OFT launches investigations into ebook agency pricing

[Grumpyreader]

Originally Posted by GeoffC

Scotland is in the UK .... as are Wales, England and Northern Ireland.

The Isle of Man and the Channel Islands are not.

Except of course that, following devolution, Scotland has its own OFT. English law usually only applies to England and Wales, Scotland and N.Ireland having their own legal systems. The extent to which ombudsmen and quangos have jurisdiction over Scotland and N.Ireland (and in some cases Wales) differs.

[Kali Yuga]

Originally Posted by Worldwalker

The US long ago ceased frowning on "combinations in restraint of trade". I have actually seen it said, by governmental individuals, that monopolies are a good thing because they give the companies involved more money, which will then allow them to "innovate".

That may be because there is nothing inherently wrong with a monopoly.

E.g. Apple has a near-monopoly at the moment on digital music. This has not prevented Apple from innovating, nor rival services like Spotify or Pandora from growing.

The problem is with anti-competitive behavior, not "being big."

Originally Posted by Worldwalker

innovation has rarely if ever come from big, established companies whose markets are secure; it's always been the province of small, struggling companies that need a means to compete other than existing market dominance.

What, exactly, are you basing that on?

IBM was huge when they developed a viable personal computer; Nintendo is massive and developed the Wii and its innovative controllers; Microsoft is massive and came up with the Xbox and the Kinect; Google is huge and while they do acquire lots of things, also came up with Android, Chrome / Chrome OS, Google Books and others; Apple was sitting on over $20 billion in cash holdings whilst they developed the iPad (and now has close to $40bn in cash); and of course, Amazon is the 800lb gorilla of the online book biz and not only pushed ebooks into prominence, but also developed Whispernet along the way; large pharmaceuticals develop lots of new drugs, etc etc etc

Innovation often requires intense resources, which simply aren't always available to small companies. And a small company can be just as scared of innovation and disruptive technologies as a large one, since they can't all turn on a dime without confusing their existing customers.

Sounds to me more like you just have the typical "Big Is Bad" bias....

[HarryT]

Originally Posted by GeoffC

Scotland is in the UK .... as are Wales, England and Northern Ireland.

But Scotland, as you well know, has its own legal system. A decision made by the OFT would be legally binding in England, Wales, and Northern Ireland, but not in Scotland. The Scottish Parliament would need to make a separate decision whether or not that decision applied in Scotland. It may not, because Scottish law differs in many ways to English law.

[kennyc]

Originally Posted by Kali Yuga

That may be because there is nothing inherently wrong with a monopoly.

E.g. Apple has a near-monopoly at the moment on digital music. This has not prevented Apple from innovating, nor rival services like Spotify or Pandora from growing.
......

What? Not even close to a monopoly ... whether de-facto or actual.

Do you think Amazon, CD-Baby and others don't sell digital music?

[Andrew H.]

Originally Posted by Worldwalker

The US long ago ceased frowning on "combinations in restraint of trade". I have actually seen it said, by governmental individuals, that monopolies are a good thing because they give the companies involved more money, which will then allow them to "innovate". This has led me to wonder who such people are getting paid by, since innovation has rarely if ever come from big, established companies whose markets are secure; it's always been the province of small, struggling companies that need a means to compete other than existing market dominance.

This is not only not true, but it's easily disproved. The Microsoft antitrust issue wasn't that long ago, and that is generally known.

The DOJ's anti-trust division filed over 70 criminal charges last year, and was involved in a lot more civil actions. I.e., they undid a merger involving Dean's Farm and another dairy producer, and they restricted Ticketmaster's merger with LiveNation.

The fact that you don't know something is happening doesn't mean it isn't happening. And, yeah, the Dean's Farm case did get slightly less publicity than the browser wars.

In the US, the issue with the agency model isn't the model itself; everyone who knows anything about the legal issues knows that (this is, for example, the iTunes approach. Also the eBay approach). The issue is with the contract provisions prohibiting a publisher from selling a book at a lower price through another reseller. I.e., they can't sell a book through Amazon for $10 and through B&N for $8. I don't know if these most favored nation clauses violate antitrust or not - but they are certainly worth looking into. But I'm not sure what the benefit to the consumer would be if these were prohibited.

[Kali Yuga]

Originally Posted by kennyc

What? Not even close to a monopoly ... whether de-facto or actual.

