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Apple's lawyer said the agency model is beneficial to both consumers and markets

The e-books price-fixing trial with Apple has begun, and a U.S. government lawyer accused Apple of conducting shady business practices with the five book publishers. 

"Apple told publishers that Apple - and only Apple - could get prices up in their industry," said Lawrence Buterman, a lawyer at the U.S. Department of Justice (DOJ). 

Buterman also added that Apple's agency model with publishers (where publishers set the price and Apple takes a 30 percent cut) hurt consumers by raising prices. 

"Overall, average prices of e-books went up, costing consumers millions of dollars," said Buterman.

The three-week trial, which started yesterday, concerns the DOJ's lawsuit against Apple in regards to its method of fixing prices for e-books. 

Orin Snyder, Apple's attorney, disagrees with the DOJ's statements. 

"What the government wants to do is reverse engineer a conspiracy from a market effect," said Snyder. "Agency [model] is good and beneficial to consumers and markets."

Snyder added that DOJ's evidence, such as emails from former Apple CEO Steve Jobs, will likely be misinterpreted. He also said that average e-book prices fell after Apple entered the market, dropping from $7.97 to $7.34.

Apple is the target of the e-books investigation along with book publishers Hachette Livre (Lagardère Publishing France), Harper Collins (News Corp., U.S.A.), Simon & Schuster (CBS Corp., U.S.A.), Penguin (Pearson Group, United Kingdom) and Verlagsgruppe Georg von Holzbrinck (owner of inter alia Macmillan, Germany). However, all the book publishers have already settled with DOJ, so Apple is the only company going to trial. 

This all started in April 2012, when the U.S. Department of Justice (DOJ) sued Apple and the five book publishers over anticompetitive practices concerning e-book sales. The book publishers were accused of partaking in an agency sales model with Apple, and the publishers could not let rivals sell the same book at a lower price. Traditionally, publishers sell physical books to retailers for about half of the cover price, which is considered a wholesale model. Retailers then had the ability to sell those books to customers for a lower price if they wanted to.

But when e-books came along, this model was challenged. Amazon started selling best sellers for as low as $9.99 to encourage its Kindle e-reader sales. Publishers were not happy with this because they thought the prices were too low.

However, Apple attempted to resolve this when it struck a deal with publishers to implement the agency model in 2010. This helped Apple at the time of its iPad and iBooks launch. But its deal with publishers made it seem like an attempt to thwart Amazon's dominance.

In April of this year, DOJ used an old email from former Apple CEO Steve Jobs as evidence in the e-books case. The email (dated in 2010) from Jobs to James Murdoch of News Corporation said, "Throw in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99.”

U.S. District Judge Denise Cote, who is overseeing the trial, said last month in a preliminary hearing that the e-books price fixing case seemed to fall in favor of the DOJ
"I believe that the government will be able to show at trial direct evidence that Apple knowingly participated in and facilitated a conspiracy to raise prices of e-books, and that the circumstantial evidence in this case, including the terms of the agreements, will confirm that," said Cote.

Source: Reuters

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RE: Am I reading this wrong?
By testerguy on 6/4/2013 1:27:13 PM , Rating: -1
Wrong as usual, on most counts.

Firstly - it has not been proven yet that they participated in a cartel or price fixed. That's what this trial is for. You don't get to define the verdict before the judge does. I'd be particularly interested to hear any evidence, whatsoever, that you have of any Apple employee stating any kind of minimum or fixed price .

It WOULD be illegal, IF they had done it.

Also - the cost of printing books is way, way lower than you think. It represents about 50p out of every £15 book. An E-book doesn't cost dramatically less - plus you have all the cost of servers, online payments, security, hosting - in the end the costs are similar.

When you buy books you're buying the content, not the physical paper.

RE: Am I reading this wrong?
By Motoman on 6/4/2013 1:50:29 PM , Rating: 5
Wow you're lost.

OK sure, we'll let the courts play this out. So if you want to keep your head firmly planted in your a$s for a while and pretend what Apple was doing was legal, you just keep on doing that.

As for manufacturing and distribution costs of books, you're so far off the charts it's not even funny. You're trying to claim that that cost is ~3% of the book's price. That's a ridiculous lie.

Granted that dedicated publishers with their own facilities will have a tighter control on manufacturing costs than a 3rd party provider, here's a good look at what it would cost an average Joe to get a book manufactured in volume by a legitimate book manufacturer:

If you ordered 10,000 copies of a 200 page 6x9 paperback, in black & white and no other frills, it works out to something like $5.80 per book. And that's just manufacturing cost - you've got distribution costs on top of that. So if you sell your paperback for ~$12, about 50% of it is already caught up in manufacturing alone.

Even if you cut that in half for a publisher that owns it's own manufacturing facilities, you're still at 25% of price for manufacturing before factoring in distribution costs. Hell, even if the big publishers can do it at a quarter of what it costs a self-publisher, it's still ~12.5% before you box it up, load it on trucks, and ship it around.

So...your 50p per £15 book? Please. Stop spilling your stupid on the internet.

RE: Am I reading this wrong?
By retrospooty on 6/4/2013 1:54:12 PM , Rating: 2
"Stop spilling your stupid on the internet."

It's all he's got. He could spill his pompous and arrogance as well, but it wouldn't matter. ;)

Defending their BS lawsuits, defending their "superior" products, defending the crappy moves they make and now defending the price fixing... Ugh. I don't even have the words to describe what a ridiculous waste of skin this clown is.

RE: Am I reading this wrong?
By testerguy on 6/5/13, Rating: -1
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