Is Apple price-fixing? Does it matter?

The United States DoJ is investigating Apple and five major publishers for collusion.

Earlier this month, the Wall Street Journal reported that the United States Department of Justice was investigating Apple and the "big five" publishers (HarperCollins, Hachette, Macmillan, Penguin, and Simon & Schuster) for collusion to fix ebook prices.

At stake is the agency pricing model, where publishers have the power to set their own prices on ebook retailers; this is in contrast to the pricing model dominant in the industry before Apple's entrance, where retailers (at the time largely synonymous with Amazon, which held 80-90 per cent of the ebook market) were free to set their own prices while guaranteeing a certain cut to the publishers.

The concern of the Department of Justice seems to be that all the major publishers used the entry of Apple into the market to force Amazon to adopt the agency model, and then, it is alleged, all made the most of their newfound freedom over pricing to raise the prices of their ebooks.

Evidence on the issue is scarce, and some of the publishers have reportedly moved to settle already; but today, some new figures came to light which may strengthen their case.

The publisher Smashwords, which acts as an umbrella body for self-published authors looking to get their books on to digital storefronts, has released the data it submitted to the DoJ in the investigation. It shows that, all else being equal, the competition afforded by agency pricing seems to lower prices across the board:

In plain English, the average prices have dropped 25% from $4.55 in October 2010 to $3.41 today...

The $3.41 is a really interesting number, for a couple reasons:

1) It shows that authors and publishers, left to their own free will, are pricing their books lower in this highly competitive market. Sure, they could all try to fleece customers by pricing their books at $29.99, but customers won't let them.

2) $3.41 is remarkably close to the average price paid for Smashwords books purchased at Barnes & Noble during the last 30 days. The B&N number: $3.16. I looked at every Smashwords book sold at Barnes & Noble between February 28 and March 27, then calculated the average price. This means Smashwords authors are pricing their books close to what customers want to pay. The median price (represents the midpoint, where an equal number of books sold at lower prices and and equal number sold at higher prices) was $2.99.

But proving that agency pricing doesn't lead to artificially inflated price tags may not be enough to save the publishers and Apple from a lawsuit. Tim Carmody reports for Wired that the issues for the DoJ are "bigger than rising e-book prices or even collusion between publishers":

"Plenty of business practices raise prices that aren’t antitrust violations," says Donald Knebel, an IP and antitrust attorney affiliated with the Center for Intellectual Property Research. "Agency pricing is perfectly legal. But something isn’t an agency relationship just because you call it that."

Knebel says there are three major points of law at stake in both the class-action suit and the Justice Department investigation against Apple and the five publishers:

  1. Whether and how the agency model applies to virtual goods;
  2. Whether Apple and publishers engaged in a “hub-and-spoke” conspiracy or simply “conscious parallelism”;
  3. The status of the “most-favored nation” clause, common to many legal contracts today, which Apple used to ensure that books could not be sold elsewhere at a lower price than in the iBooks store.

The case is nowhere close to conclusion, but whatever the outcome, it will reverberate throughout the industry. In tech, it remains the case that where America goes, the rest of the world follows.

A Kindle is tested in Amazon France. Credit: Getty

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Harmful gender stereotypes in ads have real impact – so we're challenging them

The ASA must make sure future generations don't recoil at our commercials.

July’s been quite the month for gender in the news. From Jodie Whittaker’s casting in Doctor Who, to trains “so simple even women can drive them”, to how much the Beeb pays its female talent, gender issues have dominated. 

You might think it was an appropriate time for the Advertising Standards Authority (ASA) to launch our own contribution to the debate, Depictions, Perceptions and Harm: a report on gender stereotypes in advertising, the result of more than a year’s careful scrutiny of the evidence base.

Our report makes the case that, while most ads (and the businesses behind them) are getting it right when it comes to avoiding damaging gender stereotypes, the evidence suggests that some could do with reigning it in a little. Specifically, it argues that some ads can contribute to real world harms in the way they portray gender roles and characteristics.

