backtop


Print 67 comment(s) - last by kileysmith104.. on Jun 9 at 11:03 AM

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



Comments     Threshold


This article is over a month old, voting and posting comments is disabled

RE: Am I reading this wrong?
By Solandri on 6/4/2013 2:45:05 PM , Rating: 2
quote:
now it's apple's fault that publishers wants more money per book? Books are still cheaper on amazon.

Apple's part was to require that they always get the lowest (higher) price:
quote:
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.

The writing isn't very clear, but Apple required that the publishers couldn't allow anyone (including Amazon) sell for a lower price than Apple. That's how Apple got involved in this whole mess.

Basically, every seller wants a higher price. It's one of the fundamental forces which makes the market function (the other being buyers wanting a lower price). But the market doesn't allow them to raise prices at will. If one seller raises his prices, his customers flee to another seller with lower prices, and he loses money. OTOH if his prices are too low, he can't stay in business. That balance between fear of fleeing customers and fear of going out of business is what establishes the true market price.

The way to circumvent this market mechanism is for sellers to collude together. If all of them raise prices together, then buyers have nowhere to flee to, and the higher price sticks.

So there's nothing wrong with publishers wanting more money per book. And if they can swing a deal where Apple has to charge more money per book than Amazon in order to make a profit, then all the more power to them. If Amazon's prices are too low, then Amazon will go out of business leaving Apple as the dominant ebook seller. If Apple's prices are too high, then people will buy from Amazon instead, and Apple will be forced to lower their prices or go out of business (well, out of the ebook business).

But the moment Apple required that the publishers always give Apple the lowest price, it became industry-wide price fixing. That eliminated the price differentials in the market which make the market function.


RE: Am I reading this wrong?
By BRB29 on 6/4/2013 2:56:00 PM , Rating: 2
I understand what you're saying. I'm just asking why amazon books are still cheaper. Maybe they're selling at a loss.

I think this case has greed written all over it. Publishers wanted more per book. Then they got the price hike from these contracts with Apple. Apple makes more money and now they're complaining that Apple hurts the consumer costing them millions. WTH? they wanted to raise the price. Did they think that their price hike wasn't going to cost the consumer more than Apple's? The publishers are as guilty as apple and they're using a BS excuse to sue them.


RE: Am I reading this wrong?
By Motoman on 6/4/2013 3:18:06 PM , Rating: 2
Greed? Duh. See: capitalism. Nothing new here.

quote:
The publishers are as guilty as apple and they're using a BS excuse to sue them.


No, the publishers aren't suing Apple - the government is. And the publishers. They're all in this together.


RE: Am I reading this wrong?
By Solandri on 6/4/2013 3:22:26 PM , Rating: 1
Answered in the article:
quote:
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.


"I modded down, down, down, and the flames went higher." -- Sven Olsen














botimage
Copyright 2014 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki