Apple gripes about antitrust monitoring

[PatNY]

Originally Posted by FizzyWater

This is an offside comment on something from the linked article:

I don't get the correlation between the monitor's oversight and the bolded sentence.

Yes, that is a true head-scratcher and rings hollow. Unless, of course, those development activities involved unfair market practices, in which case the monitor's presence is justified.

It will be very interesting to see exactly what arguments Apple makes to the appeals court concerning the monitor.

--Pat

[bgalbrecht]

Originally Posted by Robotech_Master

Speaking as a consumer of e-books, I'd hardly say causing the price of those e-books to jump by 50% and eliminating retailers' ability to hold sales is "questionable." I used to buy a lot of books through Fictionwise's "Buywise" discount program. Then agency pricing killed it. Then B&N killed Fictionwise.

The publishers settled and got off with slaps on the wrist. Fine. Apple wants to slug it out in court? Let 'em take their lumps. "Questionable charges" or not, legal experts tend to agree Apple's chances on appeal are shaky.

I, too was a Fictionwise ebook buyer, and my experience was comparable to yours, and strangely enough, my opinion in this matter is about the same as yours. FWIW, I think the publishers were already engaged in (illegal) discussions when Apple showed up, but Apple knowingly sealed the deal.

[pwalker8]

Originally Posted by bgalbrecht

I hardly think Cote or Bromwich are looking to use this as a spring board to bigger and better political offices.

Prosecutors. Cote is the judge, Bromwich is the monitor appointed by Cote. While Bromwich has been a prosecutor and a special investigator in the past, he is not working as a prosecutor in this case (though Apple says he's acting like one). The prosecutor is the one who brought the original case. No matter what happens with the Apple case, he will be able to cout coup on the book publishers. He's already brought in millions of dollars in settlements into the government coffers, which is generally the point of such exercises.

[pwalker8]

Originally Posted by Robotech_Master

Speaking as a consumer of e-books, I'd hardly say causing the price of those e-books to jump by 50% and eliminating retailers' ability to hold sales is "questionable." I used to buy a lot of books through Fictionwise's "Buywise" discount program. Then agency pricing killed it. Then B&N killed Fictionwise.

The publishers settled and got off with slaps on the wrist. Fine. Apple wants to slug it out in court? Let 'em take their lumps. "Questionable charges" or not, legal experts tend to agree Apple's chances on appeal are shaky.

And you are now able to buy those ebooks at the previous price now that the evil Apple and agency pricing has been slapped down? Amazon was pricing specific books at less that cost to get people to buy kindles and to attract people to their ebook store. Those prices were going up regardless, Apple is simply a convenient villain. Amazon controls roughly 70% of the ebook market in the US.

[Graham]

Originally Posted by pwalker8

Those prices were going up regardless, Apple is simply a convenient villain.

Whether or not that would have proved to be true, it's completely irrelevant. As you seem to admit here, the Big 5 prices did go up as a consequence of the actions taken in concert with Apple. The chart that shows this so clearly is, I think, the most convincing evidence in the case, and displays the facts that will provide the biggest obstacle to a successful appeal.

Apple must argue successfully that there was no collusion behind this concerted rise, but the timing of the meetings and emails Eddy Cue had with the publishers make that very hard to believe.

At best, Apple can argue that the timing was coincidental as it related to the launch of the iPad, but that doesn't stop it being collusion to act in concert. In fact it's an admission that Apple was organising the publishers to move to Agency Pricing and the MFN clause in concert.

Graham

[DiapDealer]

Originally Posted by pwalker8

Apple is simply a convenient villain.

Ironic, considering that Amazon was the "convenient villain" in the fantasy Apple and the Publishers concocted in an attempt to justify the illegal conspiracy to raise prices in the first place.

If and when Amazon chooses to use their market share to put the squeeze on consumers, they'll have their own adventure with the DOJ. And the DOJ will have my complete support then, as they do now.

[pwalker8]

Originally Posted by Graham

Whether or not that would have proved to be true, it's completely irrelevant. As you seem to admit here, the Big 5 prices did go up as a consequence of the actions taken in concert with Apple. The chart that shows this so clearly is, I think, the most convincing evidence in the case, and displays the facts that will provide the biggest obstacle to a successful appeal.

Apple must argue successfully that there was no collusion behind this concerted rise, but the timing of the meetings and emails Eddy Cue had with the publishers make that very hard to believe.

At best, Apple can argue that the timing was coincidental as it related to the launch of the iPad, but that doesn't stop it being collusion to act in concert. In fact it's an admission that Apple was organising the publishers to move to Agency Pricing and the MFN clause in concert.

