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E-Book Pricing – Apple, Amazon, the Courts, and You

E-Book Pricing: Apple, Amazon, and the Courts

E-Book Pricing: Apple, Amazon, the Courts, and You

 July 1, 2015 New Post Goes Up Every Wednesday

E-Book publishers have not developed any new technology, in a long, long time, “E- BOOKS – IS THE E-BOOK DEAD, OR JUST ASLEEP?” Instead they are still mired in disputes about pricing, and Price Fixing. Here’s the latest.

Court Ruling: Apple Conspired with e-book Publishers

7/30/15 From: CNET by Shara Tibken contributed to this report.

“The 2nd US Circuit Court of Appeals ruled in a 2-1 vote on Tuesday that Apple conspired with five major book publishers to fix pricing on e-books to establish itself in the space and damage Amazon’s standing in the marketplace.Reuters was among the first to report the news, earlier Tuesday. The judges said Apple violated antitrust law by working with the book publishers to set new pricing terms. The loss means Apple must now pay $450 million as part of an earlier settlement agreement: $400 million to consumers and $50 million in attorneys’ fees to plaintiffs’ counsel. Apple was quick to criticize the ruling.”

The e-book Market

“The e-book market has ushered in a new yet controversial era in the world of book publishing. Publishers were initially suspect of delivering digital books to e-readers, like Amazon’s Kindle, for fear of e-book sales cutting into profits on traditional printed books. The Apple case also illustrated their concern with e-book pricing models.”

“Over the last few years, however, publishers — happily or not — have embraced e-bookstores, including Apple’s iBookstore and Amazon’s Kindle marketplace. Apple’s store currently has over 2.5 million e-books available, while Amazon’s store has more than 3 million.”

The “Agency Model” Pricing

“The new ruling is the latest in a string of setbacks over the past several years as Apple has tried unsuccessfully to argue that it did not act inappropriately by partnering with book publishers through its iBooks e-book platform.”

“In an attempt to improve its position in the e-books market with its own iBooks in 2010, Apple offered a contract that allowed publishers to determine the price of e-books. The pricing system, called the “agency model,” meant prices would go up and publishers would in turn make more from the sale of each title.”

“Amazon, its top competitor at the time, was using a traditional pricing model that allowed the e-retail giant to offer a sales price on e-books. While the revenue was lower per sale, Amazon argued that it followed traditional pricing on regular books, which gave retailers latitude to offer pricing on their own terms to follow demand.”

Price Fixing Law Suits

“Apple and major book publishers were rolled into lawsuits across the US, including one from the US Department of Justice, filed in 2012. The European Union also launched an investigation into the matter, arguing that the agency model could be in violation of competition law. But the EU promptly closed its inquiry after the parties settled.”

In a series of statements and e-mails revealed during the DOJ case, Apple co-founder and then-CEO Steve Jobs told one publisher in 2010 that the publisher could benefit by joining Apple to ‘see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99.’ At the time, Amazon had kept most e-book prices to $9.99.”

As the lengthy investigation wore on, the major book publishers accused of collusion with Apple in the DOJ case settled out of court for their alleged involvement in the agency model pricing. Apple continued to argue that it was innocent, but last year it agreed to a settlement with the Justice Department after a federal judge ruled, in 2013, that the company had violated antitrust laws.

Amazon Pricing Under Investigation by the EU

“Amazon is now in its own legal trouble over e-books. Earlier this month, the EU’s competition watchdog, the European Commission, launched a formal investigation into Amazon’s deals with e-book publishers. The European Commission said it’s particularly interested in determining whether Amazon’s contracts with the publishers violate competition rules by requiring the e-book publishers to disclose to Amazon more favorable terms in deals they may have signed with competitors, like Apple.”

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