# US vs Apple; Apple Found Guilty (merged)



## history_lover (Aug 9, 2010)

I thought it might be good to have a dedicated topic for this, where we could post news updates about the court case.

For those unaware, back in 2010, Apple and most of the major publishers (Random House actually resisted it) conspired to raise ebook prices by forcing retailers to agree to an agency pricing model which allowed publishers to set their own ebook prices. They did this by threatening to withdraw their ebooks from sale altogether and supposedly, they did so in response to Amazon's attempt to sell many bestsellers for $9.99. Steve Jobs is quoted as saying publishers felt this undermined their ability to sell hardcovers for $28+. All the complaints people have had about ebooks costing more than the hardcover/paperback are a direct result of the agency pricing.

Last year, the Department of Justice in the US (as well as other organizations in the rest of the world) brought charges against Apple and these publishers for conspiracy to raise ebook prices. Immediately, some of the publishers agreed to settle and the others followed later in the year. The first publishers to settle (HarperCollins, Macmillan, S&S, Hachette) have by now lost control over their ebook prices and retailers like Amazon are now free to sell them at competitive prices. The last publishers to settle are still in the process settlement and still have control over their prices (namely Penguin) for the time being but will eventually loose it, probably later this year.

Random House aren't being sued because they actually held out on the agency pricing. They eventually joined it but only after it had been put in place by the other publishers and Apple which means they weren't a part of the conspiracy (you can even see this in the chart below, Random House prices didn't shoot up until much later than the rest). As such, they still have control of their pricing and theoretically, they can keep it. But of course the fact that all other publishers are losing the agency pricing model means they will have to price their ebooks competitively as Amazon and other retails reduce prices. They may choose to abandon it anyway.

Apple are the only ones who are fighting the charges in court, which is going on right now. Here's some articles on how that's going:

http://www.digitalbookworld.com/2013/department-of-justice-spells-out-agency-pricing-plan-in-opening-statement/
http://arstechnica.com/tech-policy/2013/06/apple-calls-e-book-price-fixing-case-bizarre-says-doj-is-being-unfair/
http://tech.fortune.cnn.com/2013/06/05/us-v-apple-could-go-to-the-supreme-court/

The power point slides used in the opening statements from the DOJ were released, you can see all of them here: http://fortunebrainstormtech.files.wordpress.com/2013/06/u-s-v-apple-et-al-opening-slides-6-3-2013.pdf - but here's a few of them:


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## history_lover (Aug 9, 2010)

Um, okay, this is directly related to Amazon and Kindle since it was Amazon's $9.99 Kindle pricing which instigated the whole thing and the results of the settlement direct effect Kindle prices... but I guess that's not enough to post it in the Kindle section?


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## Scheherazade (Apr 11, 2009)

And here I was thinking it would be moved from here to a more appropriate board while reading it.  I hope this case breaks the stranglehold Apple and the publishers have on Amazon.  I hate when companies can't compete and decide to pull underhanded tactics to get an edge on their competitor who is actually doing right by the consumer.  Apple has always been very anti-consumer anyway, I've never understood the fanaticism surrounding a product from a company that treats its customer base so badly.


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## Betsy the Quilter (Oct 27, 2008)

Well, our thinking was that it was about so much more than just Amazon and the Kindle, that NQK was the appropriate place to have it....it's a fine line sometimes.

Betsy


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## history_lover (Aug 9, 2010)

Scheherazade said:


> And here I was thinking it would be moved from here to a more appropriate board while reading it. I hope this case breaks the stranglehold Apple and the publishers have on Amazon. I hate when companies can't compete and decide to pull underhanded tactics to get an edge on their competitor who is actually doing right by the consumer. Apple has always been very anti-consumer anyway, I've never understood the fanaticism surrounding a product from a company that treats its customer base so badly.