In the US, they have around 65% of the digital music market, which is around 25-30% of total music sales.

The next closest competitor is Amazon at 13%.

So yeah, in that specific field they are currently a monopoly.

A monopoly does not necessarily mean the company is the sole provider; it's an indicator of market influence. E.g. US Steel was often described as a "monopoly," and was subjected to (unsuccessful) anti-trust actions, but "only" held 2/3 of the market at the peak of its powers.

Same thing with Microsoft, which has a very large percentage of OS market share (usually 90% or more), but are not the only OS vendor.

[Grumpyreader]

I think one of the big issues for the OFT will be whether the relationship between the publisher and the retailer is that of wholesaler and seller (i.e. the seller is buying stock himself but is free to sell on stock at whatever price he wants) or whether the retailer will be designated an "agent" of the publisher (and therefore selling for the first time on behalf of the publisher).

If it's the former then the Model could be anti-competitive. However if its the latter (as no doubt the publishers will argue) then it might not be anti-competitive as the retailer simply steps into the shoes of the publisher, who can then dictate the price at which a product can be sold. I don't think the phrase "Agency Model" is an (un)happy coincidence.

[kennyc]

Originally Posted by Kali Yuga

In the US, they have around 65% of the digital music market, which is around 25-30% of total music sales.

The next closest competitor is Amazon at 13%.

So yeah, in that specific field they are currently a monopoly.

A monopoly does not necessarily mean the company is the sole provider; it's an indicator of market influence. E.g. US Steel was often described as a "monopoly," and was subjected to (unsuccessful) anti-trust actions, but "only" held 2/3 of the market at the peak of its powers.

Same thing with Microsoft, which has a very large percentage of OS market share (usually 90% or more), but are not the only OS vendor.

You've got a totally different definition of monopoly than I have then.

http://en.wikipedia.org/wiki/Monopoly

I don't think Apple controls the price which is the determining characteristic of a monopoly.

[snipenekkid]

Originally Posted by Grumpyreader

I think one of the big issues for the OFT will be whether the relationship between the publisher and the retailer is that of wholesaler and seller (i.e. the seller is buying stock himself but is free to sell on stock at whatever price he wants) or whether the retailer will be designated an "agent" of the publisher (and therefore selling for the first time on behalf of the publisher).

If it's the former then the Model could be anti-competitive. However if its the latter (as no doubt the publishers will argue) then it might not be anti-competitive as the retailer simply steps into the shoes of the publisher, who can then dictate the price at which a product can be sold. I don't think the phrase "Agency Model" is an (un)happy coincidence.

right. as of this point in time each publisher has set themselves up as a consignment seller situation with the various online book sellers functioning as only a venue and delivery system. This should be fine if it cannot be shown there was collusion between the publishers and Apple, remember Apple's Jobs was said to be in deep conversations with publishers at, I forget but I think it was CES 2009 or CeBIT. Not 100% sure when it happened but the conversations took place right when some device was announced followed right away by the announcement of the new Agency Model agreement. It was very suspicious that the biggest five publishers all moved to the same model at the very same time. That is where Apple played a role and comes into frame. Was Jobs upset with the model or was the the puppet master or just pissed he had been backed into a corner because off of the five presented the same agreement forcing him to agree if he wanted content for the Apple Store.

To me it would seem this is all far deeper than it seems on the surface. Obviously it was an attempt to strong-arm Amazon but I thought it then and even more now, the effects are going to be much further reaching than just ebook prices.

[Kali Yuga]

Originally Posted by kennyc

You've got a totally different definition of monopoly than I have then: http://en.wikipedia.org/wiki/Monopoly

Uh.... Read the first line from the article you cited. A monopoly has "sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it."

For years, Apple specified the price (99¢ per track), the format (protected AAC), the software the tracks can be played on (iTunes), the portable devices it was compatible with (iPods), who they wanted to spotlight, and after initially cajoling the recording business, pretty much bullied them around. They've even faced anti-trust probes, over things like pushing labels to kill Amazon's "MP3 Daily Deal."

Originally Posted by kennyc

I don't think Apple controls the price which is the determining characteristic of a monopoly.

"Controlling price" is not necessarily the defining aspect of a monopoly.

That said, yes Apple has exerted strict controls over the prices of digital music in iTunes. For years they locked the (US) price in at 99¢. Currently they allow some latitude, running from 69¢ (set minimum) to $1.29 per song (set maximum).

