Rare Book Monthly

Articles - August - 2013 Issue

Apple Convicted for Role in E-Books Price Fixing Scheme

Timetoclosethebook

The closing slide from Apple's unsuccessful presentation in court.

The last man standing has fallen in the government's lawsuit over price fixing of electronic books. Unlike its partners in “crime,” Apple did not go down without a fight. Indeed, Apple says it will try to rise off the mat to go another round. For the moment anyway, the bell has rung and the U.S. Department of Justice has swept through each round and the judge has awarded it a lopsided decision.

The government's suit alleged that Apple conspired with five book publishers to thwart competition, resulting in higher prices of e-books for the book-buying public. Here are the basics of what happened. A few years ago, when e-books were new, Amazon began to offer them for sale. Amazon likes to dominate a market, and is willing to forgo current profits to become the market leader. So, Amazon bought the publishers' e-books, but sold them at cutthroat prices. Their prices left little room for profit. Some were sold at a loss. It didn't matter to Amazon. They were not out to make a dollar today. They were out to become the runaway leader in selling electronic books, the one place customers would turn when they wanted one. Profits could come later.

You might think the publishers would be laughing all the way to the bank. Cheap prices encourage more sales, but those discounts came at Amazon's expense. The publishers were getting their full price. Nevertheless, if you thought that, you were wrong. The publishers were not pleased at all. They wanted e-books to reach new customers, not the old print book buyers. The publishers make more money on a printed book than an e-book. If Amazon's super low prices ended up stealing away print book buyers, publishers feared their margins per book would fall. They wanted e-books to be an alternative method for people to buy books, not a cheaper one. They wanted Amazon to raise prices. Amazon, on the other hand, wanted to keep their prices low to discourage competition on the retail side.

When one of the publishers tried to force Amazon to sell at higher prices. Amazon threatened to stop buying their books entirely. The publisher relented. Amazon had become too powerful to take on alone.

Into this milieu stepped Apple, the giant computer, smart phone, i-this and i-that maker. Apple wanted to offer e-books for sale, but unlike Amazon, Apple does not want to wait to make profits. It wants to make them now. There was no way Apple could be competitive with Amazon on price and make money. The firm relayed its distress to the publishers. A different pricing model, however, would cure this problem. If the publishers switched to so-called agency pricing, where the publisher dictates the retail price rather than the retailer, Apple would be able to compete on price. If Apple could compete on price, it meant prices would go up, and customers would be less likely to buy cheaper e-books instead of higher priced printed books. This idea looked good to both the publishers and Apple.

Exactly what happened next was the subject of dispute. Apple held negotiations with the various publishers. The publishers switched to agency pricing. When the first publisher switched, Amazon said it would stop buying their books. When they all did, Amazon could no longer afford to pull the plug. They would have lost access to too many titles, meaning e-book buyers would turn to other retailers to buy their books. That was exactly what Amazon wanted to avoid. It had no choice but to give in and agree to sell e-books at the higher “agency” prices.

Now, there is nothing illegal about publishers employing an agency model, even if it does eliminate price competition among retailers. That is not considered price fixing. However, when several publishers get together and all agree to adopt agency pricing, that is considered illegal collusion and price fixing. That is what the Department of Justice alleged. And the instigator, or “ringmaster” to use their term, they said was none other than Apple.

The Department of Justice claimed that Apple was managing a conspiracy whereby each of the publishers would switch to agency pricing. And so they all did, at the same time, change to agency pricing. Apple was able to sell their books, and Amazon was forced to raise the price of books they sold, often from $9.99 to $12.99 or $14.99.

Apple responded that all they did was negotiate with individual publishers for terms that they felt would allow them to sell their books. They were in no way encouraging a concerted action on the publishers' part, said Apple. Judge Denise Cote looked at the evidence, including comments attributed to late Apple CEO Steve Jobs in his biography, and concluded otherwise.

In her decision, Judge Cote wrote that the publishers were already seeking a way to collectively raise prices, as they knew Amazon could effectively retaliate against the first who tried. When approached by Apple, all parties immediately recognized a common interest in having higher prices. “Apple seized the moment and brilliantly played its hand,” she wrote. “With a full appreciation of each other’s interests, Apple and the Publisher Defendants agreed to work together to eliminate retail price competition in the e-book market and raise the price of e-books above $9.99.” Guilty as charged.

