DOJ Wraps Up Case Against Apple

AppleThe Department of Justice has wrapped up its case against Apple, complete with a 119-count slide deck. If you’re into that sort of thing, it’s worth a look.

By the way, although All Things D had the final Apple slide deck as well, it appears to be gone now. If someone can point me to it, please let me know. I’d like to take a look, for comparison purposes.

I’ve got no legal training, so I could only look at it from a layperson’s perspective, and mostly I thought they’d made a good case. There were several slides that particularly caught my eye, and I thought I’d share them here, along the reasons I found them interesting.

Here’s a comparison of prices, both before and after agency pricing. Pay particular attention to the Random House line. This chart covers the period of time before Random House joined agency pricing.

Prices at the publishers who adopted agency pricing went up and stayed up, while prices at the other publishers stayed stable or went down, including Random House.

Here are two slides discussing pricing vs. output. If agency pricing was so good for the industry, wouldn’t you expect to see output increase? Not so much, apparently.

Hmm. Raise prices and see a decrease in sales. Imagine that?

There was one slide that puzzled me, however. It seems to undermine some of the argument. Take a look at this one:

Note how Amazon is more expensive than Barnes & Noble. Maybe I’m not understanding what was being compared, but this slide bothers me for two reasons.

1. One of the arguments presented for agency pricing way back when was that Amazon consistently offered the lowest price on e-books, meaning that no one else could compete.

2. Whenever you talked to people who read e-books, pre-agency, they all complained that B&N was more expensive. My memory agrees. At the time, I was reading e-books on my iPhone, so I went where the price was lower. I own almost no Nook books, pre-agency. Only Amazon (or Fictionwise—sigh) books. Would anyone like to present a counter-view or some solid data?

Since I can’t find a copy of the Apple slide deck, I can’t do a comparison between the two, but overall it looks to me like the DOJ made a pretty good case. If someone with any legal training wants to tell me why I’m wrong, I’m open to listening.

Now on to the proposed penalties, as requested by the DOJ. They are straightforward:

Prohibit agency pricing for two years
Prohibit retail price most-favored nation clauses for five years
Prohibit Apple from further antitrust law violations
Prohibit Apple from retaliation or discrimination
Require Apple to have an antitrust compliance program
Require its executives have antitrust training
Requite an independent monitoring trustee
Allow third-party booksellers to reinstate hyperlinks

Obviously I haven’t been following this case closely enough, because I have no idea what the last one means.

The first one may bother me, depending on how it’s implemented. As an author, I like the concept of agency pricing (just not collusion). Remember way back in December of 2010, Smashwords started implementing agency pricing? From the post I linked to:

The move to agency also created conflict within the supply chain, and it created challenges for Smashwords authors too. Prior to the advent of agency, three our original retailers – Barnes & Noble, Sony and Kobo – were under the traditional wholesale retailer model. Previously, most Smashwords authors and publishers didn’t care that their books were discounted, because the discounting only helped sell more ebooks, which benefited authors, publishers and readers.

But then around July, Amazon increased their royalty rates for direct publishers to match the Apple 70%. For the authors who chose to work directly with Amazon, they had to agree that their books would not be sold elsewhere for less, and if Amazon discovered the book priced elsewhere for less, they had the right to discount the author’s book to price-match the competition.

This is when the proverbial fertilizer hit the fan for some Smashwords authors who publish direct with Amazon via DTP and then use Smashwords for all the non-Amazon retailers. I recall receiving one especially frantic email from a Smashwords author on disability retirement who was faced with the prospect of seeing his Amazon sales slashed due to discounting at our retailers.

I wasn’t yet self-published, but I was working on my first book when that change happened, and I was delighted. I’m concerned we’ll see those bad days again, depending on how Judge Cote decides and writes her decision.

Obviously, I look forward to the final judgement with interest.

4 Comments on DOJ Wraps Up Case Against Apple

  1. @Frank. Thanks. I’ll take a look in the morning, when my brain is back to functional.

  2. Juli, the pricing slide that shows B&N as being cheaper is correct. Amazon was consistently lower-priced on very select titles and people focused on those titles regardless of whether they were buying them. But in overall pricing, B&N was less expensive.

    The fallacy in the original statement that people made about B&N being more expensive is that they based the conclusion on the price of the one book that they were interested in and took no account of savings over the course of a year with the purchase of a variety of books. In addition, Amazon did (and continues to do) a wonderful PR job of proclaiming both lower price and greater variety. Personally, I have never found — for my reading preferences and for what I purchase — Amazon to either have a lower price (i.e., a spread greater than 10 cents) or greater variety, with just one exception, which was a specialty (very, very niche) book that had been published about 6 years ago and Amazon was the only store that still had stock of the book in new condition (2 copies).

    B&N’s real failure has been in its inability to garner good PR. It has done everything somewhat lackadaisically. Consider its customer service. There is no reason why it cannot match Amazon’s or come pretty darn close. But it doesn’t make the effort.

    Or, even more important, B&N has something that Amazon doesn’t, yet it has failed to exploit it: physical stores. If you buy a Nook at a B&N, there is a little sign that says there are Nook classes available at the store. If you don’t see the sign, you would never know that. B&N should have been advertising that if you buy a Nook, you can get hands-on help at your local store with any problem or even just how to make use of it — no need to try to do it over the telephone. Push that in-person customer service.

    Anyway, B&N should be doing much better but it has some of the poorest leadership of any business in Riggio and crew.

  3. @Richard. Thanks for your observations. It doesn’t match mine, but then obviously you and I were looking at different books. Agree that B&N should be doing much better.

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