As many of you are aware, the Department of Justice filed a civil suit in April against Apple and five major publishers, accusing them of colluding in the pricing of e-books. The action threatens to disrupt how e-book prices are set, with many retailers fearing particularly that Amazon will now be able to return to selling e-books at below cost in an effort to induce more Kindle purchases, drive out competition and regain a near-monopoly.
As recently as a couple of years ago, Amazon virtually controlled e-book sales with a market share of about 90 percent. But in 2010, a handful of major publishers changed the terms under which they provided e-books. Instead of selling copies to Amazon and other retailers at a discount and allowing them to mark up the prices to consumers, the publishers dictated the final sales price and gave “agents” like Amazon or other distributors a 30 percent commission. This so-called agency model blocked Amazon’s ability to undercut competitors and enabled others—most notably, Apple and Barnes and Noble—to gain significant shares of the e-book market at Amazon’s expense. It also opened the way for many independent bookstores, including Politics & Prose, to start offering e-books.
But the Justice Department alleges that the agency model came about through a series of conspiratorial and improper contacts among the five major publishers and Apple. Three of the publishers—Simon & Schuster, HarperCollins and Hachette—have settled with the government, agreeing to terms that effectively strip them for two years of the ability to set a floor price for e-books. The two other publishers—Macmillan and Penguin—have, along with Apple, stated their intention to fight the government’s suit.
Under federal law, the Justice Department must accept comments from the public and submit a summary of them to the federal court charged with approving the settlement reached with the three publishers. A federal judge will then determine whether the remedy being proposed is in the public interest. The deadline for submitting comments is Monday, June 25, and we’re urging all our customers opposed to the suit to write.
This is a critical turning point for the book industry. While the agency model has bumped up consumer prices on some e-books, it has led to lower prices on others and, most importantly, it has produced a far more diverse and competitive market overall. Eliminating the model would enable Amazon to resort again to below-cost, predatory pricing and lead to a greater concentration of market power for the online giant. This would severely distort the bookselling industry—an industry that remains crucial to the cultural and intellectual life of the country.
For a very informative discussion of the Justice Department case, see the article “Paper Trail” by Ken Auletta in the June 25 issue of The New Yorker. Then send your letter of concern to:
John Read
Chief, Litigation III Section
Antitrust Division, U.S. Department of Justice
450 5th Street, NW – Suite 4000
Washington, DC 20530
And email a copy to john.read@usdoj.gov.
Please don’t delay.
-- Brad and Lissa
