Antitrust fallout: retailers sue conspirators

[DiapDealer]

To no one in particular:

My politically|financially|socially-filtered views based on like-minded people’s interpretations of "current law" (which consequently confirms my bias) is more objective than anybody else's is.

[pwalker8]

Originally Posted by Apache

It is illegal when the companies conspire together to fix the price.
Apache

So, what price did they fix it at? My understanding is that only conspiracy was that they all wanted agency pricing, not that they all wanted one particular price point. Of course, what the publishers did was never actually taken to court, nor was there any actual evidence presented in court that said that the publishers were pushing a specific price point. Lots of chest pounding, claims and victory dances by the feds in the press though. Prosecutors frequently say one thing in the press and something else entirely in court. They can say whatever they like in the press, in court, there are rules they have to follow.

The legal question that comes into play is was the actions that the publishers were accused of (getting together to insist on an agency pricing model) inherently illegal. If it isn't, then you have to prove that the consumers were harmed. Many claim that it is, yet the specific case appears no where in a law and the courts haven't ruled on that specific issue.

[frahse]

Originally Posted by fjtorres

US antitrust is primarily about consumer harm (hence the recent compensation awards) but it also offers (small) companies a venue for redress of anticompetitive behavior by other companies.
The bar is normally pretty high so there are few filings and even less successes but there is one big exception: when a company (or group) has already been found guilty of antitrust violations, the judge's findings of fact become indisputable "evidence" on which competitors claiming harm can base their claims of damages. The most recent example being the Microsoft antitrust case where the Judge ruled that MS had caused Netscape no harm but that their attempt to do so consituted an antitrust violation and thus he put them under antitrust monitoring for a decade. This was followed by dozens of private lawsuits from software companies seeking and often getting payouts, often for the results of their own bad decisions.
The bar is set high for anticompetitive antitrust cases but once it is lowered the claims multiply, which is why most targets of federal antitrust action settle with "no admision of guilt" to keep the evidence out of the public record.

In the price fix conspiracy case, the publishers settled to limit liability but since Apple refused to settle, the evidence and findings still ended up in the public record. Now comes word of the fallout: small independent ebookstores that have folded or died stillborn are suing Apple and the publishers for anticompetitive behavior, painting themselves as collateral damage of the conspirators' favoritism towards Apple.

Publishing Weekly has a (very slightly slanted) report on the lawsuits and the plaintiffs:

http://www.publishersweekly.com/pw/b...st-claims.html






PW takes a skeptical view of the suits because of the small size of the companies filing but anybody who remembers the aftermath of the Microsoft case knows that it is the smaller players that receive the most sympathetic treatment in court under antitrust enforcement. (Especially when the judge is annoyed.) And that once the small players win, the bigger ones pile on.

And in this case, if the small Adept-based ebookstores can make a case that gheh were harmed by the conspiracy to reduce competition in the BPH ebook market, then so can Adobe, Sony, and Google. And, because the Agency pricing of ebooks enabled Nook and Kindle to sell eink readers at or below cost, so can hardware-only reader vendors like Pocketbook, Bookeen, Aztak, etc. (Essentially anybody that signed up to sell generic Adept ebooks and hardware has at least a ghost of a chance.)

Once the rulings start piling up, the lawsuits start snowballing.
Just ask Microsoft; they ended up paying out billions.

Apple really should have settled.

I really warms my heart that they didn't.

[JSWolf]

Originally Posted by pwalker8

The legal question that comes into play is was the actions that the publishers were accused of (getting together to insist on an agency pricing model) inherently illegal. If it isn't, then you have to prove that the consumers were harmed. Many claim that it is, yet the specific case appears no where in a law and the courts haven't ruled on that specific issue.

The retailers don't have to prove that the customers were hurt. They have to prove that THEY were hurt. Agency did hurt some retailers for sure. Fictionwise (for example) had a way of doing business that worked before agency pricing. After agency pricing, Fictionwise's business model no longer worked and people did not shop there like they used to because people went there because of their business model.

[bgalbrecht]

Originally Posted by JSWolf

The retailers don't have to prove that the customers were hurt. They have to prove that THEY were hurt. Agency did hurt some retailers for sure. Fictionwise (for example) had a way of doing business that worked before agency pricing. After agency pricing, Fictionwise's business model no longer worked and people did not shop there like they used to because people went there because of their business model.

Fictionwise was already a subsidiary of B&N by then, and B&N had no problems selling Agency ebooks. I think Fictionwise's demise was a corporate decision to rebrand ebook sales under the B&N website, just as Amazon rolled anything Mobipocket under the Kindle branding.

[AnemicOak]

Originally Posted by bgalbrecht

Fictionwise was already a subsidiary of B&N by then, and B&N had no problems selling Agency ebooks. I think Fictionwise's demise was a corporate decision to rebrand ebook sales under the B&N website, just as Amazon rolled anything Mobipocket under the Kindle branding.

I think it was a combo of the two. Yes, FW was owned by B&N, but at the time it was still run separately and just like the other independent stores they lost customers when they were unable to sell big 5 books for a long time due to the Agency contract process which kept the books out of their stores (some never got all of them back). I'd guess that just made the decision easier for B&N to close it down.

[HarryT]

Originally Posted by AnemicOak

I think it was a combo of the two. Yes, FW was owned by B&N, but at the time it was still run separately and just like the other independent stores they lost customers when they were unable to sell big 5 books for a long time due to the Agency contract process which kept the books out of their stores (some never got all of them back). I'd guess that just made the decision easier for B&N to close it down.

I don't understand how agency pricing could keep books out of a store. Can you elaborate, please?

