Retail price controls suspended for 2 years for 3 publishing houses [ Edited ]

[Doug_Pardee Distinguished Bibliophile]

AlanNJ mentioned this in another thread, but I think it needs its own.

The Department of Justice has reached a settlement with Hachette, HarperCollins, and Simon&Schuster. The publishing houses have agreed not to attempt to control retail pricing on e-books for the next two years. The retailers lose the Most Favored Nation clauses in their contracts. The publishers also agreed not to enter into collusion (duh).

Settlement is pending approval of the court.

No surprise, Penguin and Macmillan have not settled, and DoJ has gone ahead and filed a suit against them and Apple.

Official announcement from DoJ: http://www.justice.gov/iso/opa/ag/speeches/2012/ag-speech-1204111.html

[RHWright]

I could see this pushing publishers into a Pottermore type scenario, especially with their major authors.

And you know what? I wouldn't mind. I never had a real problem with agency pricing to begin with. (Please dogpile now. )

I'm neither pro or anti Amazon, on th whole. I buy non-ebook merchandise from them on occasion.

I just don't like how they went about trying to drive everyone else out of the ebook realm with predatory low-ball prices.

[Doug_Pardee Distinguished Bibliophile]

By the way, did anybody notice that the proposed settlements include no recompense or retribution? There are no fines, no refunds, just "change how you do things for the next few years".

That suggests to me that the DoJ's case against the publishers isn't nearly as strong as their big talk.

[geertm]

A very good explanation of the settlement terms:

http://www.wired.com/epicenter/2012/04/doj-terms-settlement-ebook/

[Doug_Pardee Distinguished Bibliophile]

Thanks, Geert.

A very interesting part of the proposed settlement: Section VI.B allows the publishers to enter into 1-year Agency agreements which essentially forbid selling at an overall loss. Total discounts over the year could be restricted to be no more than the seller's total commission for the year.

[keriflur]

In the Wired explanation, the "new" agency model doesn't sound that different from the "old" wholesale model - the publisher sets a list price, they get a percentage of that list price, and the retailer sets the sale price.  The only difference is the ability to set a hard floor for the overall contract.

[MacMcK1957]

The hard floor might be enough.

[keriflur]

Yes, it might.  I'm interested to see how this all plays out.

[Nallia Distinguished Bibliophile]

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Doug_Pardee wrote:

By the way, did anybody notice that the proposed settlements include no recompense or retribution? There are no fines, no refunds, just "change how you do things for the next few years".

That suggests to me that the DoJ's case against the publishers isn't nearly as strong as their big talk.

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Apparently, 16 states have filed antitrust suits demanding monetary compensation. According to this article, posted earlier by someone else in the Community Room, Hachette and HarperCollins have agreed "to pay $52 Million in 'customer restitution.'"

http://paidcontent.org/2012/04/11/states-pile-on-claim-apple-e-book-conspiracy-cost-consumers-100-mi...

[BooksOnTheKnob]

Doug,

At least one story I read said that the ones who have settled agreed to reimburse/compensate consumers (based on some formula involving which states were in the suit, sales in those areas and total amount overcharged). We'll probably never see a dime (even though each publisher knows EXACTLY which consumers purchased their books and how much was overcharged to each of them, thanks to the very agency model they decided to pursue).

[Omnigeek]

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Nallia wrote:

Apparently, 16 states have filed antitrust suits demanding monetary compensation. According to this article, posted earlier by someone else in the Community Room, Hachette and HarperCollins have agreed "to pay $52 Million in 'customer restitution.'"

http://paidcontent.org/2012/04/11/states-pile-on-claim-apple-e-book-conspiracy-cost-consumers-100-mi...

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Want to bet that none of that "compensation" actually goes to readers, libraries or reading programs?  I am skeptical of any of these state litigations ever since they misused the tobacco litigation and funds that proceeded from the settlement.

[keriflur]

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Omnigeek wrote:

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Nallia wrote:

Apparently, 16 states have filed antitrust suits demanding monetary compensation. According to this article, posted earlier by someone else in the Community Room, Hachette and HarperCollins have agreed "to pay $52 Million in 'customer restitution.'"

http://paidcontent.org/2012/04/11/states-pile-on-claim-apple-e-book-conspiracy-cost-consumers-100-mi...

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Want to bet that none of that "compensation" actually goes to readers, libraries or reading programs?  I am skeptical of any of these state litigations ever since they misused the tobacco litigation and funds that proceeded from the settlement.

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My state (Washington) was one of the states in the litigation.  I intend to find out what they do with the money.

[Didact]

How will this affect those of us who buy from Barnes & Noble? Will Amazon be able to start underselling them again?

