Why Apple needs to settle its e-book suits

[[)roi(]]

In antitrust lawsuits filed by the U.S. Department of Justice and others, Apple stands accused of conspiring with five of the six largest U.S. book publishers to raise the price consumers paid for e-books and stifle competition in an attempt to snatch control of the e-book market away from Amazon, the sector's dominant player.

Soon after the Justice Department filed its complaint last month, Apple and two of the five publishers filed motions with a federal district court in New York to dismiss the case.

Last week, those requests were denied by U.S. District Judge Denise Cote. Cote's strongly worded 59-page decision offers several reasons for Apple to rethink its e-book strategy before Amazon pulls away again in the e-book market.

In other words, it's time for Apple to settle. It has so much to lose and very little left to gain by fighting the three complaints, brought by the Justice Department, attorneys general from 29 states, and a group of consumers who are requesting class action status.

This is likely a fight for Apple not worth having. In the complaints, Apple's partnerships with the publishers look in every way anticompetitive and anticonsumer. The case could drag on in the court for years, and even if Apple prevails, the e-book market will undoubtedly have evolved so that any Apple victory is likely to be moot.

Making that scenario more likely is that three of the five accused publishers have already settled: News Corp.'s HarperCollins Publishers, Lagardere SCA's Hachette Book Group, and Simon & Schuster (owned by CBS, which publishes CNET).

As part of the settlements, HarperCollins, Hachette, and Simon & Schuster have agreed to revoke Apple's "most favored nation" status, an agreement whereby each of the publisher defendants guaranteed that prices on hardcover new releases offered at the iBookstore matched the lowest price being offered anywhere else online. The three publishers who settled also agreed to allow e-book merchants to discount prices for at least two years.

That three of the five publisher defendants have settled not only lends credibility to the government's accusations, but it also means that while Apple is slugging it out in court, Amazon can go back to slashing prices, which the merchant has promised to do.

In the meantime, what does Apple have? Like Apple, Pearson's Penguin Group and Verlagsgruppe Georg von Holtzbrinck's Macmillan Publishers have denied wrongdoing and refused to settle. But the combined overall market share of those two companies is about 17 percent.

The last and perhaps best reason Apple should settle is that whether or not the government can make its case against the company, with every new document released in the proceeding, Apple looks more and more like an enemy of book buyers.....

http://news.cnet.com/8301-1023_3-57439543-93/why-apple-needs-to-settle-its-e-book-suits/

Apple it's time to settle and accept defeat.

 

[km2]

In other words, it's time for Apple to settle. It has so much to lose and very little left to gain by fighting the three complaints...

I'd say they've got every reason to try and fight it.

It's not like there's a real difference between buying a book from one store or another in terms of content, the only thing different stores have to compete on is price and convenience. Apple is notoriously poor at competing directly on price, but they're pretty damn good at convenience. So if they can take the ability to compete on price out of the picture that gives them a huge advantage.

And unlike Amazon, they can really leverage the lock-in provided from running their own bookstore. You buy your new iPad and decide you want to buy a new book. Since all the prices are the same you download the "recommended" way of reading books on the iPad, iBooks. Buy your first ebook book on there, and you're going to be way more likely to buy each of your subsequent ones in there as well since you're familiar with it and they're all in the same place.

Fast forward to two years when you decide to upgrade your device. Maybe there's a competing tablet out there that doesn't completely suck and you would otherwise change, but if you do you'd lose access to all your old books since there's no iBooks on any other platform. That's one hell of a reason to stay on iOS.

I'm glad though that they didn't put iBooks on the iPad as a pre-installed app. That would make it even easier for people to get accidentally trapped in the iBooks ecosystem.

 

[cerebus]

Apple's response.

The Government sides with monopoly, rather than competition, in bringing this case. The Government starts from the false premise that an eBooks “market” was characterized by “robust price competition” prior to Apple’s entry. This ignores a simple and incontrovertible fact: before 2010, there was no real competition, there was only Amazon. At the time Apple entered the market, Amazon sold nearly nine out of every ten eBooks, and its power over price and product selection was nearly absolute. Apple’s entry spurred tremendous growth in eBook titles, range and variety of offerings, sales, and improved quality of the eBook reading experience. This is evidence of a dynamic, competitive market. These inconvenient facts are ignored in the Complaint. Instead, the Government focuses on increased prices for a handful of titles. The Complaint does not allege that all eBook prices, or even most eBook prices, increased after Apple entered the market.