You DO realize that I'm specifically talking about music and not ebooks, right...?

[kennyc]

Originally Posted by Kali Yuga

Uh.... Read the first line from the article you cited. A monopoly has "sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it."

For years, Apple specified the price (99¢ per track), the format (protected AAC), the software the tracks can be played on (iTunes), the portable devices it was compatible with (iPods), who they wanted to spotlight, and after initially cajoling the recording business, pretty much bullied them around. They've even faced anti-trust probes, over things like pushing labels to kill Amazon's "MP3 Daily Deal."



"Controlling price" is not necessarily the defining aspect of a monopoly.

That said, yes Apple has exerted strict controls over the prices of digital music in iTunes. For years they locked the (US) price in at 99¢. Currently they allow some latitude, running from 69¢ (set minimum) to $1.29 per song (set maximum).

You DO realize that I'm specifically talking about music and not ebooks, right...?

And you do realize you are completely wrong. Apple no more has a monopoly on digital music than Ford has a monopoly on cars.

[jhempel24]

Originally Posted by Kali Yuga

IBM was huge when they developed a viable personal computer; Nintendo is massive and developed the Wii and its innovative controllers; Microsoft is massive and came up with the Xbox and the Kinect; Google is huge and while they do acquire lots of things, also came up with Android, Chrome / Chrome OS, Google Books and others; Apple was sitting on over $20 billion in cash holdings whilst they developed the iPad (and now has close to $40bn in cash); and of course, Amazon is the 800lb gorilla of the online book biz and not only pushed ebooks into prominence, but also developed Whispernet along the way; large pharmaceuticals develop lots of new drugs, etc etc etc

The problem with this quote, is that with the exception of IBM....nothing was really all that innovative. Being able to do something that's already been created isn't innovative, it's improving on existing technologies.

[murraypaul]

Originally Posted by Kali Yuga

Uh.... Read the first line from the article you cited. A monopoly has "sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it."

For years, Apple specified the price (99¢ per track), the format (protected AAC), the software the tracks can be played on (iTunes), the portable devices it was compatible with (iPods), who they wanted to spotlight, and after initially cajoling the recording business, pretty much bullied them around. They've even faced anti-trust probes, over things like pushing labels to kill Amazon's "MP3 Daily Deal."

"Controlling price" is not necessarily the defining aspect of a monopoly.

That said, yes Apple has exerted strict controls over the prices of digital music in iTunes. For years they locked the (US) price in at 99¢. Currently they allow some latitude, running from 69¢ (set minimum) to $1.29 per song (set maximum).

You DO realize that I'm specifically talking about music and not ebooks, right...?

You've shown they have a monopoly on music sold through iTunes, which I think everyone would agree with. You haven't shown that they can dictate price, format or other matters to other vendors of music. Indeed they obviously didn't, as many vendors sell MP3 tracks, while Apple only sell AAC ones.

[Barcey]

Originally Posted by Kali Yuga

That may be because there is nothing inherently wrong with a monopoly.

E.g. Apple has a near-monopoly at the moment on digital music. This has not prevented Apple from innovating, nor rival services like Spotify or Pandora from growing.

The problem is with anti-competitive behavior, not "being big."

[snip]....

The problem is that "being big" makes some companies think that anti-competitive behavior is a viable option.

For example if the book publishing industry hadn't consolidating into the "big six" then they wouldn't have thought that forcing the anti-competitive agency pricing onto the resellers and consumers was a viable option.

[nwhitfield]

Almost as interesting as the investigation into agency pricing, I think, is the news today regarding the territorial restrictions imposed by the Premiere League on football broadcasts, which have been used to try and stop people buying a cheaper subscription from a different country in Europe.

There's an article about this at http://www.guardian.co.uk/media/2011...-sports-rights and I've blogged about it at GoneDigital.net

Essentially, if the selling of rights for TV by territory within Europe is anti-competitive, surely so should be the selling of books in the same way.

Practically, I don't see that making a massive difference to the largely mono-lingual UK readership, but depending on the final outcome of this case, it might perhaps signal that that time has come to open up stores like the UK Kindle store and WH Smiths to buyers of eBooks from other EU countries.

(And, potentially, for those in countries with lower VAT rates on eBooks that the UK's 20% to sell books back to UK readers)