1 2 3 First Previous 33 Replies Latest reply on Apr 11, 2012 10:38 AM by Ya_Ya

    The DoJ thinks it has a case against the Agency model

    roustabout

      The wall street journal and Cnet are both reporting that the Agency pricing model is being actively pursued by the DoJ against Apple and the publishers who converted to the model in concert with one another. 

       

      http://online.wsj.com/article/SB10001424052970203961204577267831767489216.html

       

      http://news.cnet.com/8301-1023_3-57392980-93/apple-book-publishers-face-e-book-antitrust-lawsuit/

       

      The DoJ is in receipt of depositions asserting that Agency model makes for a more competitive market, despite the fact that ebook prices went up, not down, after it's introduction - and that one of the principals in the conversation laid that out as one of the goals. 

       

      Price rises  tend to be the result of a more cooperative - perhaps even collusive - market rather than a a competive one. 

       

      Particularly entertaining is Apple's response about delivering a captive audience via the iPad being helpful, despite the statement by Jobs to his biographer.

       

      When the WSJ is explaining what happened as it does in this article, it makes it understandable that at least some of publishers are looking to settle - the Journal has a dog, Harper Collins, in the fight, and still this is how the article outlines Apple's role.

       

      From the WSJ article: 

       

      As Apple prepared to introduce its first iPad, the late Steve Jobs, then its chief executive, suggested moving to an "agency model," under which the publishers would set the price of the book and Apple would take a 30% cut. Apple also stipulated that publishers couldn't let rival retailers sell the same book at a lower price.

       

      "We told the publishers, 'We'll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that's what you want anyway,'" Mr. Jobs was quoted as saying by his biographer, Walter Isaacson.

       

      The publishers were then able to impose the same model across the industry, Mr. Jobs told Mr. Isaacson. "They went to Amazon and said, 'You're going to sign an agency contract or we're not going to give you the books,' " Mr. Jobs said.

       

      The Justice Department believes that Apple and the publishers acted in concert to raise prices across the industry, and is prepared to sue them for violating federal antitrust laws, the people familiar with the matter said.

       

      - end of WSJ quote.-

        • 2. Re: The DoJ thinks it has a case against the Agency model

          Not necessarily a good thing. Remember, Amazon will be the one (and likely only) winner here. Mr. Bezos can and will use Amazon's tremendous piles of cash to sell e-books at a loss for as long as it takes to shut down every other source. Then, with one seller basically controlling the whole industry, it won't be pretty.

           

          Proprietary formats, control of what is and isn't sold, control of what prices authors can get for their works. The Agency model sounds evil, and may well be, but I'm not sure the alternative is all rainbows and unicorns.

          • 3. Re: The DoJ thinks it has a case against the Agency model
            bobstro

            Htom_Serveaux wrote:

            Not necessarily a good thing. Remember, Amazon will be the one (and likely only) winner here. Mr. Bezos can and will use Amazon's tremendous piles of cash to sell e-books at a loss for as long as it takes to shut down every other source. Then, with one seller basically controlling the whole industry, it won't be pretty.


            Won't that only be the case if the publisher makes an arrangement with Amazon? Sure, Amazon could sell at a loss, but don't the publishers have to agree to terms to start with? They can still guarantee their profits, though maybe not at the ridiculous pricing we have today.

             

            It seems to be that we'd be better off if B&N and other publishers earned customer loyalty by putting out a better set of products rather than being protected against competition by the government:

             

            1. Produce a better quality reader. Arguably, B&N's are already somewhat better, but there's LOTS of room for improvement. Make me want to use B&N because using their reader is the best experience. This means things like a functional shelving system, multi-device synchronization and backup. Make the NOOK bulletproof to use and hard to lose data on. Quit thinking of it as just a shovel to cram media down my throat.

             

            2. Produce better quality ebooks. As it stands today, there's not a hell of a lot of difference between an ebook from one source over another. Yet the epub standards are evolving. Use the enhanced capabilities of newer standards and make darned sure your reader supports it. This goes hand-in-hand with #1, above. Make reading B&N material best on a B&N reader.

             

            3. Produce enhanced "other stuff". B&N's got me hooked with their enhanced magazines (e.g. Wired), imperfect though they are. I like the subscription delivery system.

             

            4. Move to watermarking and away from DRM that makes it difficult to use my devices as I see fit. Make it clear to consumers that purchased content is identifiable with them, but don't artificially impose limitations on how consumers view content they have paid for.

             

            Finally, as a consumer, angst over these issues makes me very leery of buying a device from anybody BUT Amazon. I think B&N would be well served by opening up the Android Market and letting consumers choose what to run on their devices, including the Kindle app. Knowing that I can read anybody's ebooks on my device makes me more comfortable dropping the bucks on it. Yes, they will lose some of my purchases to Amazon, but they will keep the rest. The alternative is that I buy a Kindle, and B&N sees none of my purchases.

            • 4. Re: The DoJ thinks it has a case against the Agency model

              My normal bias is that business seeks to find ways to manipulate the market, often with questionable ethics. I do find it odd that Amazons tactic of selling below cost in pursuit of a near monopoly is not worthy of government interest, but agency pricing is? The propriety DRM process is part of this also. Why not link these issues? Amazon signs a consent decree and stops routinely selling books below cost and publishers end agency pricing. Watermarking or universal DRM is agreed to. Amazon, Apple, Google, BN can then compete in a proper market. Addressing agency pricing alone ignores the real issue. Differentiation in e books is dependent on authors. MP3 and music or blue ray and movies, are good comparisons. Film and music firms success depends on delivering the right artists. Find the right authors success follows. Proprietary formats, predatory pricing, agency pricing are all attempts to protect firms from the risk of failing to deliver competitive products and all should be addressed.

