> From my perspective Apple looked at the market (Amazon), realised their pricing wasn't sustainable, and agreed to a more sustainable model with publishers.
Working something out with all the big publishers is pretty much the definition of an illegal cartel.
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
This is classic, slam dunk antitrust, no need to spin elaborate economic theories, just prove to the court's satisfaction that consumers were harmed by an overt conspiracy to raise prices.
If Amazon was selling $12 wholesale ebooks at a loss of $2 a piece for a retail price of $9.99, it seems Apple would also have to sell them at a loss, to prevent book prices from increasing. Even if Apple had sold them at cost, with 0% margin, prices would have inescapably gone up, anyway. It seems that this standard for antitrust is reliant upon predominant pricing already being sustainable.
Well, no. The point was that Amazon was willing to make the investment (the loss per sale) to increase the market for eBooks (and its share of said market), but Apple was not. Apple never even tried to compete at the retail model, and instead attempted from the beginning to impose the agency model.
Important here is that the agency model would only have gone into effect if the publishers jointly succeeded in changing their Amazon contracts. They were able to do so because their joint Apple negotiations geave them the leverage to jointly renegotiate their Amazon contracts.
Joint negotiations aren't always an antitrust issue. But when the result is to increase prices or otherwise burden the market, it's usually (as here) indicative of antitrust activity.
Wow. Did Apple dictate that publishers change their Amazon contracts? If so, then I completely agree, Apple is clearly in the wrong. However, this is the first I've heard this. Can you lead me to supporting evidence?
The agreements also included a price parity provision, or Most-Favored-Nation clause (“MFN”), which not only protected Apple by guaranteeing it could match the lowest retail price listed on any competitor’s e-bookstore, but also imposed a severe financial penalty upon the Publisher Defendants if they did not force Amazon and other retailers similarly to change their business models and cede control over e-book pricing to the Publishers. As Apple made clear to the Publishers, “There is no one outside of us that can do this for you. If we miss this opportunity, it will likely never come again.”
Welp, I just spent an embarrassingly long while reading the 160 pages of the findings. I'm now of the opinion that Apple is probably guilty of antitrust violation. Judge Cote admits (on page 157) there's nothing inherently wrong with MFN clauses, simultaneous negotiation, price caps, or any of Apple's contracts. It's even plausible Apple could have escaped culpability, were it not for evidence that Eddie Cue and Steve Jobs knew that the publishers already wanted to raise prices, and willfully provided them the opportunity. An MFN clause was meant to protect Apple, but, because of Amazon's artificially low prices, it also had the effect of tending to indirectly trigger an industry wide switch to the agency model with increased prices, and Apple expected this. It was this expectation that apparently elevated the act to conspiracy.
Despite that, I must admit, I feel ambivalent about the ruling. Amazon's below-cost retail pricing appeared to have otherwise prevented Apple from even attempting to enter the market, at all, unless they came up with some way to profit. I guess they picked the wrong way.
So what if Apple didn't have wads of cash laying around, and felt that it could not afford to take a loss to grow the market. Would they be unable to enter the market. This sounds like if Walmart was busy undercutting all the small business in a town but one decided to keep prices a profitable level, and then Walmart sued that small business for price fixing.
I don't think that analogy is at all close. Try this: Target, which wants to enter this market, conspiring with the companies that supply them and Walmart to raise the latter's wholesale prices, and various relevant governments suing all of the former for their conspiracy to harm consumers (in this case, from glancing at the beginning of the decision it was the Feds and some state governments). The suppliers all plead guilty and settle, but for some reason Target thinks they can win in the courtroom.
(The "some reason" would appear to be a hope they can get the Supreme Court to change the law.)
Working something out with all the big publishers is pretty much the definition of an illegal cartel.