The agency model has something called "most favored nation" which forces the same retail price on all channels and retailers.
It didn't work that way: the publishers renegotiated their deals with Amazon, it was they who wanted it differently. They were able to sell for 9.99 if they wanted. Apple was just "ready to sell for more," contrary to Amazon who insisted on selling for 9.99 no matter what.
https://www.washingtonpost.com/news/wonk/wp/2013/07/10/a-jud...
"It was as apparent to the Publishers as it was to Apple that Apple’s proposal would only allow the Publishers to raise the consumer prices for e-book versions of their key titles above Amazon’s $9.99 price point to the proposed price caps if they moved Amazon and their other e-tailers to agency."
"During this week, Amazon had a long-scheduled set of meetings in New York with the Publishers. In separate conversations on January 20 and over the next few days, the Publisher Defendants all told Amazon that they wanted to change to an agency distribution model with Amazon."
I don't see anything else but that Apple negotiated the deals which pleased the publishers. They did what they believed they had to do (introduce higher prices) even before Apple. That it was "apparent to Apple" doesn't mean guilt, for me.
That the prices raised doesn't prove more but that the publishers wanted them higher and were able to set them.
"From: Eddy Cue
To: Steve Jobs
Subject: Books - Publisher update
Date: Tue, 15 Dec 2009
Steve,
[...] Clearly, the biggest issue is new release pricing and they [the publishers] want a proposal from us. Everyone was estatic to see Apple and what it could mean for their industry."
...
"They decided they had to come up with a way that would move the whole market off 9.99 and they think an agency model is the only way to do it."
"They believe that this is the best chance for publishers to challenge the 9.99 price point ...."
Clearly and explicitly recognizing that collusion is the only way to achieve the price that they desire.
...
"I am told Random House is concerned about the future of e-books and the potentially dominant role played by Google and Amazon. Would it make sense for the 2 of us to have meetings / diner with Markus Dohle, Brian Murray, John Sargent..."
Conspiracy to meet and fix prices. Collusion like this across competitors is illegal price fixing. Competitors do not have a legitimate reason to meet and discuss common pricing.
...
"You are absolutely correct: we've always known that unless other publishers follow us, there's no chance in getting Amazon to change its pricing practices."
...
"It is important to Apple that there be 'some level of reasonable pricing'. They feel the only way to get this is for the industry to go to the agency model." (additional illegal collusion to fix prices)
"When they thought it through, they didn't think anything else would keep the market from its current pricing 'craziness'" (i.e., market prices -- demonstrating conspiracy to fix prices)
"[Eddy Cue, Apple] also thinks that book prices are becoming too low - he is worried about consumer perception. Therefore he suggests an 'agency model'".
...
"To: Carolyn Reidy (Simon & Shuster)
From: Eddy Cue (Apple)
Subject: iTunes
Date: Mon, 04 Jan 2010
"[...] As we discussed, here is what I think is the best approach for ebooks. Just like the App Store, we are proposing a principal-agency model [...]"
The same email is repeated and sent to Markus Dohle of Random House, and then John Sargent of Macmillan, and very similarly to David Young of Hachette Book Group.
"After talking to all the other publishers and seeing the overall book environment, here is what I think is the best approach for ebooks", Eddy Cue wrote to David Young, and to David Shanks of Penguin, and Brian Murray of Harper Collins. He goes on to outline the illegal price fixing scheme which they successfully colluded to implement.
...
Additional points that establish the case:
- Additional emails go on to demonstrate how the model will be forced on all retails and result in the price fixing
- Graphs of data of how prices changed over time as Apple deployed its price-fixing scheme.
- Apple provides information about one competitor's prices and desires to another, explicitly communicating one competitor's pricing desires to the other.
- Evidence of collusion as copy/pasted statements make their way into material from several publishing house leaders, all on the same day following meetings with Apple.
- "Agency is anti-price war territory." Yup.
- Clear recognition by the competitors that they were engaging in illegal price fixing. "We would have to 'get everyone else to go to the agency model'. When I said, 'but of course we can't talk to our competitors', [Eddy Cue] said he didn't mean other publishers, but our accounts - to which I replied, if we make these our terms, then they are our terms." Carolyn Reidy, discussing her deal with Apple to other people.
- Additional evidence of Apple taking an active role in conducting these discussions with publishers and bringing about the actual consensus of getting them all to agree to it. Apple was the common party that actually brought the coordination about by facilitating the conversation and proposing the actual price fixing terms.
