"[Amazon's] alleged violation of antitrust laws is not an excuse..."

July 11, 2013 11:09 AM

U.S. District Judge Denise Cote has found that Apple conspired with publishers to fix the prices of ebooks. Publishers Weekly describes Apple's defeat as "a major blow". Writing before the ruling, Roger Parloff at Fortune Tech delved into Apple's "agency model" for ebook sales and noted that Amazon's business model is "the missing piece... of this jigsaw puzzle". Philip Elmer-Dewitt reviews Judge Cote's findings. (Review the decision and other trial information yourself here.) Michael Clarke at Scholarly Kitchen explains why he considers this a loss for the public.
posted by Going To Maine (49 comments total)

Not hugely suprising since Apple all but put "hey, let's enter into a criminal conspiracy to jack up prices!" into email, and "but we have a good excuse!" isnt really a workable defence.

Michael Clarke at Scholarly Kitchen explains why he considers this a loss for the public.

The counter argument would be that as a member of the public I actually kind of like the non jacked-up prices.
posted by Artw at 11:15 AM on July 11, 2013 [11 favorites]

So one way, we face a monopoly, and the other, collusion. Great.
posted by Mitrovarr at 11:18 AM on July 11, 2013 [7 favorites]

Given that the article claims we'll see higher prices in the long run, it's not so much a counter-argument as knee-jerk snark that doesn't engage with the actual argument.
posted by ominous_paws at 11:19 AM on July 11, 2013 [2 favorites]

So what, you might say, if Amazon controls the market so long as they keep prices low? Anyone who has looked at Amazon’s price to earning ratio will tell you that Wall Street is assuming the company is engaged in a market share maximization strategy. As CNN has pointed out, whereas it would take 13 years for Apple to pay back your investment based on their current P&E ratio, it would take Amazon nearly three millennia (and while Jeff Bezos is known to play a long game, I suspect even his horizon is quite a bit closer). The aim of a market maximization strategy is to dominate the market and, once all credible competition is vanquished, to raise prices and substantially grow margins unfettered by competitive pressures.

A friend of mine from that company currently describes his employer as a "charity" to which Wall Street will donate until Bezos is removed or they start raising prices.

And - surprise, surprise - it looks like they are now starting to raise prices, now that they have been granted a de facto monopoly over the e-book market.
posted by Blazecock Pileon at 11:20 AM on July 11, 2013 [4 favorites]

TBH it's hard to describe the Publishers desire to strangle e-Books in their crib and Apples desire to hamstring Amazon as "not monopolistic".
posted by Artw at 11:20 AM on July 11, 2013 [6 favorites]

Publishers are doing nothing like "trying to strangle e-Books in their crib." Seriouisly, did a book publisher murder your grandparents or something?
posted by ominous_paws at 11:22 AM on July 11, 2013 [4 favorites]

Publishers are doing nothing like "trying to strangle e-Books in their crib." Seriouisly, did a book publisher murder your grandparents or something?

I would absolutely characterize their mive to enforce hardback or higher prices for ebooks as a boneheaded dinosaur move equivalent to the music industries per-iTunes rejection of digital.

And - surprise, surprise - it looks like they are now starting to raise prices, now that they have been granted a de facto monopoly over the e-book market.

It's not beyond the realm of possibility, but that's a terrible article consisting of rabid speculation, self interest and a failure to show any actual price raises.
posted by Artw at 11:30 AM on July 11, 2013 [8 favorites]

Hopefully the DOJ will go after Amazon next.
posted by BrotherCaine at 11:33 AM on July 11, 2013 [4 favorites]

It may be an incredibly dumb question, but will this address how physical paperback books are sometimes less expensive then their digital counterparts which consist of no physical product?

Does this make that less likely?

Also, what exactly do publishers.... do nowadays? Is it all promotion as many editors are freelance? Won't Amazon essentially destroy all publishers if they control the promotion and distribution?
posted by lattiboy at 11:34 AM on July 11, 2013 [1 favorite]

More early indications that Amazon is actually now raising ebook prices, as they clearly feel that they have enough market share in a locked-in platform to do that.

