Much ado about Apple

Is the US Department of Justice making a fuss over nothing?

The perilous future of publishers was highlighted yet again by yesterday’s news that the US Department of Justice is suing Apple, Macmillan and Penguin for conspiring to fix the price of e-books.

The fuss centres on the move these companies have made on the agency model of selling, (where the publishers set the price of the e-book and the retailers take a 30 per cent cut); retailers, unsurprisingly, favour a model where they buy the e-book from the publisher at wholesale price and sell it for however much they want.

Such a model, it’s said, increases healthy competition between retailers which in turn leads to variety and greater customer choice. And according to papers filed in New York’s Southern District Court on Wednesday morning, the collusion of these publishing giants with the world’s most valuable firm (the lawsuit was launched the day after Apple’s worth surpassed $600bn), is a deeply unfair attempt to crush the freedom – and therefore prosperity – of e-book retailers who, after all, need to carve out a living for themselves too.

But this moral and legal outrage needs to be tempered a little. Two things to bear in mind: first, where is this diversity and healthy retail competition that the agency model – which is not illegal, incidentally – supposedly threatens? In every direction you turn, Amazon lurks, offering consumers e-books and books at prices that most other retailers – including high street giants such as Waterstone’s – cannot compete with. Indeed, an adoption of the agency model for e-books is essentially a digital return to the net book agreement, which publishers relinquished in 1997. Waterstone’s, supermarkets and Amazon must have been rubbing their hands with glee when that happened, as the three of them they went on to dominate the market, squashing smaller outlets in the process. What variety!

Second, though the agency model is legal, price fixing obviously is not. No doubt there will be a fair amount of legal hair-splitting over what exactly the publishing CEOs have been up to, but at the moment the circumstantial evidence is pretty thin on the ground.

The PDF document released by the DOJ reports that in late 2008, the Penguin Group and Macmillan CEOs, along with a few other heavyweights, had dinner together and ‘business matters’ were discussed. You’re kidding, right? They were at it again in January 2009, this time discussing the future of e-books and Amazon’s role in that future.

With their future looking increasingly treacherous, it’s no wonder publishing bosses have a lot to talk about at the moment. The agency model might be their only chance to survive in the cut throat world of e-book and book sales

Mark Nayler is a senior researcher at Spear's magazine.

Raising e-book prices: justified? Getty images.

Mark Nayler is a senior researcher at Spear's magazine.

Photo: Getty
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Forget planning for no deal. The government isn't really planning for Brexit at all

The British government is simply not in a position to handle life after the EU.

No deal is better than a bad deal? That phrase has essentially vanished from Theresa May’s lips since the loss of her parliamentary majority in June, but it lives on in the minds of her boosters in the commentariat and the most committed parts of the Brexit press. In fact, they have a new meme: criticising the civil service and ministers who backed a Remain vote for “not preparing” for a no deal Brexit.

Leaving without a deal would mean, among other things, dropping out of the Open Skies agreement which allows British aeroplanes to fly to the United States and European Union. It would lead very quickly to food shortages and also mean that radioactive isotopes, used among other things for cancer treatment, wouldn’t be able to cross into the UK anymore. “Planning for no deal” actually means “making a deal”.  (Where the Brexit elite may have a point is that the consequences of no deal are sufficiently disruptive on both sides that the British government shouldn’t  worry too much about the two-year time frame set out in Article 50, as both sides have too big an incentive to always agree to extra time. I don’t think this is likely for political reasons but there is a good economic case for it.)

For the most part, you can’t really plan for no deal. There are however some things the government could prepare for. They could, for instance, start hiring additional staff for customs checks and investing in a bigger IT system to be able to handle the increased volume of work that would need to take place at the British border. It would need to begin issuing compulsory purchases to build new customs posts at ports, particularly along the 300-mile stretch of the Irish border – where Northern Ireland, outside the European Union, would immediately have a hard border with the Republic of Ireland, which would remain inside the bloc. But as Newsnight’s Christopher Cook details, the government is doing none of these things.

Now, in a way, you might say that this is a good decision on the government’s part. Frankly, these measures would only be about as useful as doing your seatbelt up before driving off the Grand Canyon. Buying up land and properties along the Irish border has the potential to cause political headaches that neither the British nor Irish governments need. However, as Cook notes, much of the government’s negotiating strategy seems to be based around convincing the EU27 that the United Kingdom might actually walk away without a deal, so not making even these inadequate plans makes a mockery of their own strategy. 

But the frothing about preparing for “no deal” ignores a far bigger problem: the government isn’t really preparing for any deal, and certainly not the one envisaged in May’s Lancaster House speech, where she set out the terms of Britain’s Brexit negotiations, or in her letter to the EU27 triggering Article 50. Just to reiterate: the government’s proposal is that the United Kingdom will leave both the single market and the customs union. Its regulations will no longer be set or enforced by the European Court of Justice or related bodies.

That means that, when Britain leaves the EU, it will need, at a minimum: to beef up the number of staff, the quality of its computer systems and the amount of physical space given over to customs checks and other assorted border work. It will need to hire its own food and standards inspectors to travel the globe checking the quality of products exported to the United Kingdom. It will need to increase the size of its own regulatory bodies.

The Foreign Office is doing some good and important work on preparing Britain’s re-entry into the World Trade Organisation as a nation with its own set of tariffs. But across the government, the level of preparation is simply not where it should be.

And all that’s assuming that May gets exactly what she wants. It’s not that the government isn’t preparing for no deal, or isn’t preparing for a bad deal. It can’t even be said to be preparing for what it believes is a great deal. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.