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4/12/2012
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Apple Should Settle E-Book Antitrust Case, Expert Says

Former FTC policy director says the DOJ's evidence against Apple and several book publishers is the kind that prosecutors "fantasize about."

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The government's evidence in its price-fixing case against Apple and several book publishers is so strong that the companies would be foolish not to settle the case with the Department of Justice out of court, said a former policy director of the Federal Trade Commission, which regulates industry competition in the U.S.

"This is one of the most compelling complaints I've seen in my life," said David Balto, who was also an attorney in the DOJ's antitrust unit. "Government enforcers fantasize about this kind of evidence but this is beyond their fantasies," Balto said in an interview.

The DOJ filed its antitrust suit against Apple and five major book publishers, including Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster, on Wednesday, accusing them of conspiring to fix the prices of electronic books in order to force Amazon to raise its prices. They feared Amazon was destroying their profit margins by selling e-books for as little as $9.99.

Three of the defendants, Hachette, HarperCollins, and Simon & Schuster, have settled their cases.

South Dakota Attorney General Marty Jackley said in a statement Wednesday that his state and 14 others also filed an antitrust lawsuit against Apple and major book publishers to "restore the free market for e-book sales."

Among the government's evidence is records of emails and phone calls that allegedly show executives from the companies, including late Apple CEO Steve Jobs, openly conspiring to use their market clout to increase the price of e-books industry wide.

[ Does the expiration of its consent decree with the DOJ mean a bolder Microsoft? See Skype Buy First Of Many For DOJ-free Microsoft. ]

In one instance, an unidentified exec from the group sent an email to a superior that in part read, "The top publishers are in discussions to create an alternative platform to Amazon for e-books. The goal is less to compete with Amazon as to force it to accept a price level higher than $9.99."

And in an email to one of the publishing execs, Jobs, according to court records, wrote that "all major publishers" had told Apple that "Amazon's $9.99 price for new releases is eroding the value perception of their products in customers' minds, and they do not want this practice to continue for new releases."

Monthly US Book Revenue

Jobs also told one of the execs that he should, "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." The DOJ also alleges that the execs met quarterly in private rooms at pricey Manhattan restaurants to discuss their plan.

"One must wonder about the degree to which these business people thought about asking their antitrust lawyers for advice," said Balto, who is now in private practice. "Clearly the government has a case, and it will survive any motion to dismiss."

Balto said Apple and its co-defendants face another problem if the case goes to trial. It's been assigned to Judge Denise Cote of the U.S. District Court in Manhattan. Cote is a former head of the U.S. Attorney's Office for New York's Criminal Division. "She's fair, but she's very tough," said Balto.

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Zemack
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Zemack,
User Rank: Apprentice
4/14/2012 | 6:58:04 PM
re: Apple Should Settle E-Book Antitrust Case, Expert Says
I see nothing wrong with anything the companies did as described here. What I do see is Orwellian claptrap relating to the governmentG«÷s case, such as G«£Federal Trade Commission, which regulates industry competition,G«• G«£restore the free marketG«• by governmental decree, or the characterization of the executives private contractual correspondence as G«£conspiracy.G«• What Apple and the publishers did is competition in a free market; the G«£freeG«• meaning free from physical force and coercion. What government is now doing is force, not free market competition.

These companiesG«÷ G«£market cloutG«• represents benign economic power earned from the valuable products priced to attract untold tens of millions of willing G«£consumersG«• voluntarily buying them. It is the government that is attempting true price fixingG«Ųi.e., by political power of force and coercion. By what perverse logic do Apple and the publishersG«÷ voluntary actions constitute G«£fixingG«• the price, but governmentG«÷s coercive actions do not?

The Antitrust laws are an American travesty, and should be abolished.