Clearly publishers share the blame in allowing Amazon to dominate so much of the market, especially by insisting on DRM and then allowing that DRM to be attached to walled gardens, but as ebooks really aren't the same as an mp3 (single cut of an album vs. a whole book, listen to mp3 repeatedly vs. read most books once) the solution could entail dropping DRM, but when publishers are treated by the public as enemies, I can certainly understand the reluctance.
posted by Toekneesan at 11:34 AM on July 11, 2013 [4 favorites]

Hopefully the DOJ will go after Amazon next.

I would love to see a good legal analysis of why they have not. I know that proving a monopoly is significantly more difficult than just showing that someone dominates a market, and I imagine that the devil is in those details.
posted by Going To Maine at 11:35 AM on July 11, 2013 [1 favorite]

Some vague notions about Amazon jacking up prices now vs. the reality that publishers jacked up prices 30% over night.
posted by smackfu at 11:36 AM on July 11, 2013 [7 favorites]

Hopefully the DOJ will go after Amazon next.

Amazon is the next Walmart, which doesn't have the IT capabilities — and the ability to leverage that into profits — that Amazon has. I suspect that by the time Amazon takes over Walmart's markets it will be too late for the DoJ to do very much.
posted by Blazecock Pileon at 11:37 AM on July 11, 2013 [1 favorite]

Some vague notions about Amazon jacking up prices now vs. the reality that publishers jacked up prices 30% over night.

[Amazon] is quietly raising prices via the back door, according to the New York Times.
posted by drezdn at 11:42 AM on July 11, 2013 [3 favorites]

Also, I did a quick survey of Amazon prices of the books published by the publisher I work for and it's not just ebooks that Amazon is raising prices on. Amazon used to sell some of our books and ebooks at a loss, but I can't find any of our books currently sold below what they are paying, and most of our books were sold at around a 25% discount of retail. That's dropped to a 10% to 15% discount.
posted by Toekneesan at 11:42 AM on July 11, 2013 [1 favorite]

Amazon is the next Walmart, which doesn't have the IT capabilities — and the ability to leverage that into profits — that Amazon has. I suspect that by the time Amazon takes over Walmart's markets it will be too late for the DoJ to do very much.

But Walmart isn't a monopoly either. If Amazon is a monopoly, they can be taken on by the DoJ. If it isn't, they can't.
posted by Going To Maine at 11:44 AM on July 11, 2013

I know a few people who buy everything including TP through Amazon prime, but they aren't the same demographic as Walmart shoppers. They're looking for value but not the lowest price.
posted by BrotherCaine at 11:46 AM on July 11, 2013 [2 favorites]

I know that proving a monopoly is significantly more difficult than just showing that someone dominates a market

Well it's more than that. Simply _having_ a monopoly is not illegal, it's abusing it that is. If you get 90+% market share without using anticompetitive tactics then there's nothing illegal about that. You don't have to like arbitrarily hold yourself back in order to stay short of that, if you are so awesome everyone wants your product.

But having a monopoly _does_ make you subject to all sorts of additional scrutiny, and of course can make it both easier and more tempting to abuse your power. So often it goes along with anticompetitive practices, but the government has to prove both that you have a monopoly _and_ that you're abusing it. I think the former is much easier really since it's a more objective thing about market share and availability of alternatives, while the latter is where cases usually fall apart.

In my mind there is also a distinction between large market share and "actual" monopoly, obviously Amazon is not a 100% market share sort of monopoly, since plenty of other sites offer eBooks (Apple, Google, B&N, etc).
posted by wildcrdj at 11:46 AM on July 11, 2013 [2 favorites]

I'd never defend pricing ebooks above the cheapest available paper edition, but ebooks not being exactly as cheap as you wish them to be is not a monopoly. Let's try to retain the scantest scrap of perspective, for goodness' sake.
posted by ominous_paws at 11:47 AM on July 11, 2013

Here's a bookstore owner's (surprisingly not anti-Amazon) take on the Amazon cuts in discounts.
posted by drezdn at 11:47 AM on July 11, 2013

Not hugely suprising since Apple all but put "hey, let's enter into a criminal conspiracy to jack up prices!" into email, and "but we have a good excuse!" isnt really a workable defence.

