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  • The e-book Antitrust Lawsuit: From an Author’s Point of View

    April 13th, 2012

    You might consider me a recovered computer book author. I wrote loads of them from 1994 through the early part of this century, before I grew weary of churning out four or five titles a year for a pittance. I decided there had to be a better way to make a living, although I grant you that some authors are still busy writing “Dummies,” “Missing Manuals” and other series books covering all sorts of tech subjects, and sometimes subjects that have nothing to do with technology. There are, in fact, Dummies books on religion, rugby, marriage, divorce, and lots of other subjects. But I didn’t see a “UFOs for Dummies” anywhere, so maybe I should pitch that concept.

    But I never got into the e-book game, although the sci-fi novels my son and I wrote will shortly appear in that form.

    On the other hand, I was intrigued by the news that the U.S. Department is going after Apple and five major book publishers for alleged collusion to set prices on e-books. Sure, a quick read leads you to believe that this is the classic conspiracy of larger companies to increase prices on the things you buy.

    This whole nasty affair appears to be the outgrowth of the response by these publishers — and Apple — to Amazon’s dominance of the e-book marketplace. It wasn’t so long ago that Amazon owned the e-book market. They pulled a common stunt retailers know full well, which is the loss leader. It involves selling products at or near their wholesale cost to entice you to come to the store (or the online storefront), in the hope that you’ll buy other merchandise at the regular price.

    That’s what Amazon is doing already with the Kindle e-book readers and the Fire tablet. These devices are designed to serve as portable ordering gadgets designed to conveniently display Amazon’s e-books and other merchandise.

    Now with Amazon selling e-books for wholesale prices or lower, they were crowding out other merchants big time, with an over 90% share of the market. Well, the publishers decided to employ something called the “agency model,” which sets a floor for prices to be charged by retailers, so that you end up paying pretty much the same for e-books regardless of where you buy them. Now if one publisher does that, fine and dandy. If more two or more publishers come together to make such an agreement, it becomes a conspiracy, and collusion to fix prices. That appears to be the essence of the DOJ’s civil lawsuit.

    So far, three of the major publishers have evidently agreed to a settlement that, in essence, will kill the agency model. Two publishers and Apple reportedly said no, which is why the lawsuit is moving forward. In a brief statement, Apple denies the charges. What’s more, the government’s chances for success may not be certain according to some published reports.

    As you see, the agency model was supposedly designed to fight Amazon’s alleged “monopoly” behavior. It’s also not at all clear if all the publishers — and even Apple for that matter — actually communicated with one another to agree to use agency pricing. According to a blog post from Macmillan CEO John Sergent, that company did not make their decision in concert with any other company. He writes: “I am Macmillan’s CEO and I made the decision to move Macmillan to the agency model. After days of thought and worry, I made the decision on January 22nd, 2010 a little after 4:00 AM, on an exercise bike in my basement. It remains the loneliest decision I have ever made, and I see no reason to go back on it now.”

    Now unless the DOJ can prove that Sergent’s counterparts at the other publishing companies met with him during that little exercise routine or elsewhere to jointly reach that pricing decision, this may be a difficult case to establish, at  least for some of those publishers. However, the DOJ’s allegations do mention dinner meetings involving some of them.

    In a sense, this whole affair seems yet further proof of the law of unintended consequences. Book publishers try to get a leg up on a supposed monopoly retailer, and end up with egg on their face.

    Understand that this agency model, for however long it lasts, doesn’t necessarily impact the small publisher, or even an individual who is self-publishing. You can still set the prices you want, and Apple, Amazon or another vendor will still take their cut if they sell your book.

    I suppose the larger question is how Apple’s reputation might be impacted. Their prestige may already be somewhat tarnished because of the late reaction to the Flashback malware outbreak. In the end, though, it probably won’t matter. The so-called price fixing issues that are being litigated are probably of little interest to most people. If the prices you pay for the e-books you want go down, that’s great. But how the prices got there, and whether it involved legal action or just a corporate decision, will probably be of little interest. This is one case that won’t get near the publicity of that famous antitrust action against Microsoft some years back, nor the actions taken against Microsoft by the European Union.



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