It seems that they are fighting the suit because they believe themselves to be in the right.

 

[km2]

It seems that they are fighting the suit because they believe themselves to be in the right.

There are sadly too few press releases that just come out and go "mwuhahaHAHAHA! YOU FOOLS WILL NEVER STOP US!" It would make things so much simpler.

 

[cerebus]

There are sadly too few press releases that just come out and go "mwuhahaHAHAHA! YOU FOOLS WILL NEVER STOP US!" It would make things so much simpler.

 

[Jola]

It seems that they are fighting the suit because they believe themselves to be in the right.

So do the US Government!

 

[cerebus]

So do the US Government!

I guess you have a point but I can't figure out what it is.

 

[Jola]

I guess you have a point but I can't figure out what it is.

The same could be said of your post.

The point is that three publishers, representing the major portion of the conspiracy, have already admitted guilt and settled with the US authorities.

It is likely that part of the settlement was the provision of information to the prosecution.

So the chances of Apple avoiding serious sanction are just about zero.

 

[cerebus]

I'm actually trying to find the specifics of this suit to determine its merits but all I can find is 'Apple denies etc etc'; does anyone have a link, or the particulars of what is actually being alleged? Beyond the fact that Apple is meant to have conspired with publishers to prevent Amazon from selling below their fixed pricing.

 

[MattyW]

I'm actually trying to find the specifics of this suit to determine its merits but all I can find is 'Apple denies etc etc'; does anyone have a link, or the particulars of what is actually being alleged? Beyond the fact that Apple is meant to have conspired with publishers to prevent Amazon from selling below their fixed pricing.

Here is a link to the Department of justice filling for the case...

Link: http://ia601206.us.archive.org/6/items/gov.uscourts.nysd.394628/gov.uscourts.nysd.394628.1.0.pdf

Here is an article on ars where the judge says there is ample evidence of a conspiracy

Link: http://arstechnica.com/apple/2012/0...hat-apple-knowingly-joined-e-book-conspiracy/

Here is a link to apple's response to the claims

Link: http://ia601206.us.archive.org/6/items/gov.uscourts.nysd.394628/gov.uscourts.nysd.394628.54.0.pdf

And if you want some perspective it's worth reading through the comments section of the article in this link, a lot of the posters make very good points...

Link: http://arstechnica.com/apple/2012/05/apple-says-doj-sides-with-monopoly-rather-than-competition/

I tend to agree with what some of the posters are saying in that even if amazon had a monopoly on e-books apple can't use that as an excuse to break the law themselves, the fact that apple has already settled in the EU and three of the publishers have settled in the states weighs heavily against them. I think apple doesn't want to settle in the states because that would open them up to far more damaging civil suits {the likes of which you only really ever see in america}.

 

[[)roi(]]

I'm actually trying to find the specifics of this suit to determine its merits but all I can find is 'Apple denies etc etc'; does anyone have a link, or the particulars of what is actually being alleged? Beyond the fact that Apple is meant to have conspired with publishers to prevent Amazon from selling below their fixed pricing.

http://www.bloomberg.com/news/2012-04-17/u-s-sues-apple-for-ebook-pricing-as-three-firms-settle.html

http://online.wsj.com/article/SB10001424052702304444604577337573054615152.html

http://www.reuters.com/article/2012/04/11/us-apple-ebooks-idUSBRE8391JW20120411

http://paidcontent.org/2012/05/14/e-book-class-action-new-details/

http://www.macnn.com/articles/12/05/23/echoes.pr.that.suit.is.fundamentally.flawed/

http://arstechnica.com/apple/2012/05/apple-says-doj-sides-with-monopoly-rather-than-competition/

The arstechnica article contains the source docs:

• Original DoJ complaint (PDF)
• Apple's response (PDF)