced higher prices, is also evidence.

It's not proof, hence the investigation.

Feel free to give examples of other industries working together with a supplier to change their business model in order to raise end-user prices.

[stonetools]

Originally Posted by John F

Wasn't there an investigation phase (by the DOJ)? Since the DOJ plans on suing, isn't it likely that they found some monkey business going on?

Maybe. Or maybe after a full investigation, all they have to go on is the Jobs quote. Can they file a lawsuit based on that? Sure. Can they WIN a lawsuit based on that? Nope.
What they want to do is get certain relcalcitrant publishers to the negotiating table. Those publishers don't think they've done anything wrong. Even the ones at the table just want to avoid the expense of a continuation of the process.

[stonetools]

Originally Posted by Elfwreck

Yes they would. Settlements save time & taxpayer money, and are *often* used in cases of "we know we have you pinned; would you like to cut down on the expense of a trial and the randomness of a judge's assigned penalties, and make a deal with us for reasonable penalties?"



No. But agreements all entered at the same time, among supposed competitors, who made public statements that the public was getting things too cheap--not too cheap for them to make a profit, just too cheap for them to be comfortable with the sales--is evidence of collusion. The combination of "we want to raise prices for the end user" (which was publicly stated, more than once) and the change of an entire business model to support the forced higher prices, is also evidence.

It's not proof, hence the investigation.

Feel free to give examples of other industries working together with a supplier to change their business model in order to raise end-user prices.

I think that its important to go over what actually happened when agency pricing was inntroduced, rather than the myth of what happened.

1. In January 2010 or thereabouts, Steve Jobs suggests to the publishers that they adopt agency pricing.

2. In February 2010, one of the Big Six companies announces that it will adopt the agency pricing model.The CEO, John Sargant, goes to Seattle to discuss terms with Amazon. In a letter, he sets out what happened:

This past Thursday I met with Amazon in Seattle. I gave them our proposal for new terms of sale for e books under the agency model which will become effective in early March. In addition, I told them they could stay with their old terms of sale, but that this would involve extensive and deep windowing of titles. By the time I arrived back in New York late yesterday afternoon they informed me that they were taking all our books off the Kindle site, and off Amazon. The books will continue to be available on Amazon.com through third parties.

I regret that we have reached this impasse. Amazon has been a valuable customer for a long time, and it is my great hope that they will continue to be in the very near future. They have been a great innovator in our industry, and I suspect they will continue to be for decades to come.

It is those decades that concern me now, as I am sure they concern you. In the ink-on-paper world we sell books to retailers far and wide on a business model that provides a level playing field, and allows all retailers the possibility of selling books profitably. Looking to the future and to a growing digital business, we need to establish the same sort of business model, one that encourages new devices and new stores. One that encourages healthy competition. One that is stable and rational. It also needs to insure that intellectual property can be widely available digitally at a price that is both fair to the consumer and allows those who create it and publish it to be fairly compensated.

Under the agency model, we will sell the digital editions of our books to consumers through our retailers. Our retailers will act as our agents and will take a 30% commission (the standard split today for many digital media businesses). The price will be set the price for each book individually. Our plan is to price the digital edition of most adult trade books in a price range from $14.99 to $5.99. At first release, concurrent with a hardcover, most titles will be priced between $14.99 and $12.99. E books will almost always appear day on date with the physical edition. Pricing will be dynamic over time.

The agency model would allow Amazon to make more money selling our books, not less. We would make less money in our dealings with Amazon under the new model. Our disagreement is not about short-term profitability but rather about the long-term viability and stability of the digital book market.

(snip)

All best,
John

LINK



Amazon did indeed take down Macmillan's books, igniting a firestorm. After a few days, Amazon backs down and then four of the Big 6 conclude agency pricing agreements with Amazon on the same terms as Macmillan. The biggest publisher, Random House, sat on the side lines for a year before joining the rest of the Big 6.

When you describe the actual process of the implementation of agency pricing, instead of the the Mobile read version where five publishers move in lockstep to directives from Cupertino , then the case for conspiracy looks less compelling.

[osnova]

Timeline of illegal conduct.

Steve Jobs:

We told the publishers, 'We'll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that's what you want anyway." They went to Amazon and said, 'You're going to sign an agency contract or we're not going to give you the books.'

THEN when Apple did the launch of the iPad the next day, a VIDEO clip at the end of the event, shows Mossberg asking Jobs why a shopper would buy a book for $14.99 from Jobs when they could buy it for $9.99 from Amazon.
Jobs says that this "won't be the case."

Mossberg asks (and this videoclip is part of the lawsuits) if Jobs meant Apple's wouldn't be $14.99 ... or that Amazon's wouldn't be $9.99.

Jobs paused and said "The prices will be the same."

[osnova]

Originally Posted by stonetools

the issue for most posters here is not that the publishers acted illegally, rather it's that they acted to raise prices. It's the price raising, not the price fixing that's the problem.

Read my post a little bit above yours. What is relevant is price fixing, which, yes, led to higher prices. They violated the law.

Originally Posted by stonetools

It is legal and appropriate for Apple to suggest that the publishers adopt an agency pricing model for ebooks.

Wrong. Apple was a competitor of Amazon. Entering into discussions with other competitors to fix prices was illegal for Apple as well as for the publishers. They conspired to fix prices (Apple being the forum, facilitator and a participant of a criminal conspiracy) and they did fix prices.

[TimW]

Originally Posted by stonetools

I think that its important to go over what actually happened when agency pricing was inntroduced, rather than the myth of what happened.

1. In January 2010 or thereabouts, Steve Jobs suggests to the publishers that they adopt agency pricing.

(snip)

Somewhere after the "suggestion," Apple required that a "most favored nations" clause be included in the agreement. Some discussion of that:

...Around that same time, the publishers were negotiating with Apple about providing books for the forthcoming iPad. The ultimate deals employed the agency model and included a “most favored nations” clause that prevented the publishers from selling their goods to other retailers for lower costs.

The publishers leveraged Apple’s big new sales channel and these deal terms to force others sellers, including Amazon, to adopt the agency model, in a way that the DOJ and others allege constitutes price collusion.

“A radical, structural industry change took place in one fell swoop when the light turned on for the iPad,” said Jeff Friedman, a partner in the Berkeley office of Hagens Berman Sobol Shapiro, a law firm serving as co-lead counsel in the consolidated New York case. “All prices went up 30 to 40 percent for the five agency publishers. That is not something that happens coincidentally.”

During the negotiations, there's a strong possibility that some of publishers may break ranks and reveal more information in hopes of leniency. At any rate, it's very likely the DoJ has evidence that won't be revealed unless the case goes to court. That's another reason that the publishers and Apple will want to settle.