The publishers long ago threw in the towel and agreed to settle with the Department of Justice. They were assessed hefty fines, but the damage could have been much worse if they fought and lost. One reluctantly settling publisher noted the potential damages in a loss would put them out of business, too great a risk to continue the fight. By continuing to fight, Apple risks a large financial judgment, but with $150 billion in the bank, even the worst outcome will not materially harm their business. As a result, Apple immediately announced that it would fight on. They will take the case to the Court of Appeals, and if this is unsuccessful, they will have one more option – take it all the way to the Supreme Court. Most legal commentators do not believe the odds are in Apple's favor, but some believe they have a shot. The problem for Apple is cases are generally overturned because a higher court believes the lower court did not correctly apply the law. In this case, the dispute is not so much over the law as it is over the facts – did or did not Apple act as a “ringmaster” who led the five publishers to all take some action? Hoping a higher court will reach a different factual conclusion from the same evidence is a tougher challenge, but Apple is a company with the resources to take on even the toughest challenge.

Unrelated Addendum for those who read this far: Admittedly, this has nothing to do with books, but if you think Apple has legal problems with e-books, that is nothing compared to a lawsuit initiated by a buyer of an Apple computer from Tennessee. This customer has demanded that Apple sell its computers in “safe mode,” preset to block pornographic sites, along with paying him something in excess of $75,000. After a thorough description of the horrors pornography has inflicted on society, he tells his own sad tale. One day when he was trying to find Facebook, he accidentally hit two wrong keys. Here is what he typed, leaving the erroneous keys blank: f_c_book. We will leave it to your imagination what letters he accidentally typed besides the “a” and “e” of “face” in those two blanks. I can say that I checked out my keyboard, and discovered “a” is nowhere near “u,” and “e” is nowhere near “k.”

After that, it was all downhill. The complaint states, “The Plaintiff began to prefer the cyber beauties over his wife, which caused his marriage to fail. His wife abducted his son and disappeared, which was a subsequent consequence of Apple's decision to sell its computers not in 'safe mode.'” The complaint continues that the plaintiff, a member of the always chaste music profession, had previously “never seen pornographic images.”

The Tennessean goes on to explain, “When the Plaintiff bought his Apple Mac Book, no one at apple's store warned him that looking at pornographic images and videos could cause addictions to include arousal addiction or that the device could be the gateway to accessing content that could cause a rewiring of his brain, which lead to the demise of his family, unemployment, and unwanted changes in life style.” On this point I am in his corner. I have been to Apple stores and the salesmen absolutely do not make this warning. I must also agree with his claim that Apple knows full well “that the internet is loaded with porn.”

He later claims that the pictures “caused a release of dopamines and endorphins” which addicted him. On this one I will pass – not all that up on the science stuff. Neither would I pose as a legal expert. Nevertheless, I think this will be a tough case for the plaintiff to win. Sometimes you just have to take responsibility for your own behavior. You lose some but you win some, and on this case, I forecast an Apple victory in court.