Graham

Actually I don't think you understand how appeals work. Appeals are very rarely about facts, but rather are about points of law. In general, you can only appeal new evidence since appeals courts give what is known as due deference to the trial judge, which basically means that you can't argue the facts of the case unless either new evidence comes to light. What Apple will be arguing is that Judge Cote misapplied the law in her decision. The exact argument won't be known until until Apple actually files the text of their appeal. I'm not sure when exactly that will be, most of the stories just say early 2014.

I would also say that I'm not sure what that chart is actually saying. What exactly is the formula for weighted average being used? That could be very important. It would also be interesting to see the chart of the prices as is, without any weighting. If it turns out only a small number of books increase in price then that doesn't mean nearly as much as if a large number of books increased in price. Given that the chart was produced for the prosecutor, my cynical nature suspects that they weighted the number to make the chart look a lot more dramatic than it would have if they had simply charted average price.

My understanding is the only actual difference would be books that Amazon was previously selling at a loss, i.e. some of the big name books. When I go back and look at my orders for the time period and what I paid for each book (I have 90 ebooks that I bought at Amazon in 2010), I see very little difference before April 2010 and after April 2010. So for the books that I buy, there appears to be little if any impact. Looking at the ebooks now, I see a similar mix of prices. The big difference appears to be that since Amazon is no longer trying to establish the ebook market, they are not selling books below cost anymore, so I see more books at $15 where I don't see very many of the more expensive books in 2010. Other than that, the price doesn't seem that much more than it was in 2009 and 2010, mostly $5 to $6 books.

[PatNY]

Originally Posted by pwalker8

No matter what happens with the Apple case, he will be able to cout coup on the book publishers. He's already brought in millions of dollars in settlements into the government coffers, which is generally the point of such exercises.

What millions? How many?

I wasn't aware of any fines paid to the DOJ. The millions being paid by the publishers are to go back to consumers.

Even if they did pay the DOJ some fines, it's likely they won't even cover the complete costs of the DOJ to bring the anti-trust suits and the court costs as well.

So this idea that the DOJ brought the suits in order to make money is just ludicrous. They brought the suits to thwart anti-competitive practices and help ensure fairer prices for consumers.

Do the victories put a feather in the caps of some of the prosecutors? Sure. But, so what? Why shouldn't they be recognized?

Those prices were going up regardless, Apple is simply a convenient villain. Amazon controls roughly 70% of the ebook market in the US.

Prices certainly weren't going up at the speed they did once the agency pricing went into effect. Moreover, prices on many ebooks have gone down since the settlements.

Apple is not simply a convenient villain. They were a main conspirator in a price fixing scheme.

It is irrelevant how much of the market Amazon controlled then or now.


--Pat

[Graham]

Originally Posted by pwalker8

Actually I don't think you understand how appeals work. Appeals are very rarely about facts, but rather are about points of law. In general, you can only appeal new evidence since appeals courts give what is known as due deference to the trial judge, which basically means that you can't argue the facts of the case unless either new evidence comes to light.

Fair enough. Yes, woolly thinking from me above.

The link Robotech_Master supplied above supports this, agreeing that Apple are going to have to find some chink in the interpretation of the law to succeed:

“Apple may have a tough time getting this ruling reversed because the judge made findings of fact about the antitrust violation that appellate courts typically defer to,” Samuelson told AllThingsD. “Most reversals happen as to interpretations of the law.”

Samuelson’s point: Apple argued that the facts show no conspiracy in restraint of trade. But Cote found that the company’s actions were a per se violation of antitrust law. In other words, they were inherently illegal, so there was no need to prove that they had any anticompetitive effect on the e-books market. And Cote’s opinion relies so heavily on facts that it leaves very little room for an appellate court reversal.

Graham

[Sil_liS]

Originally Posted by pwalker8

Given that the chart was produced for the prosecutor, my cynical nature suspects that they weighted the number to make the chart look a lot more dramatic than it would have if they had simply charted average price.

How I would have liked to see this cynical nature in action when you gave the link to the WSJ.

[crossi]

Even if a business has 100% market share because they were the first to produce such a product or because they have the clearly superior product there would be nothing illegal, immoral or unethical in such a circumstance. What matters is if they got it through illegal means or used their market shares in an illegal way. Why do people keep bringing up Amazon's market share as if it was by itself proof of some wrongdoing? Amazon got it by bringing out a superior product. A easy to use reader linked with a website that was also easy to use and buy from with truely superior customer service and great prices. It didn't hurt that Amazon already had a large customer base that already had Amazon accounts.

[ProfCrash]

Amazon got it for a couple of reasons

1) They were the first mass marketed e-reader in the US. Yes the Sony was out there but how well was it advertised? Amazon had the Kindle on the front page of the Amazon website for many a year.

2) They had a book store that worked. Heck, I remember promotions with the NY Times that essentally saved you enough money to pay for your Kindle with the money you saved. And then there were the $9.99 books. And a book store that actually worked and was growing quickly.

