Book Pricing Lawsuit Reveals More Details of Apple's Negotiations, Including Steve Jobs Email

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Ibooks iconSeventeen more states have joined the antitrust lawsuit against Apple and several book publishing houses over the pricing of ebooks. Perhaps more interesting are certain details released in the latest filing that were previously redacted, including one from Steve Jobs. Portions of this email have been seen before, but this is the first chance the public has had to see a major negotiation written by the former CEO.

As reported by PaidContent, Steve Jobs became directly involved in the pricing negotiations after Apple executive "Eddy Cue could not secure one of the Conspiring Publisher’s commitment directly from an executive." Jobs "wrote to an executive at the parent company, in part":

As I see it, [Conspiring Publisher] has the following choices:

1. Throw in with Apple and see if we can all make a go of this to create a real mainstream ebooks market at $12.99 and $14.99.

2. Keep going with Amazon at $9.99. You will make a bit more money in the short term, but in the medium term Amazon will tell you they will be paying you 70% of $9.99. They have shareholders too.

3. Hold back your books from Amazon. Without a way for customers to buy your ebooks, they will steal them. This will be the start of piracy and once started, there will be no stopping it. Trust me, I’ve seen this happen with my own eyes.

Maybe I’m missing something, but I don’t see any other alternatives. Do you?

The complaint goes on to claim that the publishers and Apple "worked together to force" Random House -- the one publishing company to turn down the agency pricing model favored by Apple -- to adopt it as well. The claim goes so far as to claim that publishing companies tried to convince Barnes & Noble to not feature Random House books in any of its advertising, something that B&N apparently did.

Regarding the case, Apple has publicly defended itself and also said it wants to defend itself in a jury trial, saying that allegations against the company were "simply not true."

Top Rated Comments

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110 months ago

I'm missing something here. Jobs gives an alternative to publishers to break the monopoly Amazon had on the market and now he's a criminal? Isn't that called competition?


Yes, you are missing lots. You misunderstand the situation in at least 3 ways:
1) Apple is in trouble for competing against Amazon.
2) Assuming that Amazon had a monopoly, that Amazon was bad because of it.
3) More competitors is good.


1)
The law is about preserving or allowing competition, not competitors. The end goal is about letting the regulated market generate benefit for consumers. Apple did become a new competitor, but DOJ asserts that Apple eliminated / prevented price competition. There are other companies trying to jump into the ebook market as well, but only Apple tried preventing competition on price. This is what they are in trouble for.

2)
The laws are not anti-monopoly. Monopolies are seen as a reward, in legal and economic fields, as a reward for doing well in the competition -- which Amazon did in this case. The reason why monopolies are the ones that run afoul of anti-trust laws, is because you need a big enough market power in order to succeed with unfair market practices. There's no fear, in a market with lots of small competitors, for one of them to unfairly limit competition or competitors.

Amazon, even if they had a monopoly, was winning the market fair and square. It kept driving down prices to a point that was still profitable for them but others couldn't keep up. Consumers kept benefiting from the low prices, and given Amazon's success, it meant that's what consumers wanted. And this, making the market generate value for the consumer, is the goal of competition law.

3)
Apple, on the other hand, killed off price competition in the market (if the DOJ is correct). They forced competition to be on a narrower set of product attributes. What Apple did was not to compete better, but to prevent competition in the product attribute they couldn't. Rather than let consumers choose between Kindle and a lower price vs iBooks and a higher price -- Apple made it so you had to choose between Kindle vs iBooks at the same higher price.

Given that Amazon was winning the ebooks market, and Apple's own memo, it means that consumers care about price more than other product qualities. Because of Apple, consumers can't benefit from price competition. 1 competitor, or 300 competitor, you will always get the same price. No matter how many competitors, there is no competition on the thing customers cared the most about -- price. So then what's the point of having these competitors?

Anyhow, this whole thing is called price fixing. A fundamental element behind it is that there are multiple "competitors" who don't compete on price. (If there weren't multiple "competitors" then you wouldn't need to "fix" the price.)



P.S. For those who actually understand this case, I know I made quite a few shortcuts. I apologize.
Score: 11 Votes (Like | Disagree)
Avatar
110 months ago

I'm curious to see how this will all pan out.


The same way it always turns out. A big fat payoff for lawyers and next to no change for the consumer ;)
Score: 6 Votes (Like | Disagree)
Avatar
110 months ago

I'm missing something here. Jobs gives an alternative to publishers to break the monopoly Amazon had on the market and now he's a criminal? Isn't that called competition?

If it allowed them to continue to sell on Amazon for $9.99, while selling on Apple for $12.99, then yes, that would be competition; however, Apple said that a publisher cannot sell their books cheaper anywhere else if they want to sell on iBooks. This is the part that is price fixing and is illegal.
Score: 4 Votes (Like | Disagree)
Avatar
110 months ago

I see nothing wrong with Steve Jobs' email. He simply pointed out the reality of the current marketplace and confronted the fact that Amazon was controlling their pricing. This is competition. Specifically, what Steve Jobs was doing was bringing out competition in an emerging market before piracy simply destroyed it.

He was right.

No where in that email does he say "Do this or else," or "do this or we will hurt you." Nor does he say, "Do this at the exclusion of our competitors."


A bit of context might help, like reading the linked article instead of just the excerpt on MR. The allegation is that Apple and several of the publishers ganged up on Random House to force them to go along, an allegation that seems to be supported by the chat between Apple and the publishers. This is serious stuff, and the fact that 31 state Attorneys General are already on board spells real trouble for Apple.
Score: 4 Votes (Like | Disagree)
Avatar
110 months ago
I'm missing something here. Jobs gives an alternative to publishers to break the monopoly Amazon had on the market and now he's a criminal? Isn't that called competition?
Score: 4 Votes (Like | Disagree)
Avatar
110 months ago
I see nothing wrong with Steve Jobs' email. He simply pointed out the reality of the current marketplace and confronted the fact that Amazon was controlling their pricing. This is competition. Specifically, what Steve Jobs was doing was bringing out competition in an emerging market before piracy simply destroyed it.

He was right.

No where in that email does he say "Do this or else," or "do this or we will hurt you." Nor does he say, "Do this at the exclusion of our competitors."
Score: 3 Votes (Like | Disagree)

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