Apple being sued for price fixing

[Skull One]

That is a very nicely worded example, skull.

Thank you.

My concern is; will the DOJ lay it out to 12 jurors so they can understand it and the full ramifications.

 

[beesknees]

So why is Apple being accused of "price fixing" if the manufacturer is setting the price? The manufacturer can set the MSRP. The manufacturer can exercise contracts as I have shown. And the seller can exercise his right to buy the inventory and sell the inventory at any price point. But Apple made one mistake and removed the legal rights of the other seller. By having the manufacturer sign a contract that specifically states you can not sell your product thru any other venue without our price being the lowest, you just removed the legal rights of all the sellers involved with inventory of that product.

Apple is dictating what price point Amazon has to sell its legally owned inventory at. Apple didn't make the product. Apple isn't involved in the manufacturing process of the product. Amazon doesn't even have a contract with Apple concerning that specific inventory.

And that is why Apple is being sued for price fixing.

The same problem exists. Apple asked the publishers to force Amazon et al to sell at a certain price point. The did not force them directly or enter into an agreement with them. If Apple and Amazon got together and agreed to jack up the price that would be price fixing at their level.

 

[Ziggie]

I'd love to see the DOJ win/lose statistics. I bet they are much more balanced than is being stated here by those supposedly in the know. I can think of a dozen high profile losses off the top of my head.

Based on the most recently available information, DOJ wins 95% of the civil cases it brings.

The formatting kinda sucks below, but the full report can be found at HTTP://WWW.justice.gov/usao/. Click "2010 Annual Statistical Report."

United States Attorneys' Annual Statistical Report Fiscal Year 2010

OVERALL CIVIL LITIGATION $ 92,198 matters received-increased by two percent $ 83,599 cases filed or responded to-increased by three percent $ 77,934 cases terminated-case terminations decreased by three percent $ 21,517 judgments, or 75 percent, were in favor of the United States $ 11,459 settlements-15 percent of all cases terminated

AFFIRMATIVE CIVIL LITIGATION $ 5,297 cases filed-case filings decreased by seven percent $ 5,400 cases terminated-case terminations decreased by 13 percent $ 2,867 judgments, or 95 percent, were in favor of the United States $ 585 settlements-11 percent of all cases terminated

 

[Skull One]

LOL. I knew it was high. Didn't know the DoJ success rate was that high

 

[Skull One]

The same problem exists. Apple asked the publishers to force Amazon et al to sell at a certain price point. The did not force them directly or enter into an agreement with them. If Apple and Amazon got together and agreed to jack up the price that would be price fixing at their level.

Publishers were not doing "Agency Model Pricing" with Amazon "PRIOR" (and that is key) to the contractual deals made with Apple. After they signed with Apple, the publishers went to Amazon. Amazon had no legal choice in the matter. Amazon's lawyers were smart enough to see what was going on and played along so they couldn't be accused of breaking any laws. They simply had to wait for the DOJ to take notice.

You should read about the history of this event. Prices on Amazon E-Books literally shot up over night after Apple got into the game. And it was across the board. There is no doubt of the collusion involved between Apple and the Publishers.

 

[beesknees]

Publishers were not doing "Agency Model Pricing" with Amazon "PRIOR" (and that is key) to the contractual deals made with Apple. After they signed with Apple, the publishers went to Amazon. Amazon had no legal choice in the matter. Amazon's lawyers were smart enough to see what was going on and played along so they couldn't be accused of breaking any laws. They simply had to wait for the DOJ to take notice.

You should read about the history of this event. Prices on Amazon E-Books literally shot up over night after Apple got into the game. And it was across the board. There is no doubt of the collusion involved between Apple and the Publishers.

If everyone was forced to sell at the same price Apple gained no advantage. They may have generated more profits but so did everyone else. The big winners were the publishers. You could look at this another way too. Suppose the publishers wanted Apple to sell at the higher price and they agreed but wanted a level playing field? It would have then been up to the publishers to make it happen.

 

[Skull One]

If everyone was forced to sell at the same price Apple gained no advantage. They may have generated more profits but so did everyone else. The big winners were the publishers. You could look at this another way too. Suppose the publishers wanted Apple to sell at the higher price and they agreed but wanted a level playing field? It would have then been up to the publishers to make it happen.

Except the publishers didn't come up with this idea themselves. Apple did and that is documented. Which is really unfortunate for Apple right now.

BTW, I agree that technically no one "seller" gained an advantage in this price fixing scheme. And I also agree that Apple's defense will be "we didn't gain a competitive advantage over Amazon". Doesn't mean that it was legal.