Yeah, since there is an issue of intent in proving abuse, this kind of thing seems to be a common thread in successful cases. The Microsoft trial of the late 90s had similar emails.

In fact, after that trial was when a lot of companies got more serious about email retention policies and policing discussion on internal email, since it's such a good and potentially damning record of what an org is actually thinking.
posted by wildcrdj at 11:48 AM on July 11, 2013 [1 favorite]

Crocodile tears. Nothing's stopping the publishers from starting their own online business - except the blinkered dinosaurism that got them into their pickle in the first place.

Looks like Bezos was the right guy to hand the 10,000-year clock to.
posted by Twang at 11:52 AM on July 11, 2013 [1 favorite]

"but we have a good excuse!" isnt really a workable defence.

It was good enough for NPR, which quoted that very argument from Apple:

NEARY: Many observers expected the decision to go against Apple. And Grimmelmann believes it will be hard to win on appeal. But Apple is aggressively maintaining its innocence, saying that it helped break, quote, "Amazon's monopolistic grip on the publishing industry."

It seemed to escape professional journalist Neary that "we had a good reason" != "maintaining innocence".
posted by Gelatin at 11:54 AM on July 11, 2013 [1 favorite]

That's cute, but has no basis in reality whatsoever.
posted by ominous_paws at 11:55 AM on July 11, 2013

Hopefully the DOJ will go after Amazon next.

I assume their defense would be:

* We only sell a fraction of book titles under cost, as loss leaders, just like other retailers.
* We picked the $9.99 price point when it was not a loss, and subsequently the publishers raised the wholesale price (which was probably their first attempt at price fixing.)

That second point was interesting to read in the Judge's ruling. The publishers originally sold ebooks at 20% under the wholesale price of hardcovers.

It's also much harder to prove predatory pricing than horizontal price fixing.
posted by smackfu at 11:55 AM on July 11, 2013

But Walmart isn't a monopoly either.

Some allegations of Walmart's price-fixing behaviors have come from producers, but not consumers, so much. Enforcement of antitrust laws in the US is generally carried out on behalf of consumers (such as the case against Apple). That laws haven't been enforced to protect the rights of producers to a fair and free market is not, in my opinion, the same as saying laws haven't been broken. But, in any case, I suspect any prosecution of Walmart (or Amazon, once it replaces Walmart) will be handled as impotently as the US vs Microsoft ruling, ultimately appealed and overturned, if even successful.
posted by Blazecock Pileon at 11:56 AM on July 11, 2013 [1 favorite]

If any of these companies are broken, it will be via Europe not the DOJ.
posted by aramaic at 11:59 AM on July 11, 2013 [1 favorite]

More early indications that Amazon is actually now raising ebook prices, as they clearly feel that they have enough market share in a locked-in platform to do that.

This is an article from 15 months ago. Note also that it seems average prices increased in the period they were looking at because more books in their data set were under the agency model, the exact model Apple and publishers were colluding on.
posted by kmz at 11:59 AM on July 11, 2013 [10 favorites]

Exactly what I was going to say. You can't say anything about "Amazon raising prices" unless you only include books that aren't sold under the agency model. And as far as I can tell, the settlements the publishers agreed to prohibit MFN clauses, but allow the agency model to continue. So in the end, the publishers did successfully force Amazon to accept the agency model, where they would not have been able to without the price fixing. So it seems like they still came out winners.
posted by smackfu at 12:01 PM on July 11, 2013

Say what you will about Apple, but I cannot think of a single market in which they have engaged in predatory pricing. Unlike say, Microsoft, Google, Amazon, etc.
posted by entropicamericana at 12:31 PM on July 11, 2013 [4 favorites]

Interesting read on Ars. I'm fortunate enough to live in a different world then a lot of people and I can get my epub eBooks not from Amazon, which apparently has some sort of terrible monopoly I'm not subject too.
posted by juiceCake at 12:35 PM on July 11, 2013

Amazon has a near-monopoly on many audiobook titles. Sucks because I'm trying to give my dollars to non-Amazon entities and some titles it's impossible or costs twice as much.
posted by stbalbach at 12:35 PM on July 11, 2013

I cannot think of a single market in which they have engaged in predatory pricing.