3) Internet connectivity so you could buy books any where. They were the first on the US market with that.

They had the US market for a couple of years before BN introduced the Nook. So they were able to build up a clientel, one that wouldn't want to move to the Nook because they couldn't move their books. Then came Kobo several years later.

Sony did crap to promote their e-readers. They didn't keep pace with Amazon on many features that people liked, such as the internet connectivity, they quickly became more expensive then the Kindle, and the book store sucked.

BN promoted the Nook but the bookstore was problematic and it took forever to go international.

Amazon did not build its place in the market by attacking BN or Kobo or Sony, they built their market share by being the first mass market identifiable e-reader in the US market, a great bookstore, great customer service, and having a good product.

The first direct competition ads I have been seen have been the Fire vs iPad which is a take off on the Mac vs PC commercials. So it is tablet vs tablet not e-reader vs e-reader.

[pwalker8]

Originally Posted by Graham

Fair enough. Yes, woolly thinking from me above.

The link Robotech_Master supplied above supports this, agreeing that Apple are going to have to find some chink in the interpretation of the law to succeed:



Graham

My basic understanding is that the main chink is the per se violation. Over the last twenty years, the Supreme Court has consistently said that per se only applies to horizontal not vertical. That is to say, while it may be a per se violation for several publishing firms to get together and discuss prices, it is not a per se violation for Apple to discuss prices with a publishing firm or multiple publishing firms. Thus Jobs discussion a price point with Murdock is _not_ a per se violation (even if those particular discussion were not rendered moot when Apple went with the agency pricing). Cote appears to have dismissed all of that with a wave of her hand. My understanding is that for a violation to have occurred by Apple, they have to have knowingly entered into a conspiracy with the publishers, and no, offering each publisher the same contract is not proof of a conspiracy.

Of course, we won't know exactly on what grounds Apple is appealing until Apple files the text of their appeal.

The legal questions aren't as straight forward as some wish to believe, nor do they go away because some simply mock anyone who raises those questions or accuses them of being an Apple fan boi. If Cote had followed the legal doctrine of stare decisis (i.e. binding precedent), then IMPO, the case would have been dismissed since the evidence isn't there that Apple did what is the normal standard for anti-trust for a vertical market company (and why I think Apple is fighting this so hard).

The flip side is that all bets are off once you get to the appellate courts. Some appellate judges tend to follow the doctrine of due deference to the trial judge in extreme, i.e. if at all possible, they don't like to overturn a judgment. On the other hand, the Supreme court tends to slap down judges who ignore Supreme Court precedence, especially something as recent as 2007.

[Robotech_Master]

Jeff Bezos is honestly a brilliant marketer, and I can't say that enough. That doesn't necessarily mean he's a good person (indeed, marketers being what they are, it might mean quite the opposite!), but he's done an amazing job of building Amazon up out of nothing into an e-commerce powerhouse. Some of the things he's done have been a little iffy, and some have been very iffy, but they haven't crossed the line into illegal yet.

And certainly the thing he did that touched off the publishers' ire wasn't. Selling new titles at or below cost as loss leaders to boost sales of the backlist? That's not any different from Best Buy marking down some TVs to at or below cost in its sales circulars to draw people into the store. And yes, pwalker8, it is still doing that even now. Not to the extent it used to, perhaps, but more than the publishers would have allowed it to do under agency pricing.

For example, take a look at John Scalzi's "Old Man's War" series on Amazon. Earlier books in the series are priced at $6, on $8 paperback retail. That means they're taking in $2 each in profit on those books, assuming the standard 50%-of-retail wholesale rate. The latest book, however, is $11 on a $26 hardcover retail. Which means it's losing $2 per book at that rate on the expectation that buying that book will make consumers want to buy more than one of the other ones that earn them $2 each.

Now you can't tell me the publishers were too stupid to be able to do that same kind of research on Amazon.com and see for themselves what their backlist versus their frontlist titles were selling for. And they would have known (and if they didn't, their lawyers would have told them) that the legal standard for predatory pricing was that the company had to be selling everything at a loss, not just taking the loss on a few things to make a big profit on the rest.

Which is probably why they didn't try filing a complaint with the FTC alleging illegal behavior (the way Amazon later did when they committed illegal behavior). For all their loud complaints (in public and then later in Cote's courtroom) about Amazon's "predatory pricing," they knew they didn't have a legal leg to stand on. (And the DOJ itself made that determination as well when they looked at Amazon's books during the run-up to filing the suit.) They decided they'd find another way to bell the cat.

And the rest is history.

[pwalker8]

Amazon is going to be very hard to dislodge from their dominant position as long as they play their cards right. In a lot of ways, they are to ebooks as Apple is to digital music. For most people, Amazon simply works and has the biggest selection of any ebook store by far. The only way I see it happening is if Amazon drops the ball at some point.