Rare Book Monthly

  • <center><b>Chiswick Auctions<br>Books & Works on Paper<br>September 25, 2019</b>
    <b>Chiswick Auctions, Sep. 25:</b> Rowling (J.K.) <i>Harry Potter and the Philosopher's Stone,</i> FIRST EDITION, first issue, 8vo, 1997. £15,000 to £20,000
    <b>Chiswick Auctions, Sep. 25:</b> Bible, Italian.- Malermi Bible, woodcut illustrations, folio, Lazaro de Soardi & Bernardino Benali, Venice,1517. £8,000 to £12,000
    <b>Chiswick Auctions, Sep. 25:</b> Germany.- Homann (Johann Baptist). <i>Atlas von Deutschland,</i> engraved half title, hand coloured, 87 double page engraved maps, [folio, Erben, Nuremberg, 1753]. £8,000 to £10,000
    <center><b>Chiswick Auctions<br>Books & Works on Paper<br>September 25, 2019</b>
    <b>Chiswick Auctions, Sep. 25:</b> [Mirk (John)].- <i>Liber festivalis et Quatuor sermons</i> [bound with], [Le Roy (Pierre)] <i>A Pleasant Satyre or Poesie,</i> first edition in English, Widdow Orwin for Thomas Man, 1595, 8vo. £1,500 to £2,000
    <b>Chiswick Auctions, Sep. 25:</b> Antoninus Florentinus (Saint Archbishop of Florence). <i>Confessionale: Defecerunt…,</i> 8vo, Pietro Quarengi, Venice, 15 February 1499. £1,000 to £1,500
    <b>Chiswick Auctions, Sep. 25:</b> Jesuit Letters.- [Froes (Father Luigi) & et al.)] Avvisi del Giapone de gli anni 1582, 1583, 1584…, 1586 [bound with] Avvisi della Cina et Giapone…, FIRST EDITIONS, Rome. £1,000 to £1,500
    <center><b>Chiswick Auctions<br>Books & Works on Paper<br>September 25, 2019</b>
    <b>Chiswick Auctions, Sep. 25:</b> Plutarch & Probus (Aemilius). <i>Plutarchi Cheronei et Aemilii Probi Illustrium,</i> folio, Nicolas de Pratis for Jean-Petit, Paris, 1521. £1,000 to £1,500
    <b>Chiswick Auctions, Sep. 25:</b> Bible.- English. <i>The Byble in Englyshe of the Largest and Greatest volume,</i> elaborate woodcut border, text vignettes, folio, 1541. £1,000 to £1,500
    <b>Chiswick Auctions, Sep. 25:</b> Fore-edge Painting.- Lord George Byron, The Giaour, a Fragment of a Turkish Tale, bound with 10 other titles, 4 plates marked 'Proof.', 1813. £800 to £1,200
    <center><b>Chiswick Auctions<br>Books & Works on Paper<br>September 25, 2019</b>
    <b>Chiswick Auctions, Sep. 25:</b> Manson (John). Twelve by Sixteen Papers of John Mason, a collection of 50 sheets of paper, some watermarked, 12 x 16”, c.1978. £800 to £1,200
    <b>Chiswick Auctions, Sep. 25:</b> Fleming (Ian). <i>Dr. No,</i> FIRST EDITION, original boards, dust-jacket, 8vo, 1958. £700 to £900
    <b>Chiswick Auctions, Sep. 25:</b> Eliot (T.S.) <i>Four Quartets,</i> NUMBER 121 of 290 COPIES, signed by author, 1960. £400 to £600
  • <b>Swann Auction Galleries Illustration Art:</b> Eric Carle, <i>The Very Hungry Caterpillar,</i> hand-painted collage. Sold for a record $20,000.
    <b>Swann Auction Galleries Illustration Art:</b> Charles Addams, <i>Couple passing a giant bird house,</i> watercolor cartoon for <i>The New Yorker,</i> 1948. Sold for $16,250.
    <b>Swann Auction Galleries Illustration Art:</b> Miriam Troop, <i>Rain on Laundry Day,</i> oil on canvas, cover for <i>The Saturday Evening Post,</i> 1940. Sold for $40,000.
    <b>Swann Auction Galleries Illustration Art:</b> Rockwell Kent, <i>To All Fascists,</i> ink broadside for The League of American Writers, circa 1937. Sold for $6,500.
    <b>Swann Auction Galleries Illustration Art:</b> Jo Mielziner, <i>Pet Shop Drop,</i> backdrop design for <i>Pal Joey</i> on Broadway, 1940. Sold for a record $55,000.
    <b>Swann Auction Galleries Illustration Art:</b> Lee Brown Coye, acrylic cover illustration for the 25th anniversary of <i>Weird Tales,</i> 1944. Sold for $18,750.
    <b>Swann Auction Galleries Illustration Art:</b> Virgil Finlay, <i>The Outsider & Others,</i> pen & ink dust jacket illustration for H.P. Lovecraft's book, 1939. Sold for $5,500.
    <b>Swann Auction Galleries Illustration Art:</b> Al Hirschfeld, <i>Paul Robeson as Othello,</i> illustration for <i>The New York Times,</i> 1942. Sold for $68,750
    <b>Swann Auction Galleries Illustration Art:</b> Frederic Remington, pen & ink illustration for <i>A Scout with the Buffalo Soldiers</i> in <i>The Century</i> magazine, 1889. Sold for $17,500.
  • <b>Bonhams, Sep. 17:</b> EARLY AVIATION PHOTOGRAPHY ARCHIVE. Chronicling 20th century aviation from the earliest Wright Brothers images through commercial and military applications. $50,000 to $70,000.
