Authors Believe Apple's Entry Into E-Book Market Wasn't Anti-Competitive

ibooks-iconA coalition of authors and well-known booksellers have come forth to back Apple in a petition to overturn a recent ruling that stated the company was liable in conspiring to fix the prices of electronic books when its iBooks store launched on the iPad in 2010 (via Cult of Mac).

Together, the Authors Guild, Authors United, the American Booksellers Association, and Barnes & Noble have filed a 37-page amicus brief that states Apple was in fact enhancing competition and benefiting its customers.
“We are pleased to lend our support in this matter, critical to anyone interested in a competitive and diverse literary marketplace,” said Mary Rasenberger, executive director of the Authors Guild, in a statement. “We fundamentally question the wisdom of the Second Circuit’s use of antitrust law to punish a business arrangement that demonstrably increased competition in the e-book marketplace.”
The brief falls in line with Apple's petition of the Supreme Court to review the case this past October, after first being found guilty of conspiring to artificially inflate the prices of e-books back in 2013, when the case started. The amicus brief filed by the authors and booksellers backs up Apple's attempts at overturning the ruling, stating that a positive outcome for the case is "critical to maintaining a healthy marketplace for the ideas and First Amendment-protected expression that authors and bookstores facilitate."

The groups even mention Amazon as more of a "disruptive" force in the e-books market, with a "loss leader" strategy that led to domination over the digital bookselling marketplace. The groups use Amazon's recent public battles with publishers like Hachette, where it essentially ceased selling any of their novels due to a price point disagreement, as a primary example. They also look at the market monopoly Amazon held before Apple entered with iBooks in 2010.
“With a 90% market share, nearly every customer who wanted to purchase an e-book had to do so through Amazon,” the brief states. “Amazon could exercise this power to suppress specific publishers, authors, or messages with which it disagreed, with impunity. It also could steer the culture toward the ideas it valued. Amazon controlled what e-books were promoted on its home page, what e-books were recommended to consumers, and what books appeared at the top of a consumer’s search results when she searched for e-books on the Amazon.com website."
With no response yet from the Department of Justice regarding Apple's filing for a review, the company still has an uncertain future in the two year-long case. All respondents have until January 4 to file a response in opposition to Apple's petitioning of the Supreme Court, so the next leg of the case is just over a month away.



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25 weeks ago
It's common sense that Apple's entry into the E-Book market was great news for consumers, authors and the industry at large. It was bad news for those who wanted to control the market with bullyboy tactics that would only harm authors and publishers.
Rating: 13 Votes
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25 weeks ago

Well, this is shocking. The suppliers of the content don't think that the raising of prices unilaterally was anti-competitive.


Suppliers always raise prices unilaterally. I would help you out if I could figure out at all what it was you were actually trying to say. The seller of something always controls the price. Apple let the owners of the content set the price they wanted to sell their content for. That was it.
Rating: 6 Votes
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25 weeks ago
Although I am neither a lawyer or an expert in these sorts of litigation, I did take the time to read some of the evidence. My take is that Apple, when negotiating with the publishers was directly aiming to bring down Amazon and some of the early contract language was very much anti-competitive in that it would force the publishers to change the agreement with Amazon. The final contracts did not have any of this language, but the intent could be interpreted based on the early language.

Apple was smart to not include the language because it did seem wrong. THe question is whether the final contract was still anti-competitive. My personal opinion is that it is not, but the early language certainly give the appearance of problems. Can Apple be held liable about language that was ultimately removed from the final contract? I think this is the bigger question and why they are fighting. Frankly, Apple put themselves in this spot and the question is did they do enough to back out before the ink was dry. If I read the final contract, on its own it looks fine. It's the backstory that looks shady.

Based on all this, I understand why they went after Apple, but I also think they went to far, since Apple ultimately came to their senses and back off the bad language.

