Apple settled out of court in the latest e-books price-fixing suit brought against the company, allowing the company to dodge an $840 million bullet, as reported by Bloomberg. The case, brought against the Cupertino company by multiple states and consumers, was set to go before a jury next month, but that will no longer be necessary.
The terms of the settlement have not yet been revealed, and the opposing sides of the case have one month to request formal acceptable of their agreement by the court.
As those familiar with the case may recall, Apple was first accused of conspiring with top publishers to increase ebook pricing in its iBookstore and competing services like Amazon back in 2012. Last year, a federal court found that Apple had in fact colluded with publishers. Apple appealed the ruling, but decided to send affected customers iTunes credit anyway.
If today’s settlement is accepted by the court, an end to this case could finally be in sight, though Apple still plans to continue its appeal of the earlier ruling.
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Can someone explain what apples is actually doing wrong here? Are they taking more money than they should, or?
Apple was accused of colluding with major publishers to set the price of ebooks by using the agency model for pricing. The agency model allows publishers to set the price, rather than retailers. This meant that places like Amazon were not allowed to price ebooks below what the publisher stated. That’s why the price in ebooks jumped on Amazon by a large amount. Apple allegedly did this in order to not allow Amazon to price below them.
The agency model itself wasn’t the issue, though. The issue was that Apple supposedly met with several publishers, suggesting they accept the agency model and then helped them set the prices. This was a way for Apple to increase their market share through conspiratorial efforts.
The DOJ brought these allegations against Apple and the judge presiding over the case found that Apple made a “conscious commitment to cross a line and engage in illegal behavior”. There was significant evidence, from Steve Jobs himself, and other top ranking Apple employees, that Apple did conspire to set price points.
So this is why ebooks on the Google Play store were the same price as the same book on Apple’s iBook store?
Yes, it is. Everyone was forced to use the same price point through the agency model. Now, who’s to say whether or not Google would have priced things lower if they were given the option. Amazon did, and that was an issue for both publishers’ and Apple’s bottom lines.
From what I can find, Google released the ebook suite on December 6, 2010, which was already after the agency model had been instituted and the collusion between Apple and publishers had occurred, allegedly.
That’s one perspective… the other is help make a competitive market for both companies. Here is what happened. Amazon started selling books below cost and pissed off publishers because why would you buy a hardback for $28 when you can get the ebook for $10?
The agency model was this: publishers set the price to whatever they wanted, and Apple takes 30% of the sales. There was one contingency: if anyone is selling the books at a low price than Apple, then Apple can sell them at the same lower rate… BestBuy does this ALL THE TIME with Amazon in it’s price match.
So the book publishers go back to Amazon saying you’ll sign the agency agreement or you get zero books. And then DOJ steps in to blame Apple with crap about price point setting. Apple only told the publishers they wanted to compete with others, like Amazon, online. The publishers and Amazon screwed it up…
And now that’s why you have Magazines that cost more in e-form than print and books that are a higher cost than print. Thank you Amazon and book publishers.
Good summation.
For Apple, this fine is just the cost of doing business. I’m sure they would do it again if it made money for then. DOJ needs to be more punitive in its fines.
“And then DOJ steps in to blame Apple with crap about price point setting. Apple only told the publishers they wanted to compete with others, like Amazon, online. The publishers and Amazon screwed it up…”
You know this how? There are records of conversations and emails between Apple and publishers where Apple states what they want the price to be.
Also, you suggesting this is like price matching is ridiculous. Price matching is actually the exact opposite of what happened here. Best Buy matches lower prices from Amazon, Best Buy doesn’t collude with television makers, for example, to increase the price and then tell Amazon, along with every other competitor, “either increase the price of the television or you aren’t allowed to sell this tv anymore”. That’s anti-competitive behavior, and is illegal