Apple e-Book Appeal Ping!
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Posted on 12/15/2014 4:39:25 PM PST by Swordmaker
A US judge Monday expressed doubt towards the government's e-book antitrust case against Apple, saying the tech giant was challenging "predatory" pricing from rival Amazon.
The comments came as a federal appeals court panel heard arguments in the case, in which Apple was found to have colluded with publishers to raise e-book prices.
Apple argues that its entry into the e-book market fostered competition because it challenged Amazon, which had a dominant share in e-books. Apple claims its entry spurred additional publishers to produce e-books, and that prices of e-books generally fell even though it concedes that some prices rose in the short-term.
In July 2013, US District Court Judge Denise Cote sided with the government, concluding that Apple was liable for "facilitating and encouraging" a collective effort by the publishers to end price competition for e-books.
Theodore Boutrous, an attorney with Gibson Dunn representing Apple, told the appeals court that Cote's ruling was "a roadblock that chills innovation and competition." The decision discourages new entrants into a market, "which the court has said is the essence of competition," he said.
Apple's arguments resonated with at least one member of the three-judge panel, who appeared openly hostile to the government's case. Judge Dennis Jacobs questioned a Department of Justice attorney on the agency's hostility to Apple's challenge to Amazon, which had more than estimated 90 percent market share at the time.
"What we're talking about is a new entrant who is breaking the hold of a market by a monopolist who is maintaining its hold by what is arguably predatory pricing," Jacobs said.
Jacobs also took a swipe at the government's characterization of the conspiracy among the publishers, suggesting that prosecutors should have shown more leniency in light of Amazon's dominance, which has pushed conventional booksellers like Barnes & Noble close to bankruptcy.
"All those people who got together, it's like the mice saying they want to put a bell on the cat," the judge said.
Malcolm Stewart, the deputy Solicitor General for the US Justice Department, defended the government's case on the grounds that Apple's entry raised e-book prices for many consumers.
Stewart said the department did not believe Amazon's policies qualified as "predatory pricing," but that its standard $9.99 price on many best-sellers was "good for consumers."
Cote barred Apple and the publishers from signing the types of contracts targeted in the case. She also required Apple to accept a monitor to oversee its antitrust policies.
Finally, Cote on November 21 signed off on Apple's $450 million legal deal to compensate consumers harmed by its e-books policies. However, the settlement is contingent on the appeals court's ruling.
A ruling is expected in 2015.
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Amazon at $9.99. I went to Apple’s ibookstore and see that they have bestsellers at $3.99 and $2.99. Did the news of this lawsuit influence these low prices for bestsellers at Apple? Anyway, I’ve only bought a few books from Apple, and they were $4.99. I haven’t paid more than that, and prefer downloading free books to my iPads. Lots of places for free books, like Digital Press Publishing app “Free Books for iPad”. I don’t see the point of a lawsuit against Apple, when others like Amazon are keeping prices high.
Best Sellers are "best sellers" only while they are leading the market, roadcat. Those you are talking about are no longer "best sellers" but once were. They aren't their "new" release best sellers. I get those ads for those as well, and they're are usually for best sellers a year to two or so after being best sellers. . . and I am willing to wait for this kind of pricing to read them. If you wait long enough, they will sometimes even be offered for free.
The best sellers they are talking about in the lawsuit are their A-list authors in the first 90 days after release that everyone wants to read, right now, because everyone is talking about them. These are the books that are on the top of the New York Times list of Best Sellers. Currently. That 90 days is flexible. . . if he book stays on top of the list, the book stays on the Best Seller pricing as long as it does. There have been books that have been there for over a year. Some of Stephen King'a, John Grisham's, and J.K. Rowling's books have been that blessed.
Once that period has passed, the prices drop. The one's you are seeing are usually the ones the publishers use as teasers to get readers hooked on an author, ex-best-sellers that are are two or three cycles back from the latest and greatest. One cycle back are usually around $8.99 to $9.99, Two at $6.99 to $7.99 and then put on sale at the prices you see.
Amazon was selling books with a suggested hard back price of $29.95, e-book price of $22.95, and as soon as it was available slashing the price to $9.99, when the wholesale price for that e-book was $15.95! No one could compete losing an instant $5.96 plus overhead on every sale. That was Amazon's predatory pricing plan. No one could compete with Amazon's subsidized pricing. Even the publishers themselves could not sell below their wholesale price on their own sites because they'd be undercutting their retailers.
Amazon argued they were just "loss leaders" and making all that up on the sales of their other books. . . but studies have shown that most buyers of Best Sellers, simply DON'T buy other titles. They buy their favorite authors. . . and that's it. Brick and Mortar stores make 70% of their income on the new releases and then the balance on the back stock. That's why the new releases are in a prominent location in the stores. To make up a $6 loss plus overhead on every $10 loss leader, Amazon would have to sell one hell of a lot of low margin back stock e-Books to those e-book buyers attracted to Amazon by that loss leader. . . and they cannot demonstrate that. . . not with posting losses on their bottom line year-after-year.