Again, my take, based on non-expert reading of the details.
Rating: 5 Votes
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25 weeks ago

Kindles are widely considered to be sold at or below cost with the money maker being digital sales.

I never said whether, in 2010, Kindle was being sold at a profit, or not. It is simply a factor in total cost of ownership. Instead of paying for contents, paper, and ink in a single transaction, the ebook customer is expected to pay separately for media and "paper and ink." How many books will you read on that $399 (or $199) Kindle before it hits the recycle bin? When you know that, you know whether the lower cost of media has offset the separate cost of "paper and ink." And at that time, the only media being consumed on a Kindle was books, in 16-shades-of-gray. Photos looked awful, and color illustrations... forget about it!

At the time this was taking place, Amazon was selling the media below cost. They were also paying the cellular data providers (no wifi in early Kindles). If they were also selling the Kindles below cost (which, at $399 with no middleman, isn't likely, but possible...)... The near-term goal was not "sales of digital media." The goal would have had to be "to create a hardware-specific, proprietary market for ebooks."

If media sales was the goal (and long term, that's a logical goal), Amazon had to envision a future where they were no longer selling that media below cost. How, exactly, would they do that? They could either pay less for the media (which is what the publishers expected), or raise prices to the consumer.

The success of iPad (and phablets) killed that original vision for Kindle. Multi-purpose computing devices have clearly won, and Amazon can't afford to limit their customers to a particular hardware platform. They could well be selling Kindles at a loss in this environment - it's not just about selling media, it's about selling groceries, appliances, jewelry... Do you see Google when you power up, or Amazon?

About the "natural price", I never implied the previous price was "natural": what the previous price was is irrelevant. The point is that the price (whatever it was) was increased through horizontal price fixing, which is illegal no matter what. In this sense the increase was "artificial": it was not obtained through the rules of the free market but by engaging in illegal anti-competitive practices.

You can argue that the previous price itself was also not obtained through the rules of the free market, but first of all Amazon itself was never sued nor found guilty of any anti-competitive behaviour and on top of that it would in any case not excuse the publishers for their price fixing.


My point has nothing to do with the merits of the price-fixing case. The verdict is what it is, the plea deals are what they are. Your original comment was specifically, "...so that the perceived value of books would remain artificially high." I took that to mean all books, including print books. How could it be otherwise? (That was one of the publishers' concerns - grossly undervaluing content, grossly over-valuing the contribution paper and ink make to the cost of a book.) So... how do publishers keep the value of all books "artificially" high? (You needn't respond - since the publishers weren't accused or found guilty of fixing the prices of print books, it's "irrelevant.")
Rating: 3 Votes
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25 weeks ago
I don't think anyone but the Department of Justice and Amazon has actually thought Apple was guilty of anything. Even the Android nuts I know thought this whole thing was dumb. Amazon is the real problem. They pressure authors all the time and have questionable ethics and business practices. I have no idea why they haven't been investigated.
Rating: 3 Votes
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25 weeks ago


Frankly, Apple put themselves in this spot and the question is did they do enough to back out before the ink was dry. If I read the final contract, on its own it looks fine. It's the backstory that looks shady


This sounds nice as a comment, but it doesn't make a whole lot of sense as a justification of what's occurred. There is no reason we should know the conversations behind these deals, as this never should've gone to court. The publishers and authors felt amazing was being abusive, so they made deals which increased their relative strength.

Let's be honest, of course there is an element from within Apple which is "anti-competitive", it's how you stay competitive yourself. Do you think all of apples competitors never have anti-competitive thoughts about Apple in the phone space where Apple has 90% of the profits? Of course they do, because they inherently wish to take some of those profits from Apple.

Let's also be honest, if you're in an abusive relationship, you probably will say some things to your therapist which would be frowned upon in divorce court. It's really not relevant to the court case what you said behind closed doors. What matters are they actions and behaviors you take public ally and with the partner in question.

