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US Department of Justice Sues apple for Price-fixing

This is a discussion on US Department of Justice Sues apple for Price-fixing within the Apple forum, part of the PC; DOJ sues Apple over price-fixing scheme - Apr. 11, 2012 The U.S. Department of Justice on Wednesday brought a lawsuit ...

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    US Department of Justice Sues apple for Price-fixing

    DOJ sues Apple over price-fixing scheme - Apr. 11, 2012


    The U.S. Department of Justice on Wednesday brought a lawsuit against Apple and several publishing companies over a scheme to fix e-book prices, a source with knowledge of the investigation told CNNMoney.

    The suit likely stems from the 2010 release of the iPad, when Apple reached an agreement with five publishers to release books on its then-new iBookstore.

    A similar investigation led by the European Commission is probing whether Apple colluded to raise the price of e-books with CBS's (CBS, Fortune 500) Simon & Schuster, News Corp.'s (NWS) HarperCollins; Hachette Book Group; Pearson (PSO)'s Penguin unit and Macmillan.

    Before the release of the iPad, Amazon's (AMZN, Fortune 500) Kindle was the preeminent e-book reader on the market. Amazon forced publishers to sell most books at $9.99 -- a price that came in below the cost of the books.

    Apple's (AAPL, Fortune 500) agreement placed many books at so-called "agency pricing," putting them on the market for about $12.99 and giving Apple a 30% cut. Soon after that, Amazon allowed publishers to set their own prices, resulting in higher prices on the Kindle as well.

    The DOJ is set to announce its lawsuit at noon, the source said. Apple and the Department of Justice declined to comment.

    A class action lawsuit filed in California District Court last summer on behalf of Kindle consumers first alleged a conspiracy. According to the lawyers that filed the suit, booksellers were "terrified" by the discounted e-book price structure Amazon launched in 2007, when it sold many titles for $9.99.

    The spooked publishers went to Apple around the time of the iPad's release, the suit alleges, to find a way to force Amazon to raise its prices.

    Amazon still has regular skirmishes with publishers over rates it considers too high. In February, the company yanked distributor IPG's digital books from its Kindle store after a dispute over terms of their contract.
    silly apple and it's e-book service.



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    Leave it to Apple to ruin Amazon's awesome prices. Hope they get fined for a very big sum of money.

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    Quote Originally Posted by Nagflar View Post
    Leave it to Apple to ruin Amazon's awesome prices. Hope they get fined for a very big sum of money.
    I'd definitely take Amazon's side here. Silly Apple.


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    I don't see the DOJ having a strong case here. How can Apple be accused of price-fixing the book market, when Amazon is by far the biggest player? How can a new market entrant fix prices?

    The publishers are to blame for this mess, and that's probaby why some have already chosen to settle out of court. Apple is just one means of distribution.



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    Quote Originally Posted by simula67 View Post
    I don't see the DOJ having a strong case here. How can Apple be accused of price-fixing the book market, when Amazon is by far the biggest player? How can a new market entrant fix prices?

    The publishers are to blame for this mess, and that's probaby why some have already chosen to settle out of court. Apple is just one means of distribution.
    The reason why the DOJ can go after Apple.Is because Apple products have a HUGE fallowing. Almost everything Apple sales, sells in Millions. So if Apple has prices fixed higher on the ibookstore. Knowing full well most Apple Product buyers will use it. Resulting in Millions of Dollars for both parties. Regardless if you can get it on Amazon cheaper. Most Apple product users already have existing Apple accounts.
    Secondly if Apple is selling these e-books at a higher price and a greater volume. It limits the amount of e-books that's available on Amazon. Because the publishers can make more money selling them on Apples Store. Resulting in Amazon having to raise their price. In order to keep getting the content.
    As you said Apple may be only one means of distribution. But you have to also consider. The sheer amount of iPads that were sold when it first came out. Pre loaded with Apples ibookstore and everything else 'i' on it. That's Tens of Millions of customers buying e books at higher prices. Tens of millions who aren't buying them on Amazon. Who sold them cheaper but at little to no profit to the publishers. Publishers are in the business of making money. If they can make more selling on Apple than Amazon. Which company do you think will end up getting a larger assortment of e books?
    All the DOJ has to do. Is prove that there was in fact. Some kind of agreement between the named publishers and Apple. To in fact raise the price of E-books. Resulting in Apple getting a 'kick back' in the form of 30% of the profits. Which is still more money than they were seeing with Amazon's sales. Forcing Amazon to raise their e book prices in order to maintain their content library and stay competitive with Apple.

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    Quote Originally Posted by platzreign View Post
    The reason why the DOJ can go after Apple.Is because Apple products have a HUGE fallowing. Almost everything Apple sales, sells in Millions. So if Apple has prices fixed higher on the ibookstore. Knowing full well most Apple Product buyers will use it. Resulting in Millions of Dollars for both parties. Regardless if you can get it on Amazon cheaper. Most Apple product users already have existing Apple accounts.

    There is a Kindle app available on iOS devices. We have two iPhones in my household, but two Kindles as well. I think it's unfair and unrealistic for the DOJ to base their argument off of, "Everyone who has an iOS device is obviously not using anything else." If people are going to pay more for textbooks through the iBookstore, it's going to be for the convenience of not carrying a backpack full of them. That's a competitive advantage to me. Millions of students can't afford iPads and expensive e-textbooks and will certainly opt for the backpack instead. Amazon isn't going to lose all their business here. Plus, absolutely nothing is stopping Amazon from developing and selling a Kindle textbook reader for students.


    Quote Originally Posted by platzreign View Post
    As you said Apple may be only one means of distribution. But you have to also consider. The sheer amount of iPads that were sold when it first came out. Pre loaded with Apples ibookstore and everything else 'i' on it. That's Tens of Millions of customers buying e books at higher prices. Tens of millions who aren't buying them on Amazon. Who sold them cheaper but at little to no profit to the publishers.

    I think that the link between people buying iPads and using the iBookstore is not as cut-and-dry as you do. Amazon had the Kindle long before the iBookstore came out, so there are millions and millions of customers that had already been using it.


    Quote Originally Posted by platzreign View Post
    All the DOJ has to do. Is prove that there was in fact. Some kind of agreement between the named publishers and Apple. To in fact raise the price of E-books. Resulting in Apple getting a 'kick back' in the form of 30% of the profits. Which is still more money than they were seeing with Amazon's sales. Forcing Amazon to raise their e book prices in order to maintain their content library and stay competitive with Apple.


    Publishers are in the business of making money. If they can make more selling on Apple than Amazon. Which company do you think will end up getting a larger assortment of e books?

    I think it's just as likely that the publishers met themselves and set the prices without Apple's involvement. Apple taking 30% is standard fare, very similar to their app business model. Maybe I'm naive, but setting Apple up to be the fall guy sounds possible. And again, if there's any doubt, the DOJ doesn't have a case.


    Good discussion.



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