Not sure how this will affect authors. By Nate Raymond and Jonathan Stempel NEW YORK (Reuters) - In a sweeping rejection of Apple Inc's strategy for selling electronic books on the Internet, a federal judge ruled that the company conspired with five major publishers to raise e-book prices. U.S. District Judge Denise Cote in Manhattan found "compelling evidence" that Apple violated federal antitrust law by playing a "central role" in a conspiracy with the publishers to eliminate retail price competition and raise e-book prices. Wednesday's decision could expose Apple to substantial damages. It is a victory for the U.S. Department of Justice and the 33 U.S. states and territories that brought the civil antitrust case. The five publishers previously settled. Apple was accused of pursuing the conspiracy to undercut online retailer Amazon.com Inc's e-book dominance, causing some e-book prices to rise to $12.99 or $14.99 from the $9.99 that Amazon charged. Amazon once held a 90 percent market share. "Apple chose to join forces with the publisher defendants to raise e-book prices and equipped them with the means to do so," Cote said in a 159-page decision. "Without Apple's orchestration of this conspiracy, it would not have succeeded as it did." The decision was not a total surprise. Cote indicated before the 2-1/2 week non-jury trial began on June 3 that Apple's defenses might fail. The judge on Wednesday ordered a trial to set damages. "This result is a victory for millions of consumers who choose to read books electronically," Bill Baer, head of the Justice Department's antitrust division, said in a statement. "This decision by the court is a critical step in undoing the harm caused by Apple's illegal actions." Baer said Cote's decision, together with the earlier settlements, help consumers by reducing prices of e-books. Barnes & Noble Inc also competes in that market. In a statement, Apple said it will appeal Cote's decision. "Apple did not conspire to fix e-book pricing," spokesman Tom Neumayr said. "When we introduced the iBookstore in 2010, we gave customers more choice, injecting much needed innovation and competition into the market, breaking Amazon's monopolistic grip on the publishing industry. We've done nothing wrong." Last year, Apple settled a separate antitrust case over e-book pricing with the European Commission, without admitting wrongdoing. IMPACT The alleged collusion began in late 2009 and continued into early 2010, in connection with the Silicon Valley giant's launch of its popular iPad tablet. Only Apple went to trial, while the publishers agreed to pay more than $166 million combined to benefit consumers. The publishers included Lagardere SCA's Hachette Book Group Inc, News Corp's HarperCollins Publishers LLC, Pearson Plc's Penguin Group (USA) Inc, CBS Corp's Simon & Schuster Inc and Verlagsgruppe Georg von Holtzbrinck GmbH's Macmillan. Geoffrey Manne, who teaches at Lewis & Clark Law School in Portland, Oregon, said Cote's decision may not change the e-books market much because of the earlier settlements with publishers, which ended their pricing arrangements with Apple. "To the extent the remedy might be behavioral constraints in the e-books market, the settlements with publishers already deal with that," Manne said. In afternoon trading, Apple shares were down 52 cents at $421.83 on the Nasdaq. Steve Berman, a partner at Hagens Berman Sobol Shapiro pursuing consumer class-action litigation against Apple, called Cote's decision "a very big deal." "It exposes Apple to hundreds of millions of dollars in damages, which is what we'll ask for," Berman said. Apple ended March with nearly $145 billion of cash and marketable securities. It plans to spend $100 billion on share buybacks and higher dividends through 2015. STEVE JOBS Amazon's strategy involved buying e-books at wholesale and then selling them at below cost, in an effort to promote its Kindle reading device. Apple, in contrast, entered into "agency agreements" in which publishers were able to set prices, and pay 30 percent commissions to the Cupertino, California-based company. The federal government said this arrangement pushed Amazon into a similar model, and resulted in prices of e-books from the five publishers increasing by 18 percent. "What happens next may depend on Amazon," said Keith Hylton, a Boston University law professor and antitrust specialist. "If Amazon feels a need to keep driving e-book prices down to maximize Kindle sales, it could put downward pressure on prices overall, and perhaps help Amazon win market share back." Amazon spokesman Drew Herdener declined to comment. Evidence in the case included emails from Apple's