Why Apple and Five of the Big Six Are Really in Trouble

In law school, I had a fabulous criminal law professor. Prof. Ota had a unique talent for explaining the most bizarre concepts of law in plain English. A lot of folks are up in arms over the Department of Justice's lawsuit against Apple and five of the six largest publishing companies in the U.S., so I'm going to try to emulate her style of simplicity.

The elements of a criminal conspiracy consists of:

1) The intent of two or more persons to commit a crime together

2) An agreement between the persons to engage in the crime to be performed

3) An overt act by any one of the parties to the agreement to perform the agreed crime

The Sherman Anti-trust Act of 1890 (15 U.S.C.A Section 1 et seq.) specifically forbids ANY two or more persons or companies from agreeing to a set market price, i.e. price fixing. Self-defense from another competitor is NOT a defense to charge of price fixing.

Here's the problems for the six defendants: Performing #2 or #3 above can be used to show their intent, i.e. #1.

They've boasted quite a bit about how they're going to take down Amazon. They've all but admitted in their press statements that they agreed to set their prices above Amazon's $9.99 price point in order to increase their income. The prices for products of five of the conspirators were raised nearly simultaneously. In these same statements, they've said that even if they're guilty of price fixing, Amazon's market share justifies their illegal acts, plus prices actually fell.

Seriously, guys?

Have many of you out there have been stopped for speeding? Of those who have, how many of you have given an excuse, like you're late for work, etc? How often has the cop who stopped you let you off for whatever excuse you gave him or her?

And guess what, Defendant Publishers? A lot of indies, including me, took advantage of your naivete by undercutting your high prices.

This is my point. Breaking the law is breaking the law. It doesn't matter what justification is given. And in the end, Karma, the Golden Rule, the Threefold Law or whatever you want to call it will bite your ass.

As for the folks who claim the DOJ should be going after Amazon, then please show me exactly what law they broke. Like I've told lots of clients over the years over the years, it's not illegal for someone to be a jerk.

Uncle Sam Says 'No!' to Agency Pricing

According to the Wall Street Journal, the U.S. Justice Department is planning to file suit against Apple, Inc., and five of the biggest publishing companies in the U.S. for price collusion. In the meantime, the European Union is still conducting its own investigation into the matter.

Go read the article. I'll wait . . .

As a consumer, I like getting as much for my money as I can. But when I go shopping for a birthday present for  DH and I'm paying less for a hardcover from his favorite author than I would for an e-book, something's definitely wrong with the system and I'm pissed..

As an indie publisher, I LOVE the agency model for two reasons:

1) I can undercut the big publishers because I have much lower overhead.

2) I want to be able to set my own prices.

The problem here is that Apple and the five accused publishers pretty much admitted in the Wall Street Journal prior to Steve Jobs's death that they agreed to their agency model arrangement to stop the Godzilla known as Amazon. (Please note: The article I originally linked to last March has been removed. This link is to a cached page of the article, and I cannot guarantee this link will be active after today.)

Right now, everyone's bemoaning Bob Mayer's prediction that e-book royalty/splits will go up. This isn't my biggest worry.

My biggest worry is that this lawsuit (or settlement if the execs at the accused companies have a clue) will eliminate agency pricing, and all of the e-book retailers will start a price war that puts us indies out of business.