[sub_rosa]

Great news.  I railed pretty hard against the agency model from the very beginning.  Good to see the normal functioning of the "free market" has been restored.  Customers will benefit from this action.

[Omnigeek]

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sub_rosa wrote:

Great news.  I railed pretty hard against the agency model from the very beginning.  Good to see the normal functioning of the "free market" has been restored.  Customers will benefit from this action.

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How is this "normal functioning" of the free market rather than the equivalent of wage-and-price controls (which worked SO well in the '70s ...)?  In the free market, if you don't like like Random House's price for a book, you don't buy it -- maybe you buy something from Baen or Phoenix or another small publisher.  If Stephen King's or Tom Clancy's latest novel is worth $20 to you, you pay it -- or you wait for it to show at the library or come out in paperback or your local used book store.  If the author thinks s/he is able to make more and gain a wider audience by self-publishing, s/he can - as J.K. Rowling has.

I had no problem with the agency model as it gave publishing houses control over the perceived value of their product and protected against a single outlet setting the value equation.  Those same publishing houses just don't get my business when they charge more than I'm willing to pay for the product in question.  I am bemused at the number of people who rail at how Wal-Mart affected suppliers bottom lines and devalued products but don't like the Agency model.

[sub_rosa]

Collusion and price-fixing have been illegal for a long time.  It's why three of the five publishers that got sued decided to settle the case - because what they did was illegal.  It artifically inflated the price of ebooks to the detriment of consumers.  Antitrust Law 101.

[Omnigeek]

News flash for you sub_rosa.  Lots of people and companies settle without being guilty.  Fighting lawyers with an unlimited budget like the DoJ isn't easy -- and since the settlement they agreed to doesn't include any monetary compensation (so far), it's an easy business decision to do away with the "Most Favored Nation" clauses in their distribution contracts (which they may not have liked anyway) to set a price floor so DoJ can save face and they don't have to pay many man-months of legal time fighting.

http://news.cnet.com/8301-1023_3-57412587-93/why-e-books-cost-so-much/

Look at the numbers.  Were the publishers artificially inflating a price or was Amazon exerting market influence to artificially deflate the price in order to corner the market (which is far more illegal under existing law than maintaining a set price for your product).

[deesy58]

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Omnigeek wrote:

News flash for you sub_rosa.  Lots of people and companies settle without being guilty.  Fighting lawyers with an unlimited budget like the DoJ isn't easy -- and since the settlement they agreed to doesn't include any monetary compensation (so far), it's an easy business decision to do away with the "Most Favored Nation" clauses in their distribution contracts (which they may not have liked anyway) to set a price floor so DoJ can save face and they don't have to pay many man-months of legal time fighting.

http://news.cnet.com/8301-1023_3-57412587-93/why-e-books-cost-so-much/

Look at the numbers.  Were the publishers artificially inflating a price or was Amazon exerting market influence to artificially deflate the price in order to corner the market (which is far more illegal under existing law than maintaining a set price for your product).

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The author of the cited article states that "all of the costs associated with print, from the printing to the shipping to the distribution to the warehousing to returns, amount to a mere few dollars per copy, depending on the size of the print run."

Okay, then!  That's GREAT!  Pass those "mere few dollars per copy" along to those of us who purchase, and read, e-books.  Oh happy day ...

Oh, wait!  Apple and the publishers couldn't make obscene profits and screw over consumers if they did that. 

[AlanNJ Inspired Bibliophile]

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sub_rosa wrote:

Collusion and price-fixing have been illegal for a long time.  It's why three of the five publishers that got sued decided to settle the case - because what they did was illegal.  It artifically inflated the price of ebooks to the detriment of consumers.  Antitrust Law 101.

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How do you know that?  I'll take the argument that the original e-book pricing of $9.99 was artificially deflated.  What is the "real" price of an e-book?  To my way of thinking it's what people are willing to pay.

[deesy58]

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AlanNJ wrote:

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sub_rosa wrote:

Collusion and price-fixing have been illegal for a long time.  It's why three of the five publishers that got sued decided to settle the case - because what they did was illegal.  It artifically inflated the price of ebooks to the detriment of consumers.  Antitrust Law 101.

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How do you know that?  I'll take the argument that the original e-book pricing of $9.99 was artificially deflated.  What is the "real" price of an e-book?  To my way of thinking it's what people are willing to pay.

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A little investigation into the difference between "cost" and "price" will reveal that "price" is always whatever someone is willing to pay for something.  In a Capitalist economy, there is no necessary relationship between cost and price, unless, that is, a firm continuously sells at prices below costs.  Then, they go out of business.