In fairness, Amazon were previously selling ebooks for a loss in attempts to drive their competition out of business, which would not be good for consumers in the long run. Part of the settlement deal is that Amazon's total sales for each publisher can't be at a loss - so they can sell some ebooks for a loss but not most or all.



Betsy the Quilter said:


> Well, our thinking was that it was about so much more than just Amazon and the Kindle, that NQK was the appropriate place to have it....it's a fine line sometimes.
> 
> Betsy


I understand, it's just that I normally don't read the Not Quite Kindle section so I now have to specifically remind myself to check in here just to see if there's a response to a topic I started.


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## Betsy the Quilter (Oct 27, 2008)

history_lover said:


> I understand, it's just that I normally don't read the Not Quite Kindle section so I now have to specifically remind myself to check in here just to see if there's a response to a topic I started.


You can use the "show new replies to your posts" link at rhe top of the page or click on "notify" to make sure you don't miss anything... I use both those for forums I don't post in as often.

Betsy


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## Betsy the Quilter (Oct 27, 2008)

Do we know why Amazon was selling ebooks at a loss?  Was it to drive their competitors out of business or was it to build a demand for their brand new e-reader, the Kindle?

It seemed to me, when I bought my Kindle in 2008, that Amazon was trying to make the case for people buying what was then a pretty expensive device to read books on, by making ebooks cheap.

Betsy


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## Ann in Arlington (Oct 27, 2008)

history_lover said:


> In fairness, Amazon were previously selling ebooks for a loss in attempts to drive their competition out of business, which would not be good for consumers in the long run. Part of the settlement deal is that Amazon's total sales for each publisher can't be at a loss - so they can sell some ebooks for a loss but not most or all.


I think that's a bit of a mischaracterization. Yes, they were initially selling some books at low prices -- loss leader prices even -- but I don't think it was an attempt to drive competition out of business. Heck, at the time, there WASN'T any competition. There was only the Sony Reader when the Kindle was released. My reading of the strategy was that it was designed to create buzz. Get customers, yes, but mostly buzz.

Even though the Sony Reader did exist, it was seen as a niche device and was much more expensive than even the $399 that the original Kindle cost. (My recollection is that it started around $450.) Amazon succeeded by pricing the device well and having an excellent catalog (about 100K titles to start which was well more than Sony had) and, yes, advertising that they'd discount NYT BestSellers to $9.99.

I don't think they intended to KEEP that price point forever. If the publishers had just chilled for a year or two, prices would have gone up naturally on their own and they wouldn't be getting all this bad press. Amazon would have slowly reduced the number of <$10 "big name" books by making it not just books that ever were NYTBS but making it only books that currently ARE NYTBS. Other book prices would have been priced at whatever the publisher set and/or Amazon would discount them according to the same calculation they apply to paper books. It boggles my mind that the publishers are o.k. with discounting paper but not ebooks. 

AND, Amazon's pricing strategy was NOT hurting publishers -- getting more people to read is in everyone's interest. Plus, the publishers ended up with a smaller cut when they forced the agency model -- a clear sign that they had no real understanding of the changing market.  AND, arguably, it caused the 'rise of the indies' as well, (or at least contributed to a quicker than expected increase in visibility) because when people literally woke up one day and Every Book was more expensive by $2 or $3, they went looking for books at lower prices. Independent publishers with good stuff priced around $5 quickly filled in the niche. Arguably, that niche wouldn't have been there if people could have gone on buying their trade pubbed books for less than $10.



> I understand, it's just that I normally don't read the Not Quite Kindle section so I now have to specifically remind myself to check in here just to see if there's a response to a topic I started.


Getting out of one's comfort zone is good.  In addition to Betsy's suggestion, you can book mark any thread (menu option right next to 'reply' at the top and bottom of each thread listing) and that will work no matter where on the board the thread in question ends up. Well, unless it's deleted entirely, but that doesn't happen except when spammers start threads.