- Publishers recognize that their deals with Apple force them to an agency model for all sales.
- One publisher balks about being forced to do this. Apple enlists other publishers to convince them. Further publishers are waiting for other publishes to agree, before they agree to terms with Apple (collusion; they should be making deals independently)
United States of America v. Apple, Inc. - https://www.justice.gov/atr/case-document/file/486701/downlo...
I think the evidence is pretty overwhelming. Have you examined the actual data? I hope this provides a good starting point.
(These conspiracies to fix prices seem common for Silicon Valley companies, don't they? Apple and other tech companies were similarly involved in antitrust litigation: https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L... )
As far as I understand, they also sold other things already under the same conditions for all the publishers (music, apps).
I understand the courts had another view, but I don't agree. The publishers did raise prices, but they just wanted for the possibility to do so anyway. It was inevitable, in my view, it was Amazon that forced (by having an effective monopoly until Apple appeared) all the publishers to sell the way they didn't like, so of course it was unstable state, possible to be preserved only if the Amazon's monopoly remains.
Sorry, you have it all wrong. This isn't about Apple giving the same deal to all publishers. This was about Apple convincing all publishers to give all other retailers the same deal as Apple -- and all at the same time, as a single group across essentially the entire industry, thus resulting in price fixing and price increases.
Imagine the absurdity if the manufacturer of a car (motor vehicle) could dictate the terms at which their cars were sold by all retailers. Essentially, the manufacturer exclusively determines the price that all auto sellers must charge. Does that analogy make better sense? No car dealership can offer a discount because the manufacturer has exclusive control.
Then imagine that it's not just one auto manufacturer: it's all of them, all at once. That's what happened with ebooks - virtually the entire industry colluded. It's not just working to get the same terms for their publishers, it was also getting those publishers to, in concert all with each other, force all of their retailers to do the same thing. Only with the collusion of a cartel could they have achieved this, and the result was illegal price-fixing that harmed consumers.
Competitors are not allowed to collude, and not allowed to collude to raise prices. Competitors have no legitimate business to meet and discuss with each other and make agreements about what price they'll all offer together, as that's an illegal cartel, yet that's what happened as a result of the conspiracy that Apple led.
> The publishers did raise prices, but they just wanted for the possibility to do so anyway
Publishers always had control over the price at which they sold their books to retailers. They just did not have control over the price at which those retailers subsequently resold them to consumers. And why should they? When books were historically sold at wholesale price for 50% of their retail price, why should a publisher stop a retailer from competing on price, by offering (say) a 190% markup rather than 200%, if the retailer has a more efficient operation? Once the book is "handed off" from the publishers to the retailer, what legitimate reason is for the publisher to control that transitive resale -- and why should the publisher have control over all of those resales among all retailers? That is the cartel that Apple brought about.
Imagine if the manufacturer of a toothbrush had the power to force all stores that sell it to have the same price. Why should they have that power? Why can't stores offer a discount if they have a more efficient supply chain, or more insightful pricing strategy? And then suddenly all toothbrush manufacturers in the entire industry did the same thing at the same time? I hope this paints a better picture of what happened with Apple and ebooks, and the reason why they were convicted of illegal collusion to fix prices.
The true reality of the situation, in my opinion, is that with the advent of the Internet, the incremental value of publishing has begun to drop. Authors are increasingly required to deliver fully complete and ready-to-publish manuscripts, rather than handing off a draft to the publisher for editing and typesetting. Furthermore, individual authors are better able to market themselves and generate interest online than in the older days when advertising had a higher cost, and required printing a large order of books up front and buying retail space. It's becoming cheaper and cheaper for authors to offer books online themselves. Consider what's happened with books like The Martian: it was (as I understand it) self-published as an ebook, and then gained a following, and eventually Hollywood bought the film rights. The value added by a publisher diminishes if they're not printing and distributing your physical book - they become a publicist. So, publishers saw the reality for what it was, and saw that their industry was all trending toward undifferentiated "perfect competition". They reacted to the situation by cooking up a collusion across the industry to conspire to keep prices artificially higher than they otherwise would have been, using the combined market power of their collusion to bring it about.
