Apple, Penguin, Macmillan to face feds in court - next year
G-men want more time to probe Fruitbook affair
Apple and book publishers are facing a trial next year over the allegations they colluded on ebook prices to squeeze Amazon out of the market.
Judge Denise Cote told the fruity firm and the two bookhouses that haven't settled, Penguin and Macmillan, that the case will start in June next year, Bloomberg reported.
Three other publishers – Simon & Schuster, Hachette Books and HarperCollins – have all settled the case, which was brought by the Department of Justice under competition laws.
That suit was quickly followed by another from 15 US states and Puerto Rico, which was looking for damages. The three publishers who settled with the government also settled that case and the Connecticut assistant Attorney General Gary Becker said other states were likely to sign up.
Apple was pushing for a quick trial and for quick discovery as well, trying to get the case over and done with as quickly as possible. The iPhone-maker wanted discovery, when evidence is found and presented, to finish up at the end of the year, but the government is pushing for March 2013.
"Apple's suggestion that the United States and Plaintiff states have had the bulk of the discovery they need as a result of pre-filing investigations is overstated," the DoJ said in a filing. "There is much yet to be learned about the scope and identity of individuals who participated in the conspiracy described in the complaints before the court and a March 22 deadline will give the plaintiffs a fair opportunity to do so."
Apple denies all the collusion claims and has said that far from being anticompetitive, its foray into the ebook market broke up Amazon's monopoly in the market.
Before Apple came along, publishers were selling their books at set prices to shops, which then set the price, allowing Amazon to discount heavily to encourage people to buy Kindle ereaders and to carve out a hefty slice of the market. This kind of selling is usually short-lived, and usually takes place when enough other products have been sold or the company is comfy in the sector.
However, publishers were afraid that people would get used to cheaper books and refuse to pay more and were also worried that everyone would end up with a Kindle and therefore stop buying books from anyone other than Amazon.
Apple wanted its contracts done agency-style, where the publishers set the price and Apple then took a cut of the sales, allowing them to push the price of ebooks back up. The case hinges on whether the publishers then colluded on the prices they set, which qualifies as anticompetitive behaviour. ®
Re: Apple made just one mistake
>> So yes, Apple batters them with a 30% cut of the list price, but expects the same list price as that given to Amazon, B&N etc. Is that a mistake?
I see where you're coming from, but in a free market where I make some sort of widget, then it should be up to me how much money I'm prepared to sell them for. So lets say I'm happy to sell each widget for £1, that's not the retail price, it's what I'm prepared to sell it for.
Under Apple's system, they take 30% of the retail price, so I'd need to set the retail price at £1.43 so that after Apple takes it's 30% cut, I'm left with £1. The guys selling widgets down on the market might be happy working with only 5% margin, so he could sell them at £1.05 and I'd still get my £1/widget.
Apple don't like this, it makes them look expensive so they've done two things :
1) The "favoured nation clause" which says I can't allow my widgets to be sold cheaper anywhere else. It may well be that I make more sales from the market stall holder - so I don't want to push the price up there. That means I'm more likely to have to accept a lower price for widgets sold by Apple - perhaps only 75p. That's a big chunk out of my income.
2) Apple also prohibit me selling my widgets to users directly - if they are to be used with iStuff, then I can only sell them through Apple. So I can't direct people to buy from the market stall, they have to go into the expensive shop run by Apple.
It may be that I consider the "added value" from Apple to be worth it - they sell it, collect the money, etc. But I may already have a working relationship with the stall holder and be happy with that. It should be my choice.
Incidentally, Amazon also have this anti-competitive "most favoured nation" clause in their contracts. Given the combined market power of Apple and Amazon between them, I fail to see how on earth either is good for the consumer.
As to the argument that Amazon is dumping to kill competition, well we already have laws to govern that - did any of these other businesses make any complaint ?
My take is that the Feds have realized that they bit off too much with this one. They were probably expecting all parties to settle and now face a challenge.
OTOH, Apple's MFN clause is ripe.
I'm expecting a settlement to be announced in the quiet period after the U.S. elections and before the inauguration. MFN will go away but most everything else will stay as-is.
too late book publishers!
already buying all my books from amazon (if not with glossy paper then kindle -type books) and a handful from apple (the interactive books).
all this just looks market fight to me, why is there anything wrong? amazon does it right to sell normal books cheaper, me thinks, it's not normal to pay more than 10 euros for a book that you finish reading in 8 hours tops. Kindle books should actually be even less, like 5 euros always, if they don't use extensively pictures.