http://principledperspectives....
YMOM100
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YMOM100,
User Rank: Apprentice
4/14/2012 | 1:18:44 AM
re: Apple Should Settle E-Book Antitrust Case, Expert Says
Knowing from experience, the author / publisher makes more money on a 9.99 ebook deal than on any printed copy deal. I published books and found the service to have Amazon do the fulfillment and take a cut on the price that I set to be an OK deal. There are others who offer a similar service, but they don't do that globally and they do that at a much higher price point. By going with Amazon I was able to sell titles at a lower price while maintaining a decent royalty. Sure, Amazon makes more money than I do on each sale, but all I had to do is slap my ebook on their digital front steps and be done with it.
The difference comes into play when a publishing company is the middle man between author and distributor. When it comes to ebooks publishers are adding almost no value. It is the same in the music business. Digital production is cheap and easy and more and more content creators go straight to distributors or sell directly to customers. The times where you could not publish without a publishing company are over. Even for printed books you can hire services like CreateSpace.
I know about the contracts that authors have with publishers and they are not even half as sweet as going with a provider like Amazon or B&N.
In order to earn a living you need to sell a lot of copies and I mean a lot. I get about 7$ per sale in the sweetest constellation. Do the math and you know how many copies I'd have to sell to make a decent living. If I'd had a contract with a publishing company I'd get 1$ or maybe 2$ if I am lucky. On a 9.99 ebook sale with no publishing company in the middle the author makes around 3$. Yes, still not a lot, but a heckuva lot better than the traditional contracts. Those contracts are only reasonable when looking at the higher end hardcover book market. That is the only area where publishing service companies (not the same as publishers) currently have little or no offerings. My guess is that this will come at some point.
As far as the used book market goes, that is the same as with any used product. The original manufacturer gets nothing from the resale. If you sell your hours the original builder does not get a penny from that. Same applies to cars, computers, or junk sold at a tag sale. The only industry where this is becoming more and more common is with TV series. Actors now get a cut from reruns and other licensing.
YMOM100
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YMOM100,
User Rank: Apprentice
4/14/2012 | 1:15:15 AM
re: Apple Should Settle E-Book Antitrust Case, Expert Says
The price fixing by Apple & Co is the same bullying, because they make everyone pay a fixed price. That is illegal and that for very good reasons. The government does exactly the right thing and it is the responsibility of investigators and prosecutors to bring criminals in front of a court.
And Amazon currently has not a monopoly, there are other players in the market that would gain significantly if Amazon gets too greedy. Besides that, the 9.99 price tag is for ebooks that Amazon sells on its own. It does not apply for any of the ebooks for which Amazon does the fulfillment, because the price for those ebooks is set by the author / publisher.
It is astonishing that there are that many people who are perfectly fine with price cartels and criminal behavior. Unbelievable! Do you also applaud when some jerk beats up a kid in public?
ANON1237925156805
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ANON1237925156805,
User Rank: Apprentice
4/13/2012 | 10:35:13 PM
re: Apple Should Settle E-Book Antitrust Case, Expert Says
This is not so clear-cut. Sure Apple wanted its cut; hence the agency model. Sure that cost more for buyers. And not allowing free market competition, well it's "un-American!!!!!". But Apple wasn't aiming for a monopoly and that's a significant point htere.

In fact what Amazon was doing prior to iBooks was the equivalent of what's called dumping when done by foreign governments: they were underselling their product to control the market. Just as they are now underselling the Kindle fire to try to control the market from another angle. That's not working but with the old model they were well on their way to becoming a de facto monopoly. Now that train will be back in motion.

What will happen then? Few bookstores, ultimately. A limited presense for B&N and Apple in the ebook market but maybe no brick and mortar B&N at all. Mostly all kindle all the time. Is that an improvement? Ask yourself whether the price of books will remain $9.99 at that point.

In the meantime what does $9.99 mean? Actual hardcover print books of substance are closer to $30 at this point so I ain't buying that the underlying production costs are really so low that publishers can break even at 9.99. So what process will get squeezed to meet that price? Editing? Copy-editing? Proofreading? Graphic design? Money for the author's breakfast lunch and dinner? Will publishers be able to promote their books?

Here's another thought worth asking: If Amazon doesn't like your book and gives you the freeze treatment where do you go? When the Tea Party wants to control what we read, how hard will it be? Road to 1984. I'm not a doomsday person at all. I just think that a free publishing environment is at least as important as a free press and with so many freedoms being eroded in the name of protecting us we need to draw a line.

A remedy may be needed for Apple's foolishness, but let's think long and hard about what that remedy is. I.e., look at Amazon at the same time and send a warning shot across their bow that fairness is an equal opportunity quality. Not sure how to do that but not to address the whole picture will accidentally engineer a nightmare.

ldypcdr
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ldypcdr,
User Rank: Apprentice
4/13/2012 | 7:29:05 PM
re: Apple Should Settle E-Book Antitrust Case, Expert Says
In line with mhop, wouldn't the Agency model have been better for the authors, wouldn't the higher price have meant more royalties?
mhopcroft972
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mhopcroft972,
User Rank: Apprentice
4/13/2012 | 7:17:53 PM
re: Apple Should Settle E-Book Antitrust Case, Expert Says
The losers in this whole thing will be authors. It's hard at the $9.99 price point for an author to get a decent amount of money in royalties. Add to that the used book market (for which authors are paid absolutely nothing) and it's getting harder and harder for writers to earn a living. Where is the discussion of the interests of the people who create the content in the first place?
ldypcdr
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ldypcdr,
User Rank: Apprentice
4/13/2012 | 5:53:17 PM
re: Apple Should Settle E-Book Antitrust Case, Expert Says
Maybe I'm looking at it too simplistically, but even if Apple and the other publishers went with the Agency model, doesn't the consumer still have the option to buy from Amazon at the cheaper price? When Amazon was the monopoly why didn't the DOJ file an anti-trust suit ?
Chesters Friend
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Chesters Friend,
User Rank: Apprentice
4/13/2012 | 10:37:34 AM
re: Apple Should Settle E-Book Antitrust Case, Expert Says
Bullying? Yes .. I agree .. but by who " execs met quarterly in private rooms at pricey Manhattan restaurants to discuss their plan" ... Greedy publishers sitting in their private rooms trying to figure out how to best take a few dollars out of their customers pockets. Apple has always had this premium price tag thing going which is OK because people agree to pay it .. this is about them taking the option away. I hope they do fight it and the DOJ slaps them hard
sassigal
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sassigal,
User Rank: Apprentice
4/12/2012 | 9:41:40 PM
re: Apple Should Settle E-Book Antitrust Case, Expert Says
No Apple should fight this bulling aggressively. The US government decided that Amazon is the monopoly they would like to keep going and they are handing us all on a platter to them . After amazon suffocates its competition, the ebook that used to sell for 9.99 will the n be sold st 50 and there will be no one to save us from those morons
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