Home » Amazon, Apple, Big Publishing » Publishers Escape Liability in E-Book Antitrust Case

Publishers Escape Liability in E-Book Antitrust Case

10 September 2017

From FindLaw:

A federal appeals court said book publishers violated antitrust laws by conspiring to change prices for ebooks, but they did not injure the retailers who sued them over it.

In Diesel eBooks v. Simon & Schuster, the U.S. Second Circuit Court of Appeals said the retailers could not prove by the publishers caused their losses. The decision also spared further embarrassment for Apple, which was forced to pay a record fine in a related matter.

“We have ruled that the publisher Defendants and Apple did indeed conspire
unlawfully to restrain trade in violation of the Sherman Act,” the judges said, referencing
United States v. Apple. However, the court said the conspiracy did not cause the plaintiffs any damage in this case.

. . . .

In the ebook infancy, the industry operated largely on a wholesale business model. Publishers would sell ebooks to retailers with a suggested price, but the retailers set the final price.

The major publishers unilaterally changed the model, however, requiring retailers to sell at the publisher’s price. The publisher then paid the e-tailer commissions for sales.

In the wake of the change, Diesel went out of business.

. . . .

The appeals court had already heard the story, when the federal government and 33 states sued Apple and six major publishers. The trial court found they violated the Sherman Act.

“Through their conspiracy they forced Amazon (and other resellers) to relinquish retail pricing authority and then they raised retail e-book prices,” U.S. District Judge Denise Cote wrote at the time. “Those higher prices were not the result of regular market forces but of a scheme in which Apple was a full participant.”

Link to the rest at FindLaw

Amazon, Apple, Big Publishing

6 Comments to “Publishers Escape Liability in E-Book Antitrust Case”

  1. Having never heard of them, I’m guessing Diesel wasn’t much of a going concern when this hit and might have died even if the qig5 hadn’t moved to the agency games?

    Not that agency has helped the qig5 – unless their plan was to Titanic themselves in the first place by ramming that big block of ice named after a ‘little’ river …

    • That would be incorrect.

      Diesel, BooksonBoard, and Fictionwise were significant ebook sellers in the 2008-2009 time period. All three were growing with the market, selling both Indie and Tradpub content. All relied on a variety of discount programs that allowed them to match or undercut Amazon on specific titles. Which is to say, they did business much like Amazon and Sony. They were prominent among interoperable epub buyers.

      However, when the Agency conspiracy hit, their contracts with the BPHs were terminated because the terms with Apple required everybody move to agency. (Hence the restraint of trade ruling.) They then had to negotiate new contracts which the BPHs handled as fast as molasses, leaving them without access to any BPH titles. It also gutted their business model, leaving them to sell the same books as the walled gardens at the same prices as the walled gardens but without hardware devices tied to their stores. They managed to stay afloat off the strength of Indie sales but it was bare subsistence in an otherwise growing market. So they went from measurable market share to oblivion.

      Note that the court found that they were injured but there was no way to quantify the damage, most likely because the market was booming at the time and there was no way to guess what their sales would’ve been.

      There were plenty of other ebookstores that were counting on the ADEPT interoperable epub “standard” to prevail. Instead, the conspiracy killed interoperable epub as a market force and delivered the market to the walled gardens.

      • Here’s an example of what the market was like in 2008-2010:

        https://www.mobileread.com/forums/showthread.php?t=58328

        Note that Shortcovers was Kobo’s original name.

        Everybody competed on price in those days, not just Amazon.

        • Thank you for the corrections. I wasn’t trying (or even thinking about) this self-pub thingy nor was I actively hunting ebooks ‘way back then’, so I missed them and many others it seems.

          So, by going agency the qig5 hurt all/most of the others while Amazon was in the best position to weather the storm. (Tell me again how much trad-pub hates Amazon – it’s almost like they’re trying at every turn to force Amazon to beat them!)

          • Yup.
            They actually destroyed the one approach that stood a chance of countering Amazon. It wasn’t a sure thing but it was having an impact: at the time Agency fully took effect Kindle market share was at 54%. It has never been that low since.

            By removing price competition and favoring walled-gardens they “simplified” the decision tree for ebook adopters. The choice of an ecosystem came down to interoperable epub compatibility vs ebookstore catalog size and usability. And this happened at a time when Amazon ereaders had the unquestioned best screen technology (Pearl eink screens were a near-exclusive for Kindle) at the best price as well as the largest ebookstore.

            Agency = silver platter.
            Not only illegal but galactically stupid.

            • Sony deserves honorable mention. Their reader debuted about six months before the Kindle, and it was much better built than the original Kindle.

              But, they decided it didn’t need wireless download. There were strong Sony advocates for a wireless capability, but they lost the battle. So, Sony put out a side load device, and then Amazon came along with a magic device. Consumers noticed.

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