Apple's struggle to defeat Amazon exposed by European / U.S. ebook inquiries

[Gino Cerullo]

Originally Posted by nospam

Part of the deal with Apple, and I suspect this is what caused the action of the DOJ, was that the publishers were required to prohibit retailers from discounting their E-book offerings to customers. So yes, they were colluding to fix prices, just not by a certain dollar amount.

No, that is an incorrect interpretation of the "Most Favoured Nation" clause. The clause stipulated that the publishers, who set the prices in the iBook Store had to 'match' the lowest price offered at other ebook stores. The publishers were not prevented from discounting or putting books on sale and Apple, at no time, had any influence on the price of books on their own store or anyone else's. There is a big difference!

What Apple was trying to prevent was having the book publishers put Apple's iBook Store at a disadvantage price wise as compared to their competitors since they were not in control of the book pricing. Get that, Apple was not in control of the price of the ebooks!

I will state this now, Apple will come out of this unscathed. The DoJ has no case against them according to statements released so far. There is nothing illegal in Apple's contract with the publishers including the MFN clause. It is no different than the deal they have regarding App sales except for possibly the MFN clause.

If the publishers used their deal with Apple to pressure Amazon into a new deal that isn't illegal either that is just contract negotiation.

The only thing the DoJ has is the collusion allegation and, again according to statements released so far, they haven't produced any evidence that the two hold out publishers and Apple colluded amongst themselves or with the other three publishers in this contract arrangement. They state that they have evidence of meetings amongst the publishers but two of them deny involvement as does Apple. It may be that the other three publishers who settled were the only ones involved in those meetings and that is why they settled.

As a matter of fact one of the pieces of evidence produced by the DoJ contradicts the collusion argument. According to the DoJ Penguin Books asked for 'assurances from Apple' that the other publishers were going to also join in to the Agency Pricing model. If there was collusion then Penguin Books would not have needed Apple's assurance (and there is no evidence Apple gave any such assurance), they would have known from their own meetings with the other publishers that they were going to join with Apple in the Agency Pricing arrangement.

Notice that Penguin Books is also one of the hold outs in a settlement with the DoJ.

[TorontoColin]

What I'm not clear on is whether the policy allows other ebook retailers to discount ebooks and take the loss themselves. For example, if Amazon decided to put a book on sale themselves and just not make any profit on it (discount it by the same amount as their cut of sales), as they have announced they plan on doing, how would that affect the publishers' deals with Apple? Would the publishers then be forced to discount the books themselves on Apple's store, or is a part of their agreement with Apple that they won't let other ebook retailers discount their books at all?

If the publishers were working with Apple to prevent other retailers (Amazon, Kobo, Google, etc) from discounting their books in order to keep prices artificially high, then that is price fixing. It is also collusion as soon as they suggest that they require the other publishers to come to the same agreement. They don't need to work together directly, as long as Apple is acting as an intermediary.

If that email from Steve Jobs is real, then it is price fixing, though I doubt it's enough for a conviction. Jobs was openly suggesting that publishers (along with Apple) raise the prices of ebooks, and they then subsequently agreed they would do so across all other ebook platforms.

I also suspect Apple will get out of this, because I don't think there is enough for a conviction, which is somewhat disappointing because the increased pricing of ebooks has affected me directly and has reduced the number of ebooks I've bought. I hope at the very least it scares the publishers enough to have them rethink their current practices.

[cdn_tbird]

Originally Posted by Gino Cerullo

There is no price fixing. As NeilN indicated, no two publishers sell the same product therefore you can't be accused of fixing the price. It's not like, for example, the oil companies getting together to fix the price of a common commodity, oil.

Originally Posted by Gino Cerullo

as more writers self-publish and smaller book publishing agencies, willing to take a smaller cut for their services, come online and force the general price of books down.

To borrow an old cliche "You can't have your cake and eat it too". I think you'll need to pick one argument and stick with it.

If the first argument is true that since no two publishers sell the same book there is no price fixing, then it doesn't matter how many small publishers and self-publishers get into the game since they don't sell the same books prices will remain forever high no matter what.

[wideband]

Europeans generally take a more consumer-friendly approach than Canada and the US with their more laissez faire attitudes towards big business. Just remember how the EU tackled Microsoft and compare it to how the US backed down over Internet Explorer's browser dominance. And observe how it has opened up the market to competition from which we have all benefitted; well, perhaps not Microsoft. As an example of European attitudes, just look at Britain's Resale Prices Act. It bans any behaviour by a supplier which imposes prices or price levels on its distributors. It forbids refusing to supply goods or services unless the distributor agrees to maintain fixed prices, minimum discounts or similar practices. Exemptions can be granted but, curiously, only books and some pharmaceuticals have been exempted. Setting percentages, another way to maintain prices, clearly falls within the act. Similarly, France, Sweden and Finland have strict laws against resale price maintenance and the European Court of Justice and the European Commission do not favour it. So don't be surprised if Apple and the others find themselves with their backs against the wall on this one.

[maritimer555]

Thanks Wideband.
I'm thinking that there must also be a "Different Approach" for DVD and Blu Ray sales in Britain. Most of the time DVD and Blu Ray movies and concerts are 30-50% cheaper on Amazon.uk , then .ca or .com.

[beanagee1]

I'm not sure if the government has solid legal basis for going after Apple. Apple may not be legally off-side, but Apple did not exactly do the consumers any favours. In fact, they tried to screw the consumers. The government may be just flailing trying to do the right thing and I wish them well.