The problem is, here it is claimed that the term in Apple's contracts that guaranteed Apple the lowest retail price was the "dictate" as you say, here's from the summary of the decision to which other pointed here:
""the use of a unique "most favored nation" (MFN) clause. Under the DOJ's reading of the Seventh Circuit's Toys "R" Us decision, the DOJ argued that this was a per se violation of Section 1 of the Sherman Act."
That reading is certainly disputable, especially knowing the context: the MFN gave Apple right to sell at the lowest price on the market, and the claim was also that MFN was a pressure because Apple demanded 30% from the retail price and that was somehow bad. But that's the same percentage they took in the apps store before. I understand it was decided as it was decided, but I still claim it didn't have to be so.
If the answer is "not making MFN" then it's what apparently the court decided. But MFN actually guaranteed Apple lowest prices, not the highest.
Would you really even think "that Toys R US case is relevant here"?
I think they're great questions, really interesting and forward thinking, and it's too bad you're being downvoted for promoting interesting discussion.
The ruling doesn't undo any of the results of what happened, as far as I can tell. I see varying ebook prices on Amazon and I can only imagine that publishers now have the ability to do agency model pricing.
All this means is that Apple and others will be really careful about working with content creators or publishers in the future who are stuck with a wholesale model but desire agency-model pricing. And maybe content quality will go down since the creators earn less. Or maybe more people move to independent publishing sooner. I guess it is impossible to know.
Ironically, back around 2000, we hailed Jobs for working together with the record labels and convincing them to enter the digital age. Until the iTunes store, nobody was able to convince the labels that mp3s could be a safe way to make money. It wasn't exactly the same situation, but I could see how, from Apple and Jobs' perspective, the effort involved in the ebook situation would've seemed the same and innocent. The difference was, instead of being first to market and able to set prices without oversight, they were second and had to figure out how to compete. They realized they could compete by giving publishers a legit pricing model that they wanted, but didn't realize they could be held liable for price fixing.
Another thing I'm wondering about is why the publishers were so insistent that the others must also join. Each told Apple they would only join the plan if a minimum of 4 others did too. I don't follow why that was necessary, since books are published exclusively by one publisher and there wouldn't be any overlap. Anyway, I'm with you. It sounds like the publishers were begging for this circumstance and Apple was caught unaware. The DOJ saw an easy prize on a desirable target based on existing law and they went for it. Ultimately, though, Apple ought to have known better about the risks, and it seems they could have launched this model, albeit slower, without such a concerted effort.
He is downvoted because those questions have nothing to do with the case and are just a smoke curtain to no admit what Apple did. > Another thing I'm wondering about is why the publishers were so insistent that the others must also join. Each told Apple they would only join the plan if a minimum of 4 others did too.
Because if a majority of publishers are on board, they can force the OTHER stores threatening to stop selling ebooks though them
> Because if a majority of publishers are on board, they can force the OTHER stores threatening to stop selling ebooks though them
Some of the publishers did not support windowing, that is, withholding new releases from being available as ebooks, so that argument doesn't quite hold up.
No, agency model gave LESS revenue to publishers
> Some of the publishers did not support windowing, that is, withholding new releases from being available as ebooks, so that argument doesn't quite hold up.
What the heck has to do windowing with what I have said?
It is clear that you have your opinion fixed on stone. It is a waste of time trying to discuss anything. For you Apple is innocent, period.
Why would publishers ask for an agency model if it earned them less money?
> What the heck has to do windowing with what I have said?
Your last sentence above, "Because if a majority of publishers" runs together. Perhaps I misunderstood what you said.
> It is clear that you have your opinion fixed on stone.
I don't
> It is a waste of time trying to discuss anything
At this point I agree
> For you Apple is innocent, period
Not really. To me it seems Apple was a final piece to the puzzle and not a ring master. As I mentioned in another comment, I believe Apple ought to have known better about the risks of appearing like the master conspirator in this case. Apple ought to have known better about the risks, and it seems they could have launched this model, albeit slower, without such a concerted effort.
The difference between us is, for you, Apple is guilty, period. For me, it isn't so obvious.
> No, agency model gave LESS revenue to publishers Why would publishers ask for an agency model if it earned them less money?
This is the the difference between you and me, I have read a lot about the case. You don't know anything about it. You don't know that with the wholesale model, publishers earned more from ebooks than with the agency model. And you don't know why they prefer to earn leass with the new model. Please, read about the case before posting uninformed thing like you have being doing in all your posts.