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## Scheherazade (Apr 11, 2009)

Betsy the Quilter said:


> Do we know why Amazon was selling ebooks at a loss? Was it to drive their competitors out of business or was it to build a demand for their brand new e-reader, the Kindle?
> 
> It seemed to me, when I bought my Kindle in 2008, that Amazon was trying to make the case for people buying what was then a pretty expensive device to read books on, by making ebooks cheap.
> 
> Betsy


I always felt like it was to drive demand for the eBook readers. They had those low prices on books before there was even any real competition in the market. They, for a very long time, treated anyone who bought a Kindle like royalty. They knew they needed people to have a good experience and spread the word to get others to adopt and stick with an entirely new medium for something that had not changed much at all in hundreds of years, and they were genuinely thankful and grateful for the people who joined them on that journey. It was more of a reward for pioneering than trying to run out competitors, and I truly believe it was something that would have stuck around and been expected by consumers if not for Apple.


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## Meemo (Oct 27, 2008)

I've never understood why people are so quick to demonize Apple for the whole agency model  pricing thing and just ignore the publishers' part in it.  With the exception of Random House's procrastination, they seemed happy enough to go along with what amounted to price-fixing. 

And yeah, I do understand that some folks see Apple as the devil incarnate.  

Personally I never felt like Amazon would/could keep selling books at a loss. There may have only been one other choice for eInk eReaders when the Kindle came out - the Sony 505 was released in 2007 for $300, the Kindle was $399 when it released in 2007, but had wireless and the Sony didn't - but other sources for eBooks popped up pretty quickly. B&N was selling eBooks for probably at least a year before the Nook came out in late 2009. I was buying eBooks from multiple sources by then, using apps on my iPhone. So the competition for eBooks was out there.  But it wasn't just about competition, it was about formats. Amazon didn't want its format to become the new Betamax.  And Amazon could afford to take a loss on ebooks for a while because of all their other income. But eventually I firmly believe that while their discounts might not have dried up completely, they would've become significantly smaller, especially with the price of Kindles dropping so much. We already see them clamping down some on replacing Kindles that are no longer covered by warranty. And the last price comparison I saw showed less disparity between ebook pricing between ebook sources than there once was. 

Of course it's all speculation since we don't hang out in the Amazon boardroom.


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## history_lover (Aug 9, 2010)

Ann in Arlington said:


> I think that's a bit of a mischaracterization. Yes, they were initially selling some books at low prices -- loss leader prices even -- but I don't think it was an attempt to drive competition out of business. Heck, at the time, there WASN'T any competition. There was only the Sony Reader when the Kindle was released. My reading of the strategy was that it was designed to create buzz. Get customers, yes, but mostly buzz.


I don't think we're talking about that long ago - the agency pricing model came into effect in 2010 I think and both Nook and Kobo existed at that time. Actually, several other brands did too but Sony, Nook and Kobo were the main competitors.



Meemo said:


> I've never understood why people are so quick to demonize Apple for the whole agency model pricing thing and just ignore the publishers' part in it. With the exception of Random House's procrastination, they seemed happy enough to go along with what amounted to price-fixing.


Not me, I was thrilled when the DOJ brought charges against them all and even more so now that the publishers are losing their control over prices. That's why I started this topic, I thought those power point slides were very telling - it's shocking to see just how much of a conspiracy there was. To see the heads of publishers blatantly admitting among themselves that they basically knew what they were doing was illegal but they were going to do it anyway... well, that's certainly newsworthy.


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## Scheherazade (Apr 11, 2009)

Oh, the publishers definitely had their hand in it, but I think Apple had a big part in it too.  I think it was Apple who gave the publishers the impetus and the platform to fight from.  If it weren't for them being in direct competition with Amazon and deciding that siding with publishers to raise eBook prices was the best way to do it, the publishers wouldn't have had a whole lot of choice but to go with it.  At the end of the day, Amazon and Apple and other retailers are selling their books.  They have a lot of power in that.


