Apple Handed Proposed Solutions for Ebooks Price-Fixing Ruling
August 2, 2013 2:43 PM
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A hearing to discuss remedies and hold a trial on damages will take place on August 9
lost the ebooks battle
earlier this month when a judge ruled that the tech giant had conspired to raise prices, and now, Apple has been handed some potential consequences as a result of that ruling.
The U.S. Department of Justice and 33 U.S. states and territories have proposed that Apple be banned from entering anti-competitive e-book distribution contracts for five years; end its business models with the five publishers it conspired with; use an outside monitor to make sure that its antitrust policies are effective, and allow retailers like Amazon and Barnes & Noble to provide links to their options for two years.
"Under the department's proposed order, Apple's illegal conduct will cease, and Apple and its senior executives will be prevented from conspiring to thwart competition," said Bill Baer, head of the Justice Department's (DOJ) antitrust division.
These proposals have to be approved by U.S. District Judge Denise Cote, who is overseeing the ebooks trial.
All of the five book publishers have already settled with the DOJ, while Apple was the only one to go to trial on June 3.
The ebooks fiasco 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. These book publishers were 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).
The book publishers were accused of partaking in an agency sales model with Apple, which meant that publishers were allowed to set the price of a book and Apple would take a 30 percent cut. In addition, 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.
Apple then came along
, and publishers began to worry that it would take over the book industry the way Apple's iTunes took over the music industry, where customers would choose to purchase cheap, digital books instead of physical books.
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.
Last month, Lawrence Buterman (a DOJ lawyer) said that Apple's move to increase e-book prices hurt consumers by costing them
"millions of dollars."
Cote ruled that Apple tried to raise the prices of e-books through an agency model with other book publishers after a non-jury trial, which ended on June 20.
A hearing to discuss remedies and hold a trial on damages will take place on August 9.
The U.S. Department of Justice
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RE: Obviously incompetent business leaders
8/5/2013 2:27:35 PM
Good list of costs but forgetting cost to store or display said physical product. Physical inventory has a cost that has to be incurred by every retailer to store inventory and stock it on displays. Which also adds to cost of physical items.
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