I've heard quite a bit about this case over the past month or so, but don't understand it.
Can someone explain what Apple 'fixing' e-book prices means and how that is illegal?
Can someone explain what Apple 'fixing' e-book prices means and how that is illegal?
So when Apple decided to start the iBook store, all the publishers decided to use that as an opportunity to band together and force Amazon to use the agency model, which is how Apple sells apps (publishers set the price, Apple gets a cut).
The had the effect of causing book prices to go up (because, again, Amazon often sold at or below cost). Because Apple was the new player whose contracts caused this, they got in trouble.
Many people find this quite questionable. Prices will go up with this settlement because publishers get more control. Amazon had a de facto monopoly, which Apple actually broke up. Also, this wasn't Apple's idea, it was the publishers.
Of course, Apple was more than happy to take advantage of the situation, so they weren't exactly innocent.
It's a really a strange case.
We've seen the music industry do it (avoiding selling to keep album sales up). We've seen the game industry do it (change the same for downloads as physical copies to keep retail happy). We've seen the movie industry try to prevent disruption many times (anti-VCR, pro-Divx, anti-Netflix, etc).
They fixed prices, and theres no situation where this yields a upside to customers. And in fact, it didn't. That's why they had to pay up, and Apple, failing to come to terms with the DOJ, will now have to pay much much more dearly for ever bringing this into a court.
> They fixed prices [...]
This is something I'm not sure about. From what I've read it sounds like all the publishers already wanted to do this and Apple was just the perfect opportunity to force the issue.
But as I said above, Apple clearly knew this was the case and used it to their advantage. They didn't set out fix prices, but they weren't against it.
> And in fact, it didn't.
This is a little odd too. Because of the agency model and the most favored nation contracts, prices went up. But if prices were artificially low before hand, was this a harm to consumers or a correction that would have happened eventually anyway?
There are some interesting twists in this case that make it a lot less clear-cut than most price fixing schemes. Apple probably deserves some kind of punishment for their behavior. On a personal level I'd really like the ability to buy books in the Kindle app, that seems like a fair punishment. I love my Kindle, but I do think Amazon might have been abusing their monopoly.
Of course the publishers were all guilty as hell, but they settled quickly. If they had tried to fight this too, I wonder if we'd hear as much about Apple. They're the only ones left standing and fighting.
TL;DR version, the court found "that the Publisher Defendants conspired with each other to eliminate retail price competition in order to raise e-book prices, and that Apple played a central role in facilitating and executing that conspiracy."
Traditionally, book publishers sell to stores at a wholesale price. Stores then mark up the price a bit and sell it to the end consumers.
Amazon then started selling books for prices below the wholesale price, deliberately taking a loss.
The publishers got scared that this would destroy all non-Amazon channels, giving Amazon inordinate power over them.
So they got together with Apple and set up a scheme where the publishers would all use the "agent" model. Instead of selling the books to Apple for a fixed wholesale price, they would set the prices however they liked, and Apple would take a cut of 30%.
The publishers would then all refuse to sell to Amazon unless Amazon switched to the agent model.
That, however, is pretty straight-forward collusion and against the law.
What I've read is that the "below the wholesale price" didn't happen a lot until publishers started raising that price after Amazon created the market. Now, maybe the latter discovered they couldn't afford below $10 wholesale prices, but the method they used to deal with the problem as, as you noted, "straight-forward collusion", and as I add, that harmed the consumer; add the two together and you get a slam dunk anti-trust case.
Which leads straight to all but one of the remedies, like terminating all those deals with the publishers and for 5 years refraining from striking any vaguely similar deal with publishers. And extending this sort of thing to other media, seeing as how they are now a convicted (and unrepentant) price fixer.
As for the remaining remedy ... don't know about the legal basis for it, but Amazon was the main target of all the parties in the price fixing conspiracy.
There's a bit more detail here: http://en.wikipedia.org/wiki/Apple_Inc._litigation#eBook_pri...
But no one was coerced into buying those books. Where's the crime?