On the software side, how can anyone even know if they are selling below cost, if cost isn't a public figure?
posted by smackfu at 12:53 PM on July 11, 2013

Gelatin: "but we have a good excuse!" isnt really a workable defence.

It was good enough for NPR, which quoted that very argument from Apple:
[...]

Lately NPR has disappointed me more and more, acting as mere shills for companies instead of doing reporting.

Case: They report on T-Mobile's CEO railing against 2-year contracts that trap customers, as he rolls out a "no more binding contracts" systerm. NPR notes "Not everyone agrees that this is good for the consumer" (!), and then gives a quote from an AT&T exec who warns that "T-Mobile will still require customers to keep paying on their cellphone purchases." Wow, really? If I buy a phone, and cancel my phone service, I still have to pay for the hardware I own? AMAZING! Or, it's noise designed to confuse the listener into thinking there's something shady about T-Mobile's dealings... when in fact the deal is bone-simple and fair.
posted by IAmBroom at 12:57 PM on July 11, 2013 [3 favorites]

In defense of NPR here, my reading of that particular quote isn't that they are defending Apple's position, just repeating the angle that Apple is taking. Heck, right before they state Apple's line they both mention that lots of people expected Apple to lose and that their expert thought it would be hard for them to win. It scans (to me) as them trying to neutrally include the argument being made by a defendant. (I can say nothing about this T-Mobile thing.)
posted by Going To Maine at 1:25 PM on July 11, 2013 [1 favorite]

Honestly, I don't know where people get off on saying ebooks are "cheap" Everytime I think to try to get one to read on my Nexus, it's like... 15 bucks for something that might cost like 10 bucks in soft-cover or... then you have the artificial extremely high pricing on more academic-y texts at 90+ dollars. I can expect that with a rare book, but come the fuck on, it's digital.

So - we're going to see piracy become more rampant as prices are raised even more. It seems to me the only things that get cheap are going to be best sellers as a sales to move mechanism.

I mean, I guess I don't read enough books to really judge, but it just seems absolutely ridiculous the prices on these things. Hell, I think 10 bucks is ridiculous for a digital album, but I pay that price for artists I think are worth it (and in fact, would probably pay more for those specific artists).

I would love to see a media empire that treats its customers more like Valve does with Steam. Of course, you have to figure out a way to balance the interest of the authors. I think we need good editorship, true, but sometimes, I think there's a bit of an elitist game that happens with publishing where if you're not officially chosen by a big corporate entity, you're a joke. Ridiculous gatekeeping to confer "status" amongst the literary elite, and high prices to keep that status up. Just like the big record labels, it's going to have to fall.

The issue there, I think as noted above, is that music is a many times, short spurts, and reading tends to be one time, long in depth thing.

Also - why are ebooks working with a traditional paradigm? You have stuff like house of leaves that went for a more hypertext approach to a novel (at least, as far as I understand, I have never read it myself), why are we not having more actual hypertext novels? Not just "choose your own adventure" but really thinking outside the traditional bounds of what literature is, more towards what it could be with the new technology.

Novels arose as mass publishing took off with the printing press (along with more leisure time due to mechanical industrialization to save time and reduced requirement for farm-labor (which is much more time intensive, especially back at the dawn of the industrial age))... Secularism as an arising ideology, of course, also corresponded with this time frame. The monks with their scribing and copying vellum tomes only the most philosophical treatises and generally religious work (with some boobies and poop jokes in the margins in those beautiful illuminated manuscripts). The mass production line combined with a more secular age opened up a brand new art form.