We’re not talking here about ads that show a woman doing the cleaning or a man the DIY. It would be most odd if advertisers couldn’t depict a woman doing the family shop or a man mowing the lawn. Ads cannot be divorced from reality.

What we’re talking about is ads that go significantly further by, for example, suggesting through their content and context that it’s a mum’s sole duty to tidy up after her family, who’ve just trashed the house. Or that an activity or career is inappropriate for a girl because it’s the preserve of men. Or that boys are not “proper” boys if they’re not strong and stoical. Or that men are hopeless at simple parental or household tasks because they’re, well...men.

Advertising is only a small contributor to gender stereotyping, but a contributor it is. And there’s ever greater recognition of the harms that can result from gender stereotyping. Put simply, gender stereotypes can lead us to have a narrower sense of ourselves – how we can behave, who we can be, the opportunities we can take, the decisions we can make. And they can lead other people to have a narrower sense of us too. 

That can affect individuals, whatever their gender. It can affect the economy: we have a shortage of engineers in this country, in part, says the UK’s National Academy of Engineering, because many women don’t see it as a career for them. And it can affect our society as a whole.

Many businesses get this already. A few weeks ago, UN Women and Unilever announced the global launch of Unstereotype Alliance, with some of the world’s biggest companies, including Proctor & Gamble, Mars, Diageo, Facebook and Google signing up. Advertising agencies like JWT and UM have very recently published their own research, further shining the spotlight on gender stereotyping in advertising. 

At the ASA, we see our UK work as a complement to an increasingly global response to the issue. And we’re doing it with broad support from the UK advertising industry: the Committees of Advertising Practice (CAP) – the industry bodies which author the UK Advertising Codes that we administer – have been very closely involved in our work and will now flesh out the standards we need to help advertisers stay on the right side of the line.

Needless to say, our report has attracted a fair amount of comment. And commentators have made some interesting and important arguments. Take my “ads cannot be divorced from reality” point above. Clearly we – the UK advertising regulator - must take into account the way things are, but what should we do if, for example, an ad is reflecting a part of society as it is now, but that part is not fair and equal? 

The ad might simply be mirroring the way things are, but at a time when many people in our society, including through public policy and equality laws, are trying to mould it into something different. If we reign in the more extreme examples, are we being social engineers? Or are we simply taking a small step in redressing the imbalance in a society where the drip, drip, drip of gender stereotyping over many years has, itself, been social engineering. And social engineering which, ironically, has left us with too few engineers.

Read more: Why new rules on gender stereotyping in ads benefit men, too

The report gave news outlets a chance to run plenty of well-known ads from yesteryear. Fairy Liquid, Shake 'n' Vac and some real “even a woman can open it”-type horrors from decades ago. For some, that was an opportunity to make the point that ads really were sexist back then, but everything’s fine on the gender stereotyping front today. That argument shows a real lack of imagination. 

History has not stopped. If we’re looking back at ads of 50 years ago and marvelling at how we thought they were OK back then, despite knowing they were products of their time, won’t our children and grandchildren be doing exactly the same thing in 50 years’ time? What “norms” now will seem antiquated and unpleasant in the future? We think the evidence points to some portrayals of gender roles and characteristics being precisely such norms, excused by some today on the basis that that’s just the way it is.

Our report signals that change is coming. CAP will now work on the standards so we can pin down the rules and official guidance. We don’t want to catch advertisers out, so we and CAP will work hard to provide as much advice and training as we can, so they can get their ads right in the first place. And from next year, we at the ASA will make sure those standards are followed, taking care that our regulation is balanced and wholly respectful of the public’s desire to continue to see creative ads that are relevant, entertaining and informative. 

You won’t see a sea-change in the ads that appear, but we hope to smooth some of the rougher edges. This is a small but important step in making sure modern society is better represented in ads.

Guy Parker is CEO of the ASA