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.

Getty
Show Hide image

Battle of the banners: how the disputes of football took to the skies

Across the top of the screen floated a banner, pulled by a little aeroplane: IN ARSENE WE TRUST.

Last weekend, during the West Brom-Arsenal game, I began to think my hearing was playing up again. I’ve been given hearing aids but don’t wear them. No, not vanity, it’s just a faff to put the things in and the quality of my life, which is excellent, is not being impaired. Anyway, as I live on my own, if the sound on the telly is too low, I put it up. No one knows or cares.

When I’m out entertaining lady friends at my local bistro, I always get a quiet table in the corner and sit facing them, all rapt attention, totally focused on them, so they think. It’s really just to help my hearing.

On the TV screen, I suddenly heard an aeroplane, which was weird, as there was no sign of it, but then hearing problems are weird. Children talking sounds deafening. Some consonants disappear. Could it be a helicopter on the Heath, taking some injured person to the Royal Free? At our Lakeland house, I often heard helicopters: the mountain rescue team, picking up someone who had collapsed on Grasmoor. So I do know what they sound like. But this sounded like Biggles.

Then across the top of the screen floated a banner, pulled by a little aeroplane: IN ARSENE WE TRUST. The score at the time was 1-1, Arsenal having just equalised. They eventually got beaten 3-1. Oh, the shame and irony.

Apparently, earlier in the game, according to newspaper reports the next day, there had been an anti-Wenger aeroplane banner: NO CONTRACT, WENGER OUT. I didn’t see it – or Sky TV didn’t show it.

Where do the fans or supporter groups get all the money? And how do they organise it? There is a theory that IN ARSENE WE TRUST was paid for by Arsène himself. Another, more amusing theory is that it was a group of Spurs supporters, desperate for Arsène to stay on at Arsenal and continue getting stuffed.

There have been a few similar aeroplane banners at football matches in recent years. There was one at Newcastle, when they were playing Sunderland, which read 5 IN A ROW 5UNDERLAND. Sunderland won, so it came true. Sent the Geordie fans potty.

Everton fans flew one in 2015 which read KENWRIGHT & CO TIME TO GO. He is still chairman, so it didn’t work.

Millwall fans did an awfully complicated one in 2011 at Wigan, during the Wigan-West Ham game, which resulted in West Ham going down. They hired a plane to fly overhead with the banner AVRAM GRANT – MILLWALL LEGEND. Now you have to know that Grant was the West Ham manager and Millwall are their rivals. And that they couldn’t fly it at West Ham itself, which could have caused most fury to West Ham fans. There’s a no-fly zone in London, which stops rival fans hiring planes to take the piss out of Chelsea, Arsenal and West Ham. The Millwall supporters who organised it later revealed that it had only cost them £650. Quite cheap, for a good laugh.

There’s presumably some light aeroplane firm that specialises in flying banners over football grounds.

I do remember a few years ago, at White Hart Lane and Highbury, walking to the grounds and looking out for blimps flying overhead – small, balloon-like airships mainly used for promotional purposes, such as Goodyear tyres or Sky’s aerial camera. The results were pretty useless, showing little. I haven’t seen any recently, so presumably blimps aren’t allowed over central London either.

I am surprised drones have not been used, illegally, of course, to display obscene messages during games. They could drag a few pithy words while on the way to drop drugs at Pentonville Prison.

The history of aeroplane advertising goes back a long way. Before the Second World War, Littlewoods and Vernons football pools were fighting it out for dominance, just as the online betting firms are doing today. In 1935, Littlewoods sent planes over London pulling banners that proclaimed LITTLEWOODS ABOVE ALL. Jolly witty, huh. 

Hunter Davies is a journalist, broadcaster and profilic author perhaps best known for writing about the Beatles. He is an ardent Tottenham fan and writes a regular column on football for the New Statesman.

This article first appeared in the 23 March 2017 issue of the New Statesman, Trump's permanent revolution