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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: Question marks over Amazon
By BRB29 on 6/4/2013 1:52:27 PM , Rating: 2
Predatory pricing is when you price products below cost to knock out smaller competitors. That is not the case here.

Kindle Fire and cheap ebooks are like their advertisement campaign. I own a kindle fire HD, it's just a content and shopping device. You will end up spending much more money on other products and contents than ebooks.

It is not selling at a loss either. It has a gross profit margin but a negative net profit.


RE: Question marks over Amazon
By testerguy on 6/4/13, Rating: 0
RE: Question marks over Amazon
By BRB29 on 6/4/2013 2:20:45 PM , Rating: 2
quote:
They may well be doing it to prevent smaller competitors, but that is NOT what predatory pricing means anyway


The definition of predatory pricing is

quote:
The act of setting prices low in an attempt to eliminate the competition.

http://www.investopedia.com/terms/p/predatory-pric...
http://en.wikipedia.org/wiki/Predatory_pricing
http://www.thefreedictionary.com/predatory+pricing

Usually, if you are pricing below direct costs then you will be red flagged and reviewed. It is not easy to prove because it is hidden deep within accounting data. Some CFOs will fake accounting data also.

Amazon business strategy is to drive their main cash cows. It's pretty obvious they want to get people hooked onto their ecosystem by selling cheap Kindle Fire and ebooks. They started with books and have a reputation for it. Now they're using it to attract people and drive product sales.

You also noticed they have free student accounts with a lot of free stuff and discounts. They're getting students hooked onto it to ensure business in the future.

I'm sure they don't make money off amazon prime either. But amazon prime gets people hooked and buy a lot more stuff. $80 is very low for everything they're giving you. That's probably below cost also.


RE: Question marks over Amazon
By testerguy on 6/5/2013 3:32:09 AM , Rating: 2
Sigh...

quote:
They may well be doing it to prevent smaller competitors, but that is NOT what predatory pricing means anyway


Key part of this sentence which YOU made out was the definition of predatory pricing - SMALL. The point I was making is that they DO NOT have to be small. Hence your own definition:

quote:
The act of setting prices low in an attempt to eliminate the competition.


... proves MY point, not yours.

Whether Amazon's strategy is to 'get people hooked' or not is irrelevant. If part of their strategy to 'get people hooked' is to reduce prices deliberately aiming to eliminate the competition, it could be predatory pricing. As per your own definition.


RE: Question marks over Amazon
By BRB29 on 6/5/2013 2:04:11 PM , Rating: 2
Your whole argument actually reads like this
quote:
You can't claim to know Amazons intentions. They may well be doing it to prevent smaller competitors, but that is NOT what predatory pricing means anyway. It refers to any company who offers goods or services way below cost with the aim of gaining market share and a position of power which would enable them to subsequently increase prices. This may or not be the case with Amazon, but we definitely can't categorically state that it isn't.

Don't try to change your story.

A smaller competitor pricing a larger competitor out of business? that's called competition. They have to prove the intent of the pricing. Usually, it's by cost accounting. If you are pricing any products below cost then you are in trouble. A small competitor entering the market cannot win a price war against a larger competitor that dominate the market. They haven't even made profits yet so how could they price it below cost? They'll be out of business before they gain any traction.

On the other hands, the dominant competitor will price products to eliminate targeted smaller competitors locally. As soon as they can prove that, then you are slapped with slapped with predatory pricing. If the large competitor lower prices for their entire product line across all regions then it is legal as long as it is not below cost and it is not temporary.

You have no point besides nitpicking and selectively quoting.


RE: Question marks over Amazon
By retrospooty on 6/5/2013 4:13:33 PM , Rating: 2
"You have no point besides nitpicking and selectively quoting."

LOL... Been there with this guy many times. Hilarious.


RE: Question marks over Amazon
By testerguy on 6/6/2013 3:35:57 AM , Rating: 2
Yeah you've failed to grasp basic logic a LOT.

Not much to be proud of.


By retrospooty on 6/6/2013 8:18:50 AM , Rating: 2
You have no point besides nitpicking and selectively quoting


RE: Question marks over Amazon
By testerguy on 6/6/2013 3:31:59 AM , Rating: 1
My whole argument does indeed read like that, and it's factually the case.

And the quote you posted concisely describes precisely your failings:

1 - You mistakenly thought that predatory pricing was about preventing smaller companies from competing. It isn't. The size of the companies has no relevance whatsoever. Hence my quote 'hey may well be doing it to prevent smaller competitors, but that is NOT what predatory pricing means'.

It remains the case that predatory pricing does NOT mean preventing SMALLER companies from competing.

And the reason why this is NOT 'nitpicking' is that you used the word 'small' companies in this case to try and make out that Amazon couldn't possibly be carrying out predatory pricing against a company as large as Apple. Which is absolute nonsense .

And your second failing, also detailed concisely in my quote you posted, is that you do not know Amazon's intentions . You therefore cannot say that they definitely weren't carrying out predatory pricing.

I really can't understand why you think quoting my own post does anything but prove my points?

quote:
A smaller competitor pricing a larger competitor out of business? that's called competition.


See, again. Your absolute failure to grasp the point being made. The size of the companies has no relevance whatsoever . Your OWN definition of predatory pricing proves that (as I've already told you).

quote:
If you are pricing any products below cost then you are in trouble


Again, more flat out rubbish. You literally have no clue whatsoever. Loss leaders are perfectly acceptable, and any company is well within their rights to sell specific products at a loss. Predatory pricing is a very different animal, and it's typically found with a more widespread culture of loss across an entire department, but that alone isn't enough. It also needs to be more likely than not that Amazon is making that collective loss with a view to removing competition from the industry (ANY SIZED competition). Then, and only then, does it become illegal activity (predatory pricing).

Your final paragraph is basically you doing a complete U-Turn, and instead of stating categorically that Amazon could not be carrying out predatory pricing (which you were saying previously), you're now trying to talk about what predatory pricing is, as if that changes anything. Your paragraph contains a few inaccuracies which aren't worth pointing out.

You say I have no point but what I've been pointing out to you all along is that

a) Amazon's actions with e-books could constitute predatory pricing (something you categorically ruled out previously, yet now say is possible?)

and

b) Predatory pricing has nothing whatsoever to do with the size of the companies involved. You continue to rant about small or large companies, it's irrelevant. And when I pointed out to you that 'small' was not the definition of predatory pricing, you say I'm 'nitpicking'. Completely clueless.

Just learn to read, all of you! LOL


RE: Question marks over Amazon
By BRB29 on 6/6/2013 8:56:44 AM , Rating: 2
What the hell are you talking about?

To prove predatory pricing you have to prove 2 things

1. Price below cost
2. Intent to eliminate competition from market

Both of those cannot be proven here. It's that simple. Amazon is not charging people less than what the publishers are charging them. Amazon is not putting anyone out of business either.

Their Kindle and ebooks are incentives and used as incentives(marketing) for people to enter the amazon ecosystem.

If you accuse amazon of predatory pricing then you might as well accuse apple and google also because they're offering free apps. Free apps is literally below any amount and type of cost.


By retrospooty on 6/6/2013 10:33:11 AM , Rating: 2
"What the hell are you talking about?"

The guy is either mentally imbalanced or he is just trying to defend his position past the point where he lost the debate. Either way LOL.


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