5 ms·

I've heard quite a bit about this case over the past month or so, but don't understand it. Can someone explain what Apple 'fixing' e-book prices means and how

by ehm_may 13y ago

I've heard quite a bit about this case over the past month or so, but don't understand it. Can someone explain what Apple 'fixing' e-book prices means and how that is illegal?

hga 13y ago
In very brief, Apple and a half dozen publishers engaged in a white line price fixing conspiracy, all the publishers pled guilty, and naturally their counterparty was found guilty. A price fixing conspiracy that causes damage to consumers is white line illegal in the US; in this case, the prices of many ebooks went up by quite a bit. Which leads straight to all but one of the remedies, like terminating all those deals with the publishers and for 5 years refraining from striking any vaguely similar deal with publishers. And extending this sort of thing to other media, seeing as how they are now a convicted (and unrepentant) price fixer. As for the remaining remedy ... don't know about the legal basis for it, but Amazon was the main target of all the parties in the price fixing conspiracy. There's a bit more detail here: http://en.wikipedia.org/wiki/Apple_Inc._litigation#eBook_price-fixing_lawsuit http://en.wikipedia.org/wiki/Apple_Inc._litigation#eBook_pri...
- jolohaga 13y ago
  "in this case, the prices of many ebooks went up by quite a bit" But no one was coerced into buying those books. Where's the crime?
  - twoodfin 13y ago
    Nobody is ever really coerced into buying airline tickets, but if Expedia sat the CEOs of the major U.S. airlines down and convinced them to all agree to raise prices, that would still be price fixing and illegal under the Sherman Act.
  - hga 13y ago
    The crime is that businesses are not allowed to get together and raise prices in concert like this.
dragonwriter 13y ago
The full version of what they were found to have done wrong is at: http://www.justice.gov/atr/cases/f299200/299275.pdf http://www.justice.gov/atr/cases/f299200/299275.pdf TL;DR version, the court found "that the Publisher Defendants conspired with each other to eliminate retail price competition in order to raise e-book prices, and that Apple played a central role in facilitating and executing that conspiracy."
MBCook 13y ago
Amazon used to buy all their eBooks on the wholesale model; the same one used for print books. They would buy the books from the publisher at a fixed price (say $10 each), and then sell them at whatever price they wanted. Amazon often sold the books at/below cost to get people to buy Kindles. So when Apple decided to start the iBook store, all the publishers decided to use that as an opportunity to band together and force Amazon to use the agency model, which is how Apple sells apps (publishers set the price, Apple gets a cut). The had the effect of causing book prices to go up (because, again, Amazon often sold at or below cost). Because Apple was the new player whose contracts caused this, they got in trouble. Many people find this quite questionable. Prices will go up with this settlement because publishers get more control. Amazon had a de facto monopoly, which Apple actually broke up. Also, this wasn't Apple's idea, it was the publishers. Of course, Apple was more than happy to take advantage of the situation, so they weren't exactly innocent. It's a really a strange case.
- coldcode 13y ago
  It's funny that you can monopolize a market as long as you lose money doing it. I wonder what would happen if Amazon then raised ebook prices to 19.99.
- jolohaga 13y ago
  What's wrong with publishers getting more control? Don't they pay authors? We're not talking about scientific journal publishers here. Who's forcing them to reduce their prices?
  - MBCook 13y ago
    Legally nothing. But the eBook market didn't start to take off until Amazon started to force it. We have every reason to believe that publishers will price eBooks in a way that minimizes disruption to their traditional paper business and keep profits higher than the real equilibrium. We've seen the music industry do it (avoiding selling to keep album sales up). We've seen the game industry do it (change the same for downloads as physical copies to keep retail happy). We've seen the movie industry try to prevent disruption many times (anti-VCR, pro-Divx, anti-Netflix, etc).
rverghes 13y ago
This is my understanding of the situation: Traditionally, book publishers sell to stores at a wholesale price. Stores then mark up the price a bit and sell it to the end consumers. Amazon then started selling books for prices below the wholesale price, deliberately taking a loss. The publishers got scared that this would destroy all non-Amazon channels, giving Amazon inordinate power over them. So they got together with Apple and set up a scheme where the publishers would all use the "agent" model. Instead of selling the books to Apple for a fixed wholesale price, they would set the prices however they liked, and Apple would take a cut of 30%. The publishers would then all refuse to sell to Amazon unless Amazon switched to the agent model. That, however, is pretty straight-forward collusion and against the law.
- hga 13y ago
  How many non-intrinsically expensive ebooks had reasonable wholesale prices above $10? What I've read is that the "below the wholesale price" didn't happen a lot until publishers started raising that price after Amazon created the market. Now, maybe the latter discovered they couldn't afford below $10 wholesale prices, but the method they used to deal with the problem as, as you noted, "straight-forward collusion", and as I add, that harmed the consumer; add the two together and you get a slam dunk anti-trust case.

