The US Department of Justice is out for blood from the big Apple. USDOJ is suing Apple, along with major publishers, for collusion of e-book pricing. The publishers included in the law suit include Penguin, HarperCollins, Simon and Schuster, and Hachette. The problem is that the model employed gives the power of price setting to the publishers, depriving the sellers of this right.
While three of them have settled, including Simon and Schuster, Hachette, and HarperCollins, the other three, including Apple, face charges of conspiring to rob sellers of their freedom in price setting. Attorney General Eric Holder claimed that the public was ripped off at the tune of millions of dollars on the most popular e-books.
The accusation is that the publisher defendants teamed up with Apple to put a stop to retailer competitive pricing. Apple officially refused to comment. Although Hachette claims there were no anti-trust laws violated, they joined the settlement. Granted, they claim they were reluctant to settle, but the fact remains that they did.
Macmillan revealed the fear that drove the collusion, namely Amazon’s supposed monopoly. However, even the European Commission has been snooping around the e-book price fixing issue. Apple, HarperCollins, Hachette, Simon and Schuster, and Macmillan are moving right away to quiet that riot. They have sent proposals to the EU Commission. This has pleased the EU Commission, who started the investigation in December last year.
The sales model for tangible books allows the publisher to determine a wholesale cost and the retailer to set the retail price. Although this was how e-books were priced, the model Apple would like to replace it with is called an agency model. Frankly, the agency model is a Communist idea of the late Steve Jobs, who also had strong Communist tendencies in his governance model for Apple. It is no exaggeration to label it this way, since the retailer is only allowed a flat 30%, depriving them of competition based pricing. In other words, as in the Soviet Communist system of work, no one is allowed to get richer than anyone else, except those controlling behind the scenes.
Some say it was an attempt to head off Amazon at the pass, stopping them form cornering the market with slashed prices. However, if the publishers would have lowered their wholesale prices and some of the retailers had wanted to compete with Amazon, then nothing could have stopped them. This is a lame excuse for instituting a Communist system on e-book retailers. Let them compete and survive or die.
Amazon’s motivation for cutting the prices of their e-books was to win some over to Kindle. Why can’t Apple offer their retailers discounts to offer their customers in a reverse fashion? Buy X number of e-books from my shop and receive a discount on your next iPad.
Jobs likened it to an aikido move. Apple has been, off and on, the most valuable company or at least the most valuable tech company. However, at what cost to the public and to the American Capitalist system? His system was to control all businesses involved in the Apple sphere, even if they were not part of Apple itself. The publisher cannot dictate to the retailer what price they will sell it for. There can only be a suggested retail price. In this case, the US Department of Justice is on the side of justice and the American people.