Were there monks who savaged the printing press the way the big oligopolies tried to do with things like napster or e-book markets? I imagine not nearly as much, because this is more directly related to profit motive than a publishing press would to scribes. Those who benefited from religion would not have the market concerns that competing publishers would have. I mean, sure, you've gotta burn heretics lest their memes infect the populace, so, I guess, maybe that's similar, and more brutal. You have the patronage of the church to protect your market, but at the same time, you're only allowed to print what the church allows. At some point attempts to find exact parallels are doomed to fail, but...

The point being, why the hell are we not really trying to push what an e-book can be?

Then I get back into my cynical mode and realize that this is how I thought in the mid-90s before the net became a big commercial adfest, and I have to push my thoughts on potential inspiring futures to be relegated to the backwaters of the imaginal realms and focus clearly on the reality that's out there in front of me, and that means that we're stuck in an archaic mode of thinking for quite a long time. Feh.
posted by symbioid at 1:42 PM on July 11, 2013 [4 favorites]

Ebooks from small publishers are usually very reasonably priced, and that's probably a lot of what people are thinking of when they're saying ebooks are cheap.
posted by asperity at 2:11 PM on July 11, 2013

As for monopoly: there's only one manufacturer of e-ink screens, and it bought its closest competitor with similar screen technology. All the ebook reader manufacturers are using the same screens with different hardware and software around them -- there's no significant difference there. And yet we've got "Kindle" being used in place of more generic terms, and people ask "which Kindle should I buy?" when there are plenty of other ebook readers on the market. You don't want Amazon to own the industry? Then quit buying into that.
posted by asperity at 2:18 PM on July 11, 2013 [2 favorites]

Ebooks from small publishers are usually very reasonably priced

Maybe we have different ideas about "reasonably priced." I just clicked on a book at random on the Melville House site; they want $18.50 for the ebook.

To be fair, the Melville House ebooks I've read have actually been nicely done. With most publishers, you pay $10+ and you get something with half a dozen OCR errors on every page, random bits of HTML markup interspersed with the text, missing or repeated lines, etc. The last ebook I read suddenly went from regular-sized text to inch-tall letters for several pages—for no reason—and then back. I have another which I've paid for, and would very much like to read, but never will, because it is set entirely in a be-curlicued italic font that is painful to read on the low-resolution Kindle display. None of this, of course, is something you can discern prior to paying for the book.

Maybe if publishers want people to pay more money for ebooks they should develop the extremely basic level of competence it would require to make them legible.
posted by enn at 2:31 PM on July 11, 2013 [4 favorites]

This is an article from 15 months ago. Note also that it seems average prices increased in the period they were looking at because more books in their data set were under the agency model, the exact model Apple and publishers were colluding on.

You noticed I said early, right?

Look, Amazon has been called a charity run for the benefit and aid of its customers, primarily because it gives little if anything back to shareholders and instead "invests" in marketshare through lower prices (often strategically below cost) and subsidized shipping. But do a bit of math. Last year Amazon opened a slew of new distribution centers and even this year they will open more. Yesterday I got an email about three that just opened. They can't keep prices low forever. They have significantly more expenses and a much lower stock price and thus less capital to spend on marketshare. With Borders gone, indies cut in half, and B&N close to collapse, why would they keep those prices low? They have won, and they have shareholders to answer to. Those shareholders have long recognized what Bezos was doing in growing the company, but now that they own the book market, what is their incentive to keep prices low?

I'm astonished at the loyalty they've built using the "charity for our customers" strategy, but those same customers are mistaken in thinking that those prices and subsidies are in any way sustainable.
posted by Toekneesan at 2:39 PM on July 11, 2013 [3 favorites]

Also, the court has no issue with the agency model. It was the $14.95 price point at the center of the agency model that got everyone in trouble. Agency is basically consignment. And Robinson-Patman specifically exempts consignment from prosecution under the act. If you look at the specifics of the case, the real issue was Apple's proposed $14.95 price floor vs. Amazon's $9.95 price. That's what was colluded. There is nothing at all illegal about the agency model.
posted by Toekneesan at 2:53 PM on July 11, 2013 [1 favorite]

Maybe we have different ideas about "reasonably priced."