              • 5. Re: The DoJ thinks it has a case against the Agency model

                Another report, this one from the NY Times. Link courtesy of Farcry's post in the Community Room.

                 

                Interesting that there's no hint in any of the published reports that the settlement talks might include any provisions to mitigate predatory pricing on Amazon's part.

                 

                • 6. Re: The DoJ thinks it has a case against the Agency model

                  Bottom line it's a good thing because it will answer the question of whether or not laws have been broken, which is the only thing that at least the DoJ is and should be concerned about.

                  • 7. Re: The DoJ thinks it has a case against the Agency model

                    All I can say is that it's about time this happened.  Finally my tax dollars are being used on something that I agree with.  You should be able to sell something for whatever price you like, lower or higher than your competitors.

                     

                    There's no agency price model for selling DTBs, and that market hasn't shifted to totally Amazon.com.  Why don't you think the same thing would happen with eBooks?

                     

                     

                     

                     

                    • 8. Re: The DoJ thinks it has a case against the Agency model
                      keriflur

                      doncr wrote:

                      All I can say is that it's about time this happened.  Finally my tax dollars are being used on something that I agree with.  You should be able to sell something for whatever price you like, lower or higher than your competitors.

                       

                      There's no agency price model for selling DTBs, and that market hasn't shifted to totally Amazon.com.  Why don't you think the same thing would happen with eBooks?

                       


                      Amazon isn't selling DTBs at a loss.
                      **This is not to say that I don't agree with free market competition.  I do. I also believe that if the agency model is lifted, Amazon will do its best to drive out all competition by selling bestsellers at a loss, just like it used to do.  While free markets tend to work out the best for consumers, I'm not sure that will be what happens in this situation.
                      • 9. Re: The DoJ thinks it has a case against the Agency model
                        Doncr, gb, freedom is always tempered by fairness. If your acts unfairly damage another your freedom is subject to limits. If Amazon sells below cost in order to push other competitors out of the market this is not fair competition, the short term benefit to consumers does not justify damage to other firms. Of course it can cut the other way as well. The agency pricing models benefits to publishers and some retailers may not justify the harm to consumers and loss of freedom to other retailers. So the real issue is are the competing interests properly balanced. I often see posts about rights or freedom which fail to acknowledge the responsibilities and limitations as if the only issue is the lowest price or maximum freedom of choice for the consumer. There should be a bias towards those goals but there are real dangers if the pendulum swings to far in either direction.
                        • 10. Re: The DoJ thinks it has a case against the Agency model

                          Htom _Serveaux: Proprietary formats, control of what is and isn't sold, control of what prices authors can get for their works. The Agency model sounds evil, and may well be, but I'm not sure the alternative is all rainbows and unicorns.

                           

                          Totally agree.

                           

                          As for the original articles, I don't think the DOJ has stated that they definitely have a case, just that they're looking into it. There's an important difference there to keep in mind. 

                           

                          From the WSJ article: Government lawyers have questioned how competition could have increased when prices went up.

                           

                          Really? How about because it helped keep others in the arena. That increases competition; doesn't it? After all that's what the word means. (banging head against keyboard)

                          • 11. Re: The DoJ thinks it has a case against the Agency model
                            Omnigeek

                            Unfortunately, their public pronouncements like this settle nothing as their judgments have been so flawed in the past.  This is the same DoJ that basically swung a Senate seat in Alaska with prosecutorial misconduct so flawed they got lambasted by the federal judge, the same DoJ that saw no reason to prosecute the Black Panthers for intimidation at the voting booths despite having video coverage of them, the same DoJ that had no problems with Operation Fast and Furious until it broke out in the public and then decided to try to prosecute the gundealers that worked with them.

                             

                            Bottom line for me is that our economic system is designed to say sellers have the freedom to sell for what they want but suppliers have the freedom to cut off sellers they feel are undermining the overall value of the product.  The only possible exceptions are for "necessities of life" -- and much as I love reading, books (virtual or physical) don't fall into that category.  I argue that the DoJ has exceeded its jurisdiction under the Constitution many times in the past and this is no exception.

                            • 12. Re: The DoJ thinks it has a case against the Agency model

                              TnTexas wrote:

                              As for the original articles, I don't think the DOJ has stated that they definitely have a case, just that they're looking into it. There's an important difference there to keep in mind. 


                              It seems to me that by far the most important piece of this reporting is where it says that the parties have been discussing a settlement for months. The public announcement today may simply be a way for the DOJ to apply more pressure on one or more recalcitrant party. Government agencies have very big sticks to swing (i.e. fat wallets) in such situations. They can twist arms really hard in order to get the settlement terms they want. Defendants can be very reluctant to go to court, where anything can happen, especially when the prosecutor has a bottomless budget.

                              • 13. Re: The DoJ thinks it has a case against the Agency model

                                TnTexas, don't ever assume doj defines competiton in any way but lower sale prices. Author and consumer access and choice in a developing market are long term benefits, difficult to quantify. As such they are unlikely to aid in promotion or politicians being elected, and they appoint the bosses.

                                • 14. Re: The DoJ thinks it has a case against the Agency model
                                  Let me see if I understand this.....our brilliant government employees are going to take on Apple.....hummmm.....somehow it doesn't seem like a fair fight!!! :-)
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