by ehm_may 13y ago

I've heard quite a bit about this case over the past month or so, but don't understand it. Can someone explain what Apple 'fixing' e-book prices means and how that is illegal?

hga 13y ago

In very brief, Apple and a half dozen publishers engaged in a white line price fixing conspiracy, all the publishers pled guilty, and naturally their counterparty was found guilty. A price fixing conspiracy that causes damage to consumers is white line illegal in the US; in this case, the prices of many ebooks went up by quite a bit. Which leads straight to all but one of the remedies, like terminating all those deals with the publishers and for 5 years refraining from striking any vaguely similar deal with publishers. And extending this sort of thing to other media, seeing as how they are now a convicted (and unrepentant) price fixer. As for the remaining remedy ... don't know about the legal basis for it, but Amazon was the main target of all the parties in the price fixing conspiracy. There's a bit more detail here: http://en.wikipedia.org/wiki/Apple_Inc._litigation#eBook_price-fixing_lawsuit http://en.wikipedia.org/wiki/Apple_Inc._litigation#eBook_pri...

jolohaga 13y ago
"in this case, the prices of many ebooks went up by quite a bit" But no one was coerced into buying those books. Where's the crime?
- twoodfin 13y ago
  Nobody is ever really coerced into buying airline tickets, but if Expedia sat the CEOs of the major U.S. airlines down and convinced them to all agree to raise prices, that would still be price fixing and illegal under the Sherman Act.
- hga 13y ago
  The crime is that businesses are not allowed to get together and raise prices in concert like this.

dragonwriter 13y ago

The full version of what they were found to have done wrong is at: http://www.justice.gov/atr/cases/f299200/299275.pdf http://www.justice.gov/atr/cases/f299200/299275.pdf TL;DR version, the court found "that the Publisher Defendants conspired with each other to eliminate retail price competition in order to raise e-book prices, and that Apple played a central role in facilitating and executing that conspiracy."

MBCook 13y ago

Amazon used to buy all their eBooks on the wholesale model; the same one used for print books. They would buy the books from the publisher at a fixed price (say $10 each), and then sell them at whatever price they wanted. Amazon often sold the books at/below cost to get people to buy Kindles. So when Apple decided to start the iBook store, all the publishers decided to use that as an opportunity to band together and force Amazon to use the agency model, which is how Apple sells apps (publishers set the price, Apple gets a cut). The had the effect of causing book prices to go up (because, again, Amazon often sold at or below cost). Because Apple was the new player whose contracts caused this, they got in trouble. Many people find this quite questionable. Prices will go up with this settlement because publishers get more control. Amazon had a de facto monopoly, which Apple actually broke up. Also, this wasn't Apple's idea, it was the publishers. Of course, Apple was more than happy to take advantage of the situation, so they weren't exactly innocent. It's a really a strange case.

coldcode 13y ago
It's funny that you can monopolize a market as long as you lose money doing it. I wonder what would happen if Amazon then raised ebook prices to 19.99.
jolohaga 13y ago
What's wrong with publishers getting more control? Don't they pay authors? We're not talking about scientific journal publishers here. Who's forcing them to reduce their prices?
- MBCook 13y ago
  Legally nothing. But the eBook market didn't start to take off until Amazon started to force it. We have every reason to believe that publishers will price eBooks in a way that minimizes disruption to their traditional paper business and keep profits higher than the real equilibrium. We've seen the music industry do it (avoiding selling to keep album sales up). We've seen the game industry do it (change the same for downloads as physical copies to keep retail happy). We've seen the movie industry try to prevent disruption many times (anti-VCR, pro-Divx, anti-Netflix, etc).

rverghes 13y ago

This is my understanding of the situation: Traditionally, book publishers sell to stores at a wholesale price. Stores then mark up the price a bit and sell it to the end consumers. Amazon then started selling books for prices below the wholesale price, deliberately taking a loss. The publishers got scared that this would destroy all non-Amazon channels, giving Amazon inordinate power over them. So they got together with Apple and set up a scheme where the publishers would all use the "agent" model. Instead of selling the books to Apple for a fixed wholesale price, they would set the prices however they liked, and Apple would take a cut of 30%. The publishers would then all refuse to sell to Amazon unless Amazon switched to the agent model. That, however, is pretty straight-forward collusion and against the law.

hga 13y ago
How many non-intrinsically expensive ebooks had reasonable wholesale prices above $10? What I've read is that the "below the wholesale price" didn't happen a lot until publishers started raising that price after Amazon created the market. Now, maybe the latter discovered they couldn't afford below $10 wholesale prices, but the method they used to deal with the problem as, as you noted, "straight-forward collusion", and as I add, that harmed the consumer; add the two together and you get a slam dunk anti-trust case.