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## history_lover (Aug 9, 2010)

Scheherazade said:


> Oh, the publishers definitely had their hand in it, but I think Apple had a big part in it too. I think it was Apple who gave the publishers the impetus and the platform to fight from. If it weren't for them being in direct competition with Amazon and deciding that siding with publishers to raise eBook prices was the best way to do it, the publishers wouldn't have had a whole lot of choice but to go with it. At the end of the day, Amazon and Apple and other retailers are selling their books. They have a lot of power in that.


Apple do seem to have been the catalyst - they are the ones who went to the publishers and proposed this idea. But most of the publishers (Random House aside) seem to have been more than happy to go along with it. The scheme only worked if most of them came on board - had only one publisher agreed to it, they may have had control over their prices but they would have been forced to keep them low in order to compete with the lower prices from all the other publishers who didn't sign on. That's why it's a conspiracy and that's why they're all equally responsible, because it only worked if they all collectively agreed to raise prices.


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## history_lover (Aug 9, 2010)

Here's Apple's defense and the DOJ's closing statements: http://allthingsd.com/20130620/heres-apples-closing-slide-deck-in-e-book-case-and-the-dojs-too/

Sounds like they're still waiting on a decision from the judge: http://www.latimes.com/business/la-fi-apple-ebooks-20130621,0,4233324.story


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## Jesslyn (Oct 29, 2008)

http://news.cnet.com/8301-1023_3-57593034-93/apple-found-guilty-of-conspiring-to-fix-e-books-prices/

Hopefully, we can now get our refunds (I got a LOT of books during that period) and put all of this behind us.


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## cleee (May 15, 2009)

Unfortunately, all this probably means is that a year from now, we will all get a Class Action Settlement email that will say that 5 million claimants are entitled to compensation in the amount of about .80 cents.


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## Jesslyn (Oct 29, 2008)

cleee said:


> Unfortunately, all this probably means is that a year from now, we will all get a Class Action Settlement email that will say that 5 million claimants are entitled to compensation in the amount of about .80 cents.


From what I understand we will get a certain amount based upon the prices and number of books we purchased from Hachette, Harper Collins, Simon & Schuster, Penguin or Macmillan between 4/1/10 and 5/21/12 and that it will range from $0.30 to $1.32 per book purchased. So I'm hoping out of all the class actions that I have been a part of, this one may actually give me more than $1.

That's not to say that I'm expecting a windfall, but I'm hoping for at least enough to get one book.
EDIT:
I went to look and the DOJ website says:

New York Times bestsellers: $1.32 per E-book. These include titles that were New York Times bestsellers at any time during the claim period.
Non-New York Times bestsellers titles: $0.30 per E-book. These E-books include any titles that were not New York Times bestsellers during the claim period.


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## history_lover (Aug 9, 2010)

Verdict is in, Apple found guilty: http://www.bbc.co.uk/news/business-23259935


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## Atunah (Nov 20, 2008)

Interesting. So they will appeal and a hearing will be set to determine damages. 

And yes, the publishers were jumping right into this whole thing willingly. Well some need a bit more of a push it seems. But in the end, they all went in together. 

I hope agency on ebooks never comes back. I never understood why it was ok to sell paperbooks without it, but somehow an ebook had to be under it. Never made sense to me. And I never head an explanation from the publishers on why. Ebooks are just another medium of the same art. 

Thanks for posting this. I was wondering where it was standing at the moment.


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## Mike D. aka jmiked (Oct 28, 2008)

Atunah said:


> I hope agency on ebooks never comes back.


The decision was on price-fixing. As I understand it, the agency model is still in effect, and the ruling does not affect it.