> Your last sentence above, "Because if a majority of publishers" runs together. Perhaps I misunderstood what you said
Yes, you have misunderstood, and it was very lear,. All the publishers together were able to force the other stores to the agency model with the threatening of pulling the books
> The difference between us is, for you, Apple is guilty, period
No, the difference is that different courts have found guilty Apple, period.
You're the one saying that all the courts are wrong without any evidence of it, just because you don't like the outcome.
This is irrelevant and has nothing to do with the case. The case is about Apple colliding with the publisher to FORCE all the stores to change to the agency model.
The case is not Apple dealing with their OWN store
You mean, actually selling the books? The only change from wholesale to agency is that the retailer is forbidden from purchase.
The publishers even before Apple arrived tried various steps to change their deals with Amazon and let it sell for more, they just haven't had any negotiation power.
From the court document:
"Well aware of the Publishers’ experimentation with windowing, Apple also told Publishers that it opposed windowing; it believed that withholding e-books alienated customers and led to piracy."
It was one attempt of the publishers before.
This makes it very clear: https://www.washingtonpost.com/news/wonk/wp/2013/07/10/a-jud...
And how was Apple doing anything what the publishers didn't do themselves? The CEO's had their meetings without Apple, even before, as I've already quoted. And after the meetings with Cue, they continued. Cue didn't organize them:
"After Young had met with Apple but before S&S had its meeting, Young could not resist calling Reidy to share the wonderful news that the “Top Man” at Apple opposed $9.99 pricing. He hesitated to say more because S&S would be meeting with Apple the following day, and he did not want to “spoil [the] fun.”"
It's obvious the publishers communicated, but I don't see Apple's guilt.
All my quotes here and in other posts here are from the court decision.
If that still did not convince you, then I don't see the point discussing it further.
Note that antitrust laws are there to protect consumers.
[0] http://allthingsd.com/20130515/heres-that-steve-jobs-e-book-...
It's like it was written as an admission.
All of your quotes here and in other posts are cherry picking form the court decision to much your beliefs.
Read the 160 pages of the ruling and then post. But it seems that nothing will change your views
Exactly, and I quote the exact formulation of MFN from the court's decision in my other (possibly harder to read) comment here.
> The agency model has something called "most favored nation"
"Most Favored Nation" clause, as stated in the court document:
http://dearauthor.com/wp-content/uploads/2013/07/Cote-Decisi...
"The MFN guaranteed that the e-books in Apple’s e-bookstore would be sold for the lowest retail price available in the marketplace." Why shouldn't be Apple able to propose that in its contract? It's on publishers to accept it or not.
It was obviously the opposite of "raising prices" it was a protection for the Apple book store to remain competitive.
Why should Apple be responsible for what the publishers do with their own contracts to Amazon once the Apple's store opens? Of course the existence of Apple's store changes the market conditions, and why shouldn't it?
Why should Apple be guilty that the publishers made new, what they saw as better for them deals with Amazon once the Apple's store opened? It's the Amazon that got the competition at that moment, not that Apple behaved anti-competitive. Amazon effectively haven't had any competition before. Once it had, the publishers wee able to renegotiate.
"Every Publisher with whom Apple met lamented Amazon’s pricing New Releases and NYT Bestsellers at $9.99. Several of them made clear that they were actively searching for a way to gain more control over pricing and were implementing tactics they did not enjoy, like windowing."
"As Apple had expressed to the Publishers, it strongly believed that withholding content would interfere with the growth of the digital market and was inconsistent with its business goals and practices. Apple thus embraced the model that Hachette and HarperCollins had proposed -– the agency model. Apple was already familiar with this model since it used the agency model to sell apps through its App Store."
Edit: just posting a link to some newspaper article doesn't prove anything. Under "specific" I mean a "specific proof" that somehow negates the quotes from the court decision I've presented or shows them in completely new light.
I don't think it is. There's an opportunity for some store to do that.
For what it's worth, I agree with you that it isn't so cut and dry that Apple set out to fix prices or do evil here. They were simply one gateway to higher prices desired by publishers. Selling electronic goods is sufficiently different from selling tangible goods to warrant additional consideration beyond existing case law.
I think the DOJ/government finds Apple difficult to work with. During the encryption congressional hearing, Trey Gowdy was begging Apple to lobby for legislation, or come up with their own new legislation. It was disgusting. The DOJ and our Congress do not understand technology and it hurts the industry.