late co-founder Steve Jobs to News Corp executive James Murdoch that the government said reflected Jobs' desire to boost prices and "create a real mainstream e-books market at $12.99 and $14.99." Those emails hurt Apple's case. "Apple has struggled mightily to reinterpret Jobs's statements in a way that will eliminate their bite," Cote said. "Its efforts have proven fruitless." Cote also rejected Apple's argument that it would be unfair to single out the company when Amazon and Google Inc, among others, entered similar agency agreements with publishers. Apple had argued that it never even understood that publishers might have talked among themselves about higher prices before the iPad launch. "There is no such thing as a conspiracy by telepathy," Apple's lawyer Orin Snyder said in closing arguments on June 20. The decision allows the plaintiffs to seek injunctive relief to prevent further pricing conspiracies. At trial, the Justice Department said it wanted to block Apple from using the agency model for two years. It also wants to stop Apple over a five-year period from entering contracts with clauses designed to ensure it offers the lowest prices. The case is U.S. v. Apple Inc et al, U.S. District Court, Southern District of New York, No. 12-02826. (Reporting by Nate Raymond and Jonathan Stempel in New York; Additional reporting by Alistair Barr; Editing by Gerald E. McCormick and John Wallace)
I posted a thread in the lounge, earlier: https://www.writingforums.org/showthread.php?t=63162 It is certainly going to go up on appeal. I'm not sure it will have much short-term effect on authors. Amazon is going to continue to dominate for the near future, and depending on what they do with their market share, it could have a negative impact. Also, just my view, but it is probably better on a writing site to link to this stuff instead of cutting and pasting, given copyright and the fact that we're all authors.
Agreed. Right, wrong, or indifferent, Apple has shown itself to be as tenacious as a dog with a neck-bone when it comes to litigation.
I skimmed over this a couple of times and I don't really get it... Is it saying that Apple somehow conspired to raise amazon's e-book prices so theirs could be cheaper than amazon's? Or were they simply trying to raise the price of e-books in general so publishers can charge more? Either way I don't see how increased e-book prices could be bad for authors, unless it becomes prohibitively expensive and people stop reading. People's perceived value of an ebook is extremely low. They'll happily pay $30 for a Tv series, $15 for a movie, but a 500 page novel, delivering 20-30 hours of entertainment is only worth a few coins.
[MENTION=53332]AVCortez[/MENTION] - in a nutshell, Amazon are by far the market leaders in sales of eBooks and they have the power to dictate the prices. They don't care how much the publisher/author gets as long as they get 30% and usually set best selling prices at $9.99. Apple on the other hand sell squillions more iPads than Amazon sell Kindles so Apple decided to take the power from Amazon and split it between themselves and the publisher. Their plan was to make it easier for iPad users to buy directly from Apple. The publisher would set the price and with a one click app on the iPad, users would buy an eBook and the biggest commission would go direct to Apple and the publisher. It's not proven if the actual author was going to benefit at all. So basically it was a power struggle between Amazon and Apple with the author none the wiser, or richer. I'm not sure you can compare apples and oranges, a whole family and friends can sit in front of a TV and watch something, over and over and then you get something like Netflix charging $5 a month for hundreds of movies and film/tv costs a shit load more to produce than you or I sitting in a quiet room tapping keys into MS Word. A publisher might take a calculated risk in pumping money into our books but like I said, apples and oranges. I'm not sure if they mentioned Apple's fine for this illegal activity but I'm sure it's an awful lot higher than their tax bill - go get 'em boys!
erebh: Actually, what Amazon was doing was paying the publishers a set price, and then discounting the price on Amazon.com, sometimes to the point of taking a loss on the work. Publishers still got the same amount, whether Amazon was taking a beating or not (in other words, Amazon wasn't paying them 30% of the sale price. They still do this - if you publish on Amazon and they decide to discount the book it doesn't effect your royalty), but some of the publishers were concerned that Amazon was driving the overall price for e-Books down.