    <b>Bonhams, Sep. 17:</b> SPUTNIK-1 EMC/EMI LAB MODEL, 1957. Full scale vintage test model of the Sputnik-1 satellite, Moscow, [February, 1957]. $400,000 to $600,000.
    <b>Bonhams, Sep. 17:</b> FIRST TELEPHONE CALL TO THE MOON. Partial transcription signed by Apollo 11 astronauts and President Nixon. $20,000 to $30,000.
    <b>Bonhams, Sep. 17:</b> Apollo 11 Beta cloth crew emblem, SIGNED BY THE ENTIRE APOLLO 11 CREW. $8,000 to $10,000.
    <b>Bonhams, Sep. 17:</b> GEMINI 1/8 SCALE MODEL. Rarely seen large-scale contractor's model. $3,000 to $5,000
    <b>Bonhams, Oct. 23:</b> SMITH, CHRISTOPHER WEBB. 1793-1871. <i>Indian Ornithology.</i> [Patna, India]: 1828. $50,000 to $80,000.
    <b>Bonhams, Oct. 23:</b> DUPRÉ, LOUIS. 1789-1837. <i>Voyage à Athènes et à Constantinople, ou Collection de portraits, vues et costumes grecs et ottomans.</i> Paris: Dondey-Dupré, 1825. $60,000 to $90,000.
    <b>Bonhams, Oct. 23:</b> ADAMS, JOHN. Autograph Letter Signed ("J Adams"), [to Dr. Perkins?] while recovering from his small pox inoculation, [late-April, 1764]. $30,000 to $50,000.
    <b>Bonhams, Oct. 23:</b> AUSTEN, JANE. Autograph Letter Signed ("J. Austen"), to her sister Cassandra, 4 pp, "Thursday – after dinner," [September 16, 1813,] Henrietta St. $80,000 to $120,000.
    <b>Bonhams, Oct. 23:</b> AUDUBON, JOHN JAMES. 1785-1851. <i>The Birds of America, from Drawings Made in the United States and Their Territories.</i> New York & Philadelphia: J.J. Audubon & J.B. Chevalier, 1840-1844. $20,000 to $30,000.
    <b>Bonhams, Oct. 23:</b> DODWELL, EDWARD. 1767-1832. <i>Views in Greece.</i> London: Rodwell and Martin, 1821. $20,000 to $30,000.
    <b>Bonhams, Oct. 23:</b> JAMES, JESSE. Autograph Letter Signed ("Jesse W. James"), to Mr. Flood demanding Flood retract spurious accusations, 3 pp, June 5, 1875. $200,000 to $300,000.
  • <b>Forum Auctions: Fine Books, Manuscripts and Works on Paper. September 26, 2019</b>
    <b>Forum Auctions, Sep. 26:</b> Joyce (James). <i>Dubliners,</i> first edition, signed presentation inscription from the author, 1914. £100,000 to £150,000
    <b>Forum Auctions, Sep. 26:</b> The Beatles.- Baker (Geoffrey.) 3 Autograph Letters and 1 Autograph Card signed to Ann Gosnell, addtionally sgn’d by George Harrison, John Lennon, Cynthia Lennon and others, 1968. £5,000 to £7,000
    <b>Forum Auctions, Sep. 26:</b> Pilgrim Press.- Dod (John). <i>A plaine and familiar exposition of the tenne commandements ...,</i> [Leiden], [William Brewster], 1617. £15,000 to £20,000
    <b>Forum Auctions: Fine Books, Manuscripts and Works on Paper. September 26, 2019</b>
    <b>Forum Auctions, Sep. 26:</b> Automaton Chess Player & Mechanical Illusion.- Reynell (H., printer). “The Famous Chess-Player, No.14, St.James's-Street, next Brooks's,” broadside advertisement for "The famous Automaton", [1784]. £2,000 to £3,000
    <b>Forum Auctions, Sep. 26:</b> Clemens (Samuel Langhorne). <i>Life on the Mississippi,</i> first English edition, signed presentation inscription from the author, 1883. £8,000 to £12,000
    <b>Forum Auctions, Sep. 26:</b> Arctic Sledge Flag.- Fulford (Reginald Baldwin). Sledge flag... HMS Discovery, 1875. £4,000 to £6,000
    <b>Forum Auctions: Fine Books, Manuscripts and Works on Paper. September 26, 2019</b>
    <b>Forum Auctions, Sep. 26:</b> Rowling (J.K.) <i>Harry Potter and the Philosopher's Stone,</i> first edition, first printing, 1997. £20,000 to £30,000
    <b>Forum Auctions, Sep. 26:</b> Piranesi (Giovanni Battista). <i>Le Antichità Romane,</i> 4 vol., 1756. £20,000 to £30,000
    <b>Forum Auctions, Sep. 26:</b> Canaletto (Giovanni Antonio Canal, called). <i>Urbis Venetiarum Prospectus Celebriores,</i> 3 parts in 1, Richard Ford's copy, Venice, Giovanni Battista Pasquali, 1751. £10,000 to £15,000
    <b>Forum Auctions: Fine Books, Manuscripts and Works on Paper. September 26, 2019</b>
    <b>Forum Auctions, Sep. 26:</b> Atlases.- Speed (John). <i>A Prospect of the Most Famous Parts of the World,</i> bound with <i>The Theatre of the Empire of Great Britaine,</i> 1631-27. £12,000 to £18,000
    <b>Forum Auctions, Sep. 26:</b> Anatomical illustration.- Aselli (Gaspare). <i>De lactibus sive lacteis venis... dissertatio,</i> first edition, Milan, Giovanni Battista Bidelli, 1627. £20,000 to £30,000

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