Mike


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## Atunah (Nov 20, 2008)

jmiked said:


> The decision was on price-fixing. As I understand it, the agency model is still in effect, and the ruling does not affect it.
> 
> Mike


I know this was about the price fixing, but I still don't want the agency stuff coming back. Looking at the books in the store, on many it used to say "sold by publisher" and now it says "sold by Amazon". And many many books have come down. Even if its just from 7.99 to like 7.59. No matter what the term used now, this all has had an effect on the pricing, which is really all I care about as a reader.


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## tecwritr (Oct 28, 2008)

Meemo said:


> I've never understood why people are so quick to demonize Apple for the whole agency model pricing thing and just ignore the publishers' part in it. With the exception of Random House's procrastination, they seemed happy enough to go along with what amounted to price-fixing.
> 
> And yeah, I do understand that some folks see Apple as the devil incarnate.
> 
> ...


Apple was demonized because what they did violated the law as shown with the courts decision.


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## Scheherazade (Apr 11, 2009)

http://www.theverge.com/2013/7/10/4510338/apple-found-guilty-of-ebook-price-fixing

This quote pretty much says it all and is why I have always blamed Apple more than the publishers even if they colluded, "Without Apple's orchestration of this conspiracy, it would not have succeeded as it did in the Spring of 2010." The publishers went along with it, sure, and many of them probably happily so, but Apple was the evil mastermind behind it all pulling the strings for their sole benefit.


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## KindleChickie (Oct 24, 2009)

Jesslyn said:


> From what I understand we will get a certain amount based upon the prices and number of books we purchased from Hachette, Harper Collins, Simon & Schuster, Penguin or Macmillan between 4/1/10 and 5/21/12 and that it will range from $0.30 to $1.32 per book purchased. So I'm hoping out of all the class actions that I have been a part of, this one may actually give me more than $1.
> 
> That's not to say that I'm expecting a windfall, but I'm hoping for at least enough to get one book.
> EDIT:
> ...


Ugh. My books went up on average $5, but because they were not best sellers I get .30.

Big publishing still made out like a bandit.


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## larryb52 (Nov 18, 2009)

apple already announced it would appeal, so you may wait awhile for refunds...


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## backslidr (Nov 23, 2012)

The only way I'll get rich is if we get refunds on freebies.


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## DYB (Aug 8, 2009)

I am very much a fan of Apple products and I am very much not on Apple's side in this situation.  The reason Apple orchestrated this whole thing is quite obvious to me: they are a business and their responsibility is to make money.  No business that is for profit is in it to make their customers happy.  No, not even Amazon.  They are in it to make money, to earn profits for their shareholders, etc.  Making customers happy is how they make money.  And Apple, which I do agree has a lot of contempt for their customers, also makes products that their customers like.  A lot.  Myself included.  When Apple, which has controlled the music digital download market for years (and created the very 9.99 per album structure that they later decided they opposed with ebooks), released a product that Amazon took control of much sooner (remember, Steve Jobs said people don't read), it was Apple's responsibility to their shareholders to break Amazon's monopoly on the ebook market.  How they went about doing it is what got them in trouble.  But the fact that they were doing something is completely understandable.

Prices on Amazon would not have remained at 9.99, as others have pointed out above.  We only have to look at the iTunes store for proof: Apple got customers addicted to their online store and the 9.99 per album structure - but it no longer exists.  They raised prices on music eventually.  And prices would have gone up on ebooks as well because Amazon is not a benevolent benefactor who just wants to make us all happy.  For example, I have noticed over the past month or so that my Amazon Prime free shipping membership isn't worth as much as it used to be because a lot of items I previously bought and had shipped for free have now become "Add On" items.  Which means I have to purchase $25 of other stuff before I can get free shipping on these now "Add On" items.  No more "Oops, I forgot to get some razor blades, nevermind, free shipping!" because those razor blades are now an Add On item.  I suspect this is only going to get worse.  Amazon is a business, in it to make money first and foremost.  How the publishers did not realize this, and so blatantly colluded with Apple, says a lot about their own stupidity.  Apple's behavior, though not their understanding of the law (or lack of understanding), is perfectly normal.