As the judge pointed out, Amazon is running other competitors out of business (or keeping them out) by such predatory pricing. They are the true monopolist.
Actually, I buy books for my Amazon Kindle frequently, and Amazon’s prices have come down considerably. There are lots of ebooks for $3.99 and 2.99 and 1.99 now. I just recently got Brad Thor’s latest thriller for 3.99 (just a few days ago). I think Amazon knows that the gov’t is going to lose their case against Apple on the Appeals level, and were it to go to the Supreme Court, the gov’t would lose there also. So Amazon is now dropping its ebook prices because of new competition.
It sounds to me like the female District Court judge is a liberal hack siding with the gov’t against Apple, and the gov’t wants to rape Apple for large sums of money because this is how they fund all their liberal causes on the domestic political front and get money to their political Dem cronies, from these slush funds created from ill gotten gains.
The Obama Admin gets their walking around money from the Banks whom they rob, from regulatory and rules penalties their goons in the EPA and other gov’t departments generate, and through their IRS and corporate shakedowns. They want another big payoff from Apple in this alleged antitrust suit, but they are going to lose this one, and I think it may have dawned on some of the Courts on the higher levels at least that this is how the Obama Admin makes its side money. The charges against Apple are bogus. I hope the gov’t loses its case here bigtime.
Apple aced its e-book antitrust appeal Fortune Magazine — by Philip Elmer-DeWitt — DECEMBER 15, 2014, 2:08 PM EST
Two of three appellate judges seemed inclined to see things Apple’s way.
Deputy Solicitor General Malcolm Stewart, a legal heavyweight from Washington called in to defend the antitrust ruling that went so badly for Apple two years ago, tried several times Monday to compare Apple to a driver who carries a narcotics dealer to a drug pickup.
The point of his analogy, made before a three-judge panel in a Manhattan courtroom, was that if Apple knew that book publishers were engaged in an unlawful conspiracy to fix the price of e-books and was prepared to facilitate that conspiracy, it was as guilty as they were.
Judge Dennis Jacobs would have none it. Narcotics trafficking, he pointed out, was one of the very few “industries in which the law does not look with favor on new entrants.”
The packed courtroom erupted in laughter.
It was not a good moment for the deputy solicitor general — or, by extension, for Denise Cote, the district court judge whose antitrust ruling against Apple Stewart was laboring to defend. In contrast, the morning seemed to go more smoothly for Apple’s counsel, Theodore Boutrous, Jr., of Gibson Dunn & Crutcher.
My colleague Roger Parloff, who has seen more than his share of appellate hearings, was surprised how well this one went for Apple.
The key legal question,” he writes, “was whether the Apple’s conduct as a new entrant in the e-book market should have been viewed as “per se illegal”—in which case it could be simply presumed to be anticompetitive—or whether it should have been judged under a more demanding “rule of reason” analysis, in which case the fact-finder (which here was Judge Cote) had to undertake a much more searching investigation of all the circumstances in order to decide whether the conduct was pro-competitive (i.e., benefitted consumers) or anticompetitive.“Judges Jacobs and Lohier seemed quite concerned that Judge Cote had used the wrong standard, but Jacobs’s qualms clearly went much further—seeming to question the government’s judgment in ever having brought the case. His problem was that Apple was a new entrant that was bringing competition to a market that had been, until then, dominated by a “monopolist,” Amazon. Judge Jacobs also repeatedly referred to Amazon’s $9.99 pricing policy, whereby it sold books at below the wholesale acquisition cost, as “predatory pricing,” and seemed to suggest that Amazon was obviously using it as a means of maintaining its monopoly dominance.”
At times Judge Jacobs came close to suggesting that the government had prosecuted the wrong company. At the very least, he said, a horizontal initiative “used to break the hold of a monopolist” ought not be found to be illegal per se. He likened any collusive conduct on the publishers’ part to “mice getting together to go put a bell on the cat.”
More laughter. More trouble for the government’s cause.
The third judge, Debra Ann Livingstone, said less, and what she did say seemed more in line with the district court’s perspective.
If Judge Cote’s ruling is ultimately upheld on appeal (notwithstanding Judge Jacobs’ courtroom colloquy) Apple will pay $400 million to consumers and $50 million in attorneys fees. If the court vacates the liability finding against Apple but sends the case back to either Judge Cote or another judge for a further look under the “rule of reason” standard, Apple will pay $50 million to consumers and $20 million in attorneys fees. If the court overturns the case outright, Apple pays nothing.
At the end of the 80-minute hearing, the justices reserved their decision, which could take as long as six months.
It looks as if they may be doubling down on their predatory pricing. . . before the appellate court throws the DOJ and judge Cote's idiotic case out for mis-prosecution.
Thanks for explaining it to me. I didn't realize Amazon was selling the new bestsellers so far under wholesale. That would certainly get buyers to buy from Amazon and ruin business for all competitors. I like waiting for hot items to cool off and buy them at discounted prices; I don't need that "new car smell" and I wait to save a few bucks.
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