I probably should've specified small publishers that primarily or exclusively publish fiction ebooks. Those are generally pretty damn cheap, with frequent promotions. And generally there are no OCR problems since they start in ebook form.

Also, about font problems: many ebook readers offer a large (and sometimes user-editable) selection of fonts so that you can pick whatever you'd like to read in, but sometimes poorly produced ebooks won't let you have the option. This is where DRM avoidance is helpful -- you can edit them yourself if they've made the extremely poor decision to limit your font choices to something ridiculous.
posted by asperity at 3:19 PM on July 11, 2013

Actually, I said lower stock price, but that isn't what I meant. They have less capital from that stock to invest. They have a crazy stock price, which is what has fueled this bubble. But in the next two years we will see Amazon struggle to keep that stock price high, primarily because they're spending that capital on things that have long term expenses, instead of spending it on lower prices. They are a brilliant company, but they've hit a wall where, at least in the book business, they can't partner or outsource much more of their growth. They're going to have to build physical things if they wish to continue the rate of growth that has kept their stock so high. But they now are seeing a huge growth in their expenses. And those expenses are commitments, stuff, real estate. That is going to impact service, prices, and customer delight.
posted by Toekneesan at 3:20 PM on July 11, 2013

I think 10 bucks is ridiculous for a digital album, but I pay that price for artists I think are worth it

You do see the inherent contradiction here, no?
posted by IndigoJones at 4:02 PM on July 11, 2013 [3 favorites]

But in the next two years we will see Amazon struggle to keep that stock price high, primarily because they're spending that capital on things that have long term expenses, instead of spending it on lower prices.

One significant short- to medium-term pressure on Amazon to keep the stock price high is the vesting that it offers to developers and other staff to reduce short-term (2-3 year) turnover. If the stock price goes down, that reduces total compensation and makes job offers and continued employment less enticing.

Since Amazon is almost entirely a technology company, offering tech jobs in a competitive market, it has few ways to make up for this without increasing prices. It could increase budgets for existing staff, cut existing staff, or increase outsourcing. The first option would reduce already slim profits but keep staff quality at an even level, everything else the same. The second and third options would reduce the quality of the Amazon product. We'll likely see further price increases, if only to help keep the company's internal situation in some equilibrium.

Other tech companies do stock buybacks and other accounting tricks to accomplish the same result. The trick is how they manage to do this without affecting revenue elsewhere in the company.
posted by Blazecock Pileon at 4:15 PM on July 11, 2013

Maybe if publishers want people to pay more money for ebooks they should develop the extremely basic level of competence it would require to make them legible.

Maybe if the device manufacturers would stop dicking around and decide on a single file format standard that would be easier to do.

(Said the owner of a small publishing company for which this is daily existence-bane)
posted by bitter-girl.com at 5:12 PM on July 11, 2013 [5 favorites]

IndigoJones: "I think 10 bucks is ridiculous for a digital album, but I pay that price for artists I think are worth it

You do see the inherent contradiction here, no?"

Not really no. It just means I'm ridiculous. Go ahead and ridicule me! ;)
posted by symbioid at 6:57 PM on July 11, 2013

IndigoJones: "I think 10 bucks is ridiculous for a digital album, but I pay that price for artists I think are worth it

You do see the inherent contradiction here, no?"

It's not as contradictory as it seems. $10 is ridiculous for a digital album, but I would certainly pay $100 for some of them.

How else are you going to send Band X your money, especially if you don't want any physical items? It's not like you can just mail that $10 check to Band X...

If I download an album for free, listen to it, like it, and want to compensate the artist (but don't want any physical merchandise or attend one of its live shows), what should I do?
posted by mrgrimm at 11:21 PM on July 11, 2013

Amazon's stock price has kept rising over the years even though they have never had a ton of profits. I'm not sure what force is going to make that change, despite Apple fans grousing that "it's not right."
posted by smackfu at 4:31 AM on July 12, 2013