[MikeB1972]

Originally Posted by HarryT

I don't understand how agency pricing could keep books out of a store. Can you elaborate, please?

BooksOnBoard lost all agency titles because all contracts had to be renegotiated with the switch to agency (Took a good 3 months for BOB to get them back on the site).

BOB and fictionwise at least would have had to make a fair bit of changes to their websites as well as none of their discounts or loyalty rewards were allowed on agency titles.

[JSWolf]

Originally Posted by bgalbrecht

Fictionwise was already a subsidiary of B&N by then, and B&N had no problems selling Agency ebooks. I think Fictionwise's demise was a corporate decision to rebrand ebook sales under the B&N website, just as Amazon rolled anything Mobipocket under the Kindle branding.

Fictionwise was not part of B&N when agency pricing went into effect. Fictionwise sold to B&N because agency pricing was killing their business.

[fjtorres]

Originally Posted by pwalker8

So, what price did they fix it at? My understanding is that only conspiracy was that they all wanted agency pricing, not that they all wanted one particular price point.

You misremember, sir.
At launch all agency ebooks did in fact share exactly two price points: $12.99 and $14.99. Apple insisted on it in the documents released in the court opinion. The publishers were reluctant because they wanted *everything* at $14.99 or higher.

More, price fixing conspiracies *often* agree to different prices for different conspirators (the european soap cartel cited above allowed each conspirator a band of prices and they took turns running promotions). The point is to prevent price competition among cartel members by coordinating their pricing, not merely (and crudely) sticking to one fixed price across the board. Price fuxing is about maintaining price floors rather than literal price fixing.

Here's a quickie history of cartels and illegal price fixing conspiracies from Hammurabi to the present:
http://bizshifts-trends.com/2014/04/...ness-strategy/

[fjtorres]

Originally Posted by MikeB1972

BooksOnBoard lost all agency titles because all contracts had to be renegotiated with the switch to agency (Took a good 3 months for BOB to get them back on the site).

There were also tax-law considerations and accounting issues because agency "commissions" are tracked and taxed differently across the 5000 different local tax regimes in the US. For the big boys the added costs were, if not trivial, certainly manageable but those added fixed costs were...unwelcome...at smaller vendors...

The conspiracy allowed the bigger, walled-garden, ebook vendors effective exclusivity on BPH titles for several months during 2010, thus shifting sales away from the smaller, generic-epub vendors.

[fjtorres]

Originally Posted by JSWolf

Fictionwise was not part of B&N when agency pricing went into effect.

Sorry but no.
B&N bought Fictionwise outright before launching Nook.
http://www.barnesandnobleinc.com/pre...ctionwise.html

They kept operating independently (and successfully) until the conspiracy, when B&N decided not to negotiate Agency agreements for Fictionwise to shift their market share to Nook.
Of course, not all Fictionewise business was epub-based so those customers went to... well, Amazon and Alf...
So it can be fairly said that agency killed Fictionwise but not that it forced their sale.

[Sil_liS]

Originally Posted by fjtorres

There were also tax-law considerations and accounting issues because agency "commissions" are tracked and taxed differently across the 5000 different local tax regimes in the US. For the big boys the added costs were, if not trivial, certainly manageable but those added fixed costs were...unwelcome...at smaller vendors...

The conspiracy allowed the bigger, walled-garden, ebook vendors effective exclusivity on BPH titles for several months during 2010, thus shifting sales away from the smaller, generic-epub vendors.

What about the small companies that were selling books through apps? One had been discussed here when it closed: https://www.mobileread.com/forums/sho...d.php?t=132791

[fjtorres]

Originally Posted by Sil_liS

What about the small companies that were selling books through apps? One had been discussed here when it closed: https://www.mobileread.com/forums/sho...d.php?t=132791

Expect them to be looking to sue, too.
Everybody with a book app can theoretically sue. Random House would have a doozy if they chose to sue--the feds already documented their entire case for them--and even Nook if they get new owners.
Antitrust is bad mojo to mess with: it is inherently wide open to interpretation by juries.

Again: look to Microsoft and the torrent of (jury trial) lawsuits they had to field after their antitrust fight. Most were trivial or baseless but many of the trivial ones still got payouts just to get them to go away. And Microsoft didn't have $150B just begging to be whittled down nor were they actually found guilty of harming consumers...

Antitrust with a consumer focus? The ambulance chasers are standing by the phonebanks. The current ones are the tip of an iceberg: the real flood in Microsoft's case came after the appeals court ruling.

[pwalker8]

Originally Posted by fjtorres

You misremember, sir.
At launch all agency ebooks did in fact share exactly two price points: $12.99 and $14.99. Apple insisted on it in the documents released in the court opinion. The publishers were reluctant because they wanted *everything* at $14.99 or higher.

More, price fixing conspiracies *often* agree to different prices for different conspirators (the european soap cartel cited above allowed each conspirator a band of prices and they took turns running promotions). The point is to prevent price competition among cartel members by coordinating their pricing, not merely (and crudely) sticking to one fixed price across the board. Price fuxing is about maintaining price floors rather than literal price fixing.

Here's a quickie history of cartels and illegal price fixing conspiracies from Hammurabi to the present:
http://bizshifts-trends.com/2014/04/...ness-strategy/

Funny how if someone asserts something often enough on the internet, it becomes accepted as fact. You confuse Apple's original starting proposal of two price points, that was what Steve Jobs mentioned to Murdock a year or so previous, with the final agreement of "fine, you can set the price, but we get x% and you can't sale it for less elsewhere" i.e. what is know as safe harbor.

We will see where all this leads once the appeals courts get their say.