Everyone in book publishing has been talking about the anti-trust litigation and proposed settlements initiated by the United States against Apple and 5 major book publishers. The government’s case alleges that the defendants agreed to fix prices on e-books and that these agreements had the effect of raising prices to consumers. Most people in our business believe that the United States’ position is misdirected, that the lawsuit will enhance the market power of Amazon.com and that this is the real anti-trust threat to the industry. The Authors Guild representing authors, the American Booksellers Association representing independent booksellers and now the Association of Author Representatives representing literary agents are on record as opposing the position of the Department of Justice. I decided to weigh in, myself, with the letter below. The DOJ is required to consider these letters, so any of you who wish to express your opinions should write to John Read at the address below.
John R. Read
Chief, Litigation III Section
United States Department of Justice
450 5th St NW
Suite 4000
Washington DC 20530
Dear Mr. Read:
I am writing regarding the proposed settlement between the three book publishers ( Simon and Schuster, HarperCollins, and Hachette Book Group) and the United States regarding e-book pricing.
I feel that it is wrong for the Department of Justice to focus its anti-trust efforts against Apple and the major book publishers for their implementation of the so-called “agency model” for pricing. There are restraint of trade issues in our industry, but this litigation is misdirected and likely to exacerbate those issues.
The decision by each book publisher to implement agency pricing was in response to Amazon.com’s policy and practice of setting prices on e-books below cost in order to drive other potential sellers of these products out of the market, thus giving Amazon a virtual monopoly on the sale of e-books. This strategy was enhanced by the manner in which Amazon designed and marketed it’s Kindle format editions of e-books, so that those books could only be read on Amazon’s proprietary Kindle book readers, and only purchased on the Amazon web site. Amazon refused to allow other potential competitors in the e-book business to sell Kindle edition titles. At the time that publishers began contemplating implementation of the agency model, Kindle Editions accounted for 90% of book sales on e-book readers.
Amazon was able to sustain this otherwise ruinous pricing policy, because it could offset its losses by driving people to its website where they would also purchase more profitable items.
The dangers implicit in this strategy can be demonstrated. Amazon has shown its willingness to stop selling titles by publishers who will not agree to Amazon’s trade terms. This happened recently with 5000 Independent Publisher Group titles. As a result, these e-books are simply not available to the 60% of all e-book readers who read e-books on their Kindles.
Amazon’s policies have already had a devastating effect on community based bookstores including the recently bankrupt Border’s, Barnes and Noble, and the thousands of independent booksellers across the country.
