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Texas investigating Apple, publishers over e-book pricing

updated 11:00 am EDT, Wed June 2, 2010

Texas AG thinks iBookstore pricing may be unfair

Texas' attorney general is investigating Apple and publishers for possible anti-competitive e-book pricing, multiple sources said on Wednesday [sub. required]. At least Hachette and HarperCollins have confirmed they were asked to provide documents, but Apple is also believed to be a target. The WSJ speculates that the investigation may have to do with Apple's preference for an agency model on the iBookstore, where publishers have control over the pricing.

The focus likely would be on the higher prices that have stemmed from Apple's approach, which has transferred to Amazon as publishers negotiate similar terms for the Kindle. Although some books for the iPad cost the same $10 as they have on the Kindle, many newer bestseller titles cost $13 to $15. Texas may be concerned that the rejection of the Kindle's wholesale model, where books carry a fixed pre-sales price, is artificially driving prices upwards.

It's not clear if the investigation, which hasn't yet resulted in formal accusations, will make progress. Amazon when it has used the wholesale model has often deliberately sold books at a loss, paying as much as $15 for a book but selling it below cost to boost market share. The Agency approach reduces the amount publishers can charge but lets them set prices closer to the originally targeted value and creates the perception that the books are worth more.

The investigation is separate from any federal-level investigation but would be part of a possible all-out investigation of Apple's behavior in media, which may now include videos and apps in addition to music. Officials are rumored worried that Apple is strongarming labels and studios into denying exclusives to others and otherwise negotiating terms most favorable to its own commanding share of downloadable media.

Neither Apple nor the Texas attorney general's office have commented on the subject.


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By Electronista Staff
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Comments

  1. rvhernandez

    Fresh-Faced Recruit

    Joined: Apr 2005

    +7

    Investigate Amazon

    It's Amazon that was "strong-arming" publishers and selling books at a loss to deter competition.

  1. hayesk

    Professional Poster

    Joined: Sep 1999

    +6

    Huh?

    How is allowing the publisher to set their prices anti-competitive. Isn't that how the free market system works?

    If there's collusion between publishers, then that's a different story.

  1. iphonerulez

    Dedicated MacNNer

    Joined: Nov 2008

    +7

    Doesn't this stuff happen all the time

    in the home heating fuel prices and automobile gasoline industry? How come they don't investigate those energy supply companies?

    Why is everything that Apple is doing being investigated by the Feds even though Apple doesn't have very much market share.

  1. Jonathan-Tanya

    Fresh-Faced Recruit

    Joined: Oct 2004

    +3

    just an investigation

    the investigation is coming from an unexpected dramatic increase in e-book pricing. That's the type of thing that should start an investigation - however, that doesn't mean it will always come to the conclusion that something illegal occurred. Sometimes dramatic increases just occur - though for the most part, its usually market manipulation.

    Piracy hasn't been much of a problem in the e-book space, but it looks like publishers are intent on creating a piracy problem.

    But I digress...

    It's just an investigation, I seriously doubt there will be a problem with the agency model in general.
    It's not anti-competitive, in my opinion.



  1. eddd

    Fresh-Faced Recruit

    Joined: Dec 2001

    +3

    This is ridiculous

    This is exactly what competition is all about... competition in the eBook market in this case. Two sellers (Apple and Amazon) have two approaches, and the market will decide. Of course, the market includes the supply side, so publishers also have a choice. They didn't when Amazon was the only game in town. And publishers have the right to withhold their goods from any reseller if the terms aren't agreeable. A free market can result in higher prices if the value is there... the customer will decide.

    This should be welcomed, not scrutinized. The Amazon model was artificial and unsustainable (prices would need to rise eventually), and was created to build a monopoly. If customers are willing, more money entering a market should result in better products, with more and better choices. It's better for everyone, including the customers.

    Texas... brother. Someone should investigate their legal system, which seems to attract these kinds of nuisance suits.

  1. elroth

    Junior Member

    Joined: Jul 2006

    -2

    wait

    It's a funny point being argued. There's a law that manufacturers cannot require retailers to sell for full retail price - the discount stores had to go to court some years back to clarify that.

    But I don't see how Apple's plan violates that, except that it gave leverage to publishers to force Amazon to sell at the publishers' prices.

    Another complication is that the publishers possibly only agreed to be in the iBookstore if Apple met their price demands. And apparently the agreement on price is a short-term agreement (1 or 2 years, I believe).

    It's not really as simple as it may seem.

  1. testudo

    Forum Regular

    Joined: Aug 2001

    -2

    investigation

    Investigate Amazon
    It's Amazon that was "strong-arming" publishers and selling books at a loss to deter competition.


    Who says they aren't? In this or another investigation?

    Why is everything that Apple is doing being investigated by the Feds even though Apple doesn't have very much market share.

    Why is it that anytime that someone wants to look at Apple, people here feel like they're being singled out? Do you all really think the entire world is out to get Apple?

    And in case you missed it, Texas is a state (or, as Texans would say, The State). It is not the 'Feds' who are investigating.

    Texas... brother. Someone should investigate their legal system, which seems to attract these kinds of nuisance suits.


    Nuisance suits? It isn't a suit. It's an investigation. And it's being looked into by the state, not some patent-troll out in west texas looking for some easy cash.

  1. Foe Hammer

    Fresh-Faced Recruit

    Joined: Feb 2005

    -1

    Everything's Bigger In Texas

    Especially the nuisance investigating imbeciles. Oops! I mean THE nuisance investigating imbeciles.

  1. CmdrGampu

    Fresh-Faced Recruit

    Joined: Aug 2009

    -1

    Texas has a lot more to worry about...

    than the price of textbooks. Given the moronic, far right-wing, pro-religion curriculum their board of education recently passed, their textbooks won't be worth the paper they're printed on, or in this case the flash cells they're stored in.

  1. testudo

    Forum Regular

    Joined: Aug 2001

    -1

    more of the same....

    How is allowing the publisher to set their prices anti-competitive. Isn't that how the free market system works?


    Well, if the publisher is colluding with the seller to force competitors into changes or out of business, it could be argued.

    This is exactly what competition is all about... competition in the eBook market in this case. Two sellers (Apple and Amazon) have two approaches, and the market will decide.

    It's the hypocritical "Whatever Apple does is the correct way for this market".

    So, tell me please. Why was Apple on the side of 'competition' and the customer when they, for so long, resisted raising prices on the iTMS? Every time it was brought up, all we heard was that it was just a money grab and the labels being greedy and music should be free and so on and so on.

    When the labels allow Amazon to sell DRM-free music, we're told they're just trying to 'break' Apple. Nothing about how they are 'free' to sell through who they want and letting markets decide.

    But now Apple sells books the way the publisher actually wants, and it's now what 'competition' is all about.

    But I'm sure you all have great 'reasons' why the book area is completely different...

    The Amazon model was artificial and unsustainable (prices would need to rise eventually), and was created to build a monopoly.

    A monopoly for what? For readers? Or for books?

    And the iTunes model of 99 cents a song was artificial too. And it was all built to push Apple's iPod, in turn to gain Apple a monopoly.

    Of course, the market includes the supply side, so publishers also have a choice. They didn't when Amazon was the only game in town.

    Amazon was never the only game in town. You people make it seem like the Kindle was the first ever eReader. It was not. Amazon was one of many eReaders with their own bookstores.



    It's just an investigation, I seriously doubt there will be a problem with the agency model in general.
    It's not anti-competitive, in my opinion.



    Well, IIRC, you've actually written books, and, as such, I would take your opinion on this more than the average "How dare they look at Apple!" poster.

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