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## The Hooded Claw (Oct 12, 2009)

I'm glad for the verdict! Surprised how little coverage this is getting in most media.

Is this trial the reason for the delay in payments from the settlement with the publishers? That mystifies me, since the publishers have all settled already. I don't understand.


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## Betsy the Quilter (Oct 27, 2008)

Folks, I'm going to merge this with the ongoing thread in NQK.

Betsy
KB Mod


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## Meemo (Oct 27, 2008)

tecwritr said:


> Apple was demonized because what they did violated the law as shown with the courts decision.


I got that part.  I guess you missed where I talked about people not laying equal blame on the publishers. And courts' decisions aren't always correct (although I think they got this one right).


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## Ann in Arlington (Oct 27, 2008)

It's probably not over.  Apple will, no doubt, appeal.


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## MamaProfCrash (Dec 16, 2008)

I blame the Publishers as well but they were smart and settled. The Publishers received a fair amount of hate when agency pricing happened and then when the law suit was announced. Three of the Publishers settled immediatly. Penguin was the last to settle. They took a look at the evidence that the DoJ had and knew they would lose. I think Apple thought they could win because they were not a Publishing company and it would be harder to say they colluded. 

I believe the figures listed above are based on the Publishing Houses settlement. Apple is likely to get slapped harder since it went to court and cost the government money to fight the case. So those numbers are likely to change. While this is a civil trial the punishment phase is greatly influenced by if you accept the plea bargin (criminal court, less jail time, fewer fines) then if you go to trial (criminal more jail time, more fines).

I would prefer to get my Publisher settlement money before the Apple money. I am cool with two gift certificates.


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## HappyGuy (Nov 3, 2008)

Can I have my settlement in Amazon gift cards?


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## MamaProfCrash (Dec 16, 2008)

According to the email we got a while bck that is how we are going to get the refund from Amazon. I cannot remember how Nook, Sony, and Kobo are going to handle it. I am not sure if iBook users are getting anything.


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## history_lover (Aug 9, 2010)

jmiked said:


> The decision was on price-fixing. As I understand it, the agency model is still in effect, and the ruling does not affect it.
> 
> Mike


That's incorrect - most of the publishers no longer have the agency model anymore. I believe only Random House and Penguin still have control over their ebook prices. Random House weren't involved in price fixing so they've been left alone. Penguin were charged but were the last ones to agree to a settlement - I don't know the details of the settlement but every other publisher who settled have since lost/abandoned the agency pricing. If you notice on Amazon, ebooks from S&S, Macmillan, HarperCollins, and Hachette all have prices now listed under "Amazon price" and the notice "this price was set by the publisher" is gone - that's why so many prices have gone down in the last year. So it must have been a part of the settlement that they would give up control of their ebook prices.

I assumed Penguin's settlement would be the same but here it is 7-8 months later and they still have control. Granted, in the last couple of weeks, Penguin have reduced a LOT of their ebooks to $11.04 (new releases) and $8.89 (older releases), which suggests that even though they can still set their own ebook prices, they are finding a need to reduce them to compete with those Amazon and other retailers have lowered. So the DOJ has done it's job and brought competition back to the market - but if both Random House and Penguin keep the agency model, it means their books will never be one of Amazon's Daily Deals or other promos.

The issue with the agency model is that it was design specifically to allow the price fixing so naturally, at least four publishers lost the agency model in the settlement. Penguin may have to follow suit soon - I don't know if it was a part of their settlement and it's just taking time to be put in place or whether they will keep it. I hope they lose it because I don't see why they should be an exception.


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## MamaProfCrash (Dec 16, 2008)

Agency pricing will go away for at least two years but once that period passes Agency can return. There is a limit placed on discounting so that no company can sell ebooks for any particular company at a loss. So Amazon can discount books but they have to make up the loss on other books.


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