The fact that Apple was brought to court at all is extremely concerning for our democracy/economy. We should be attacking monopolies, not defending them. The fact that Amazon has faced no questions after the hachette debacle is terrifying.

Apple is sued constantly, more than any organization in history. They have never taken the verdicts to the Supreme Court. It's clear Apple thinks this is a question about the fairness of our country, not a few million dollars.

Most favored nation clauses are in no way defined as anti-competitive. The judge in the case deemed that in a scenario where a loss leader was causing everyone in the industry to lose money, including themselves, how on earth would a most favored nation clause be anti-competitive? It's simply attacking the issue at its root.

Play out amazon's strategy and you end up with absolutely a less healthy ecosystem for authors and publishers. Inevitably, this will decrease the quality of books our nation writes. That is the definition of anti-competitive.

For the judge to say that apples evidence that it was increasing the total amount of money spent one books isn't relevant is ridiculous. Of course it's relevant in a discussion about anti-competitive behavior. If the competition increased, then it wasn't anti-competitive. For the judge to assign a monitor with 0 experience in the field is absurd. For him to demand meetings with the head of industrial design is inappropriate. For the judge to stand by his requests is insane.

Apple just did this same thing in the music industry, and had the monitor the whole time, and nothing scandalous was observed.

There's no two ways about this, apple entering the ebook market was good for authors, publishers and consumers. The fact that this discussion is happening is a major sign our country is in trouble.
Rating: 3 Votes
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25 weeks ago

Well, this is shocking. The suppliers of the content don't think that the raising of prices unilaterally was anti-competitive.


The "suppliers of the content" (in other words hard working authors who make a living writing the books that you want to read at the cheapest price possible) who actually know what's going on in the market have figured out that Amazon had a 90% monopoly in the market which makes any allegations of anti-competitiveness against any else ridiculous, and they have also first hand experience with Amazon brutally using their monopoly to force companies like Hachette to surrender to their conditions.
Rating: 3 Votes
Avatar
25 weeks ago
Well, this is shocking. The suppliers of the content don't think that the raising of prices unilaterally was anti-competitive.
Rating: 3 Votes
Avatar
25 weeks ago

Although I am neither a lawyer or an expert in these sorts of litigation, I did take the time to read some of the evidence. My take is that Apple, when negotiating with the publishers was directly aiming to bring down Amazon and some of the early contract language was very much anti-competitive in that it would force the publishers to change the agreement with Amazon. The final contracts did not have any of this language, but the intent could be interpreted based on the early language.

Apple was smart to not include the language because it did seem wrong. THe question is whether the final contract was still anti-competitive. My personal opinion is that it is not, but the early language certainly give the appearance of problems. Can Apple be held liable about language that was ultimately removed from the final contract? I think this is the bigger question and why they are fighting. Frankly, Apple put themselves in this spot and the question is did they do enough to back out before the ink was dry. If I read the final contract, on its own it looks fine. It's the backstory that looks shady.

Based on all this, I understand why they went after Apple, but I also think they went to far, since Apple ultimately came to their senses and back off the bad language.

Again, my take, based on non-expert reading of the details.


Pretty good comment. I think, though, the basis of the anti-competitive action was that the publishers were colluding, and Apple was the go-between. That, in itself, is illegal. So the early language may indeed be evidence of that collusion. The final contract is actually less relevant; as it would have been ok for Apple to have individual agreements with each publisher like the ones in the contract. The anti-competitive part was the publishers agreeing with each other, via Apple.
Rating: 3 Votes
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25 weeks ago

I don't think anyone but the Department of Justice and Amazon has actually thought Apple was guilty of anything.


Huh? Wasn't it the DOJ's job to determine if Apple colluded with publishers, which they did?
Are we really going back to "what did they do wrong?"
I thought we past that.

Mossberg - Steve, how are you going to compete when you charge $15 a book?
Jobs - Because we will make it so everyone has to charge $15 a book.


Yep, nothing shady going on there.
Rating: 2 Votes
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