I don't how that works [MENTION=18889]Steerpike[/MENTION] - isn't below cost selling, or predatory pricing illegal in most states of America as well as most countries in the world? If it's a case where Amazon are selling below cost, wouldn't Apple have hit them in the face with it like a wet kipper? I won't pretend I know everything this huge companies are up to but I doubt they can get away with taking a hit so publically.
It can be considered predatory. I don't think it was a secret - I read an article referencing it at Bloomberg earlier, and others in previous months. Part of Apple's reason for trying to push their model was because Amazon was selling some e-Books below cost and Apple didn't want to do that to compete with them. Amazon even sells the Kindle Fire below cost (or did, for a while) according to reports I've seen. I'm not sure it is predatory per se, and Amazon has argued that consumers reap the benefit of it. But it could certainly be another area for the Justice Department to look at.
Amazon selling the kindle is different because it's their product and only they sell them so they could spend €100 on making a kindle and sell it for €1 if they want - that's not against the rules. Sony also do it with their playstations and then make it up on the games at €50 each. All the Printer manufacturers are the same, they sell printers for €40 and ink is €30! Selling somebody else's product below cost is totally illegal. It means that Amazon could sell actual paper books for 50 cents until every other bookseller goes bust - then bounce the price back up again, price fixing, below cost selling, predatory pricing - it's all illegal.
As I said, it's not per se illegal from what I understand, though it is suspect. Also, whether it is someone else's product or their own, the same rationale applies. Amazon could sell Kindles for 50 cents until every other e-Reader manufacturer goes broke, then raise the price once they're the only ones left. Even when Amazon was selling the books at that low price, they were still paying the publisher regular price for them. If you publish an e-Book on Amazon, I'm pretty sure they can decide to discount it if they feel like it, but it doesn't affect what you receive as the author. Companies do these sorts of things as promotions all the time, with their loss-leaders. Items that are sold at low or even below-cost prices to get people in the door. If you're doing it to try to drive others out of business, then it could certainly be problematic, but it seems to be allowed as a promotion to attract customers. That line is obviously quite vague. Also, if you're engaged in illegal predatory pricing, it doesn't matter if it is your own manufactured product or not, you'll still be violating the law.
Oh well, as long as these huge corps are fiddling tax (they all channel cash through Ireland) the govts will find a way to fine them, swings and roundabouts
Erehb, in regards to your predatory pricing statement. News 24, an Australian news network ran a story about Amazon evading tax in the UK. Apparently they register themselves in small countries or something so that can avoid paying GST (I think, may have been some other tariff). It could also allow them to manipulate prices on digital products even in the US because all they need is a server. That said, my limited experience with international business has lead me to believe that whether or not you are based in the country you are distributing, you are still subject to their laws. Then again, if your legal departments big enough you can get away with just about anything. Well, in that case I say let the big dicks swing. If trade publishing houses are making more money, they'll eventually be more inclined to publish new authors and pay them more. This might seem like a scandal now, but it's really just testing the water in a pond that just sprung out of nowhere. Trade Publishing is a bit of a wounded beast I think. It could go either way - accept the digital format and work with it to increase their profits and continue functioning, or snap angrily until it tires and dies. While a power struggle between multi-nationals isn't a very glamorous way to go about it, it is a means to an end. That's capitalism really, the fat cats with their armani shoelaces and freeze dried coffee ice-cream eat their caviar first, and when they're full it trickles down to the masses. If they harness e-book sales and are really killing it, I still don't think our generation will benefit. The fat cats have big bellies. But in the long term it will be for the best. Oh, the reason I've concluded this is because I read about an author who received a $150k advance for her first book in the late nineties, while a friend of my sister's just got 10k for his.... It's reasonable that in this unstable market publishers don't want to throw huge amounts of money into an unknown who could be outsold by an indie author with a large twitter following. But if they were cashed up, and had an extremely cheap method of testing the water it could lead to higher advances for new authors.