Apple made one simple mistake. They made a contract with very specific wording in it and the prices jumped across all ebooks in a time span that leaves no doubt that an "event" took place.

 

[Stormborn]

It is a form of price fixing in a way but also apple was trying to stay competitive. The price fixing is totally on the publishers. They are simply greedy. Ebooks don't cost more than hardcovers on amazon.

 

[Skull One]

It is a form of price fixing in a way but also apple was trying to stay competitive. The price fixing is totally on the publishers. They are simply greedy. Ebooks don't cost more than hardcovers on amazon.

Apple was not even remotely trying to stay competitive. They get 30% of everything sold. They wanted this price hike because there is a huge difference between 30% of $8 and 30% of $15+.

The price fixing was Apple's idea. They went to the publishers, not the other way around.

 

[beesknees]

Except the publishers didn't come up with this idea themselves. Apple did and that is documented. Which is really unfortunate for Apple right now.

BTW, I agree that technically no one "seller" gained an advantage in this price fixing scheme. And I also agree that Apple's defense will be "we didn't gain a competitive advantage over Amazon". Doesn't mean that it was legal.

Apple made one simple mistake. They made a contract with very specific wording in it and the prices jumped across all ebooks in a time span that leaves no doubt that an "event" took place.

It may have been Apple's idea but they didn't gain an advantage and did not directly implement the plan. I'd even argue that during the contract negotiations it is the publisher's responsibility to determine if one of the terms involves a criminal act.

I am no Apple fanboy but I think there is a big difference between asking some to break the law and actually breaking the law. What Apple did was unethical and really lousy in this economy but it does not seem like direct participation.

 

[wholesalestunna]

As a big reader, I'm excited to see how this will unfold. I read about three books a week and $15 for an ebook when you can buy a paper copy for the same or less is rediculous. Amazon does a great job of marketing things, and if they want to take a hit on some book sales to gain customers, they should be able to. Look at the free paid amazon app of the day they run. This is why I'm a huge amazon fan because they actually offer deals.

 

[Seadog]

If you will look at the charges, the DOJ accuses the publishers of collusion on the agency model a full year before any talks with Apple. Second, there is as much a case against Amazon as there is against Apple. If you will look at the recent record of the DOJ, they have been under fire for several monumental lapses in judgement. I am sure that you will find that their success rate is greatly exaggerated.

Finally, the problem the publishers have is they have made a lot of money in the past. Because of that, they have paid really high amounts to authors, even when their books failed to live up to expectations. The one publisher that is a public company, and therefore has to publish their financial reports, has seen declining profits every year. Changes are coming to the publishing industry, and it is not good. Most publishers are struggling. Not all publishers make millions from best selling books. Most publishers are small operations that are facing increasing costs for paper and ink, labor, and transportation. Even major established publishers like Reader's Digest are facing challenges to stay in business. The publishers are trying to stay alive. Yes they were on a wild ride of profits in the past, but now the question is about staying alive. Apple is very likely to just drop selling eBooks due to this nonsense. If DOJ breaks the publishers, many of them will face some hard times, and you could see some drastic measures from publishers trying to stay alive. It just seems amazing that DOJ accuses the publishers of price fixing and not the music moguls.

 

[thewitt]

If you will look at the charges, the DOJ accuses the publishers of collusion on the agency model a full year before any talks with Apple. .

This is exactly why they were able to respond so quickly. They had a year to prepare...

It's not a slam dunk by any stretch, and it would not surprise me to find political motivation at the bottom of thus one as well.

At any rate, it will be interesting to watch this play out.

 

[jsh1120]

The way it will "play out" has already been more or less laid out by Skull One. Apple and the remaining publishers who haven't already caved will cave or they'll lose the case. The "competitive advantage" Apple gained in all this was to blunt the impact of Amazon's tablet impact among consumers who buy a lot of e-books. Apple likes selling books but they like selling tablets even more. And that's where their strategy was aimed.

The unfortunate collateral damage here is the impact on the remaining independent booksellers. A drop in e-book prices will simply accelerate their demise.

 

[Johnm]

I agree 100% with Skull One.
The bottom line is Apple wanted their 30% on all books sold. Apple forced book sellers to stop selling books on an iPad without Apple getting their 30%. This forced book sellers to get onside or leave.
It is for this reason some companies used Html5 to create apps that did not require Apple's approval.
They could publish on the iPad without giving Apple a 30% cut of subscription revenue.

This is not criticising Apple. If we want our Apple devices we need Apple to stay in business. This requires a prosperous company. That 30% makes that possible.