If you have even a passing interest in the publishing industry, you’ve no doubt heard of the lawsuit the Department of Justice (DOJ) filed against Apple and the Big Six, less Random House, earlier this week. When I noticed that every industry professional I followed was taking the publishers' side (especially since most of those industry professionals were agents and thus not directly affiliated with any of the major players), I suspected something was fishy. And now, after reading Nathan Bransford’s excellent post on the topic, I know it is.
The background is complicated, but here’s the basic idea insofar as I understand it: E-books used to be--and
in many cases, still are--priced according to the wholesale model of distribution, in which e-sellers
pay a publisher’s wholesale price for e-books, then turn around and sell them at whatever end price they choose. In 2010, Apple convinced five of the six major publishers
to switch to the agency model, in which the publishers set the end price for
their titles, then split the revenue with the e-seller according to a predetermined
The DOJ’s claiming that Apple and those five major
publishers colluded--that is, got together in some secret lair (read: upscale
New York restaurant) and decided as a group--to set artificially high prices. Which is illegal.
Which has been illegal ever since they first put the antitrust laws on the
books back in the days of big oil and railroad barons.
But here’s the thing: The government implemented
antitrust laws to PROTECT CONSUMERS FROM MONOPOLISTS. And even if Apple and Company
got together in their upscale New York restaurant and agreed to fix
prices--which is a big "if," one that Macmillan, Penguin, and Apple have already decided to challenge in court--you could argue that they were
colluding to PROTECT CONSUMERS FROM A MONOPOLIST.
Which monopolist? Well, that would be Amazon, of course.
See, if you want to understand why publishers switched to
the agency model--which, as Mr. Bransford pointed out, actually cost them
revenue (and continues to do so)--you have to understand what, or who, they were facing. Amazon sets their prices so as to be the lowest-priced seller
of every good on the planet, and I daresay they are. In fact, they price many e-books below cost, which means
they actually lose money every time one of those e-books sells. And why
would they do that? To drive every other e-seller out of the market, thus
leaving them free to do whatever they want (which, according to this article,
they kind of already are).
It’s called predatory pricing, and it’s also illegal under
the government’s current antitrust laws.
I guess what I’m saying is that, like always, the government
is a little late to the party and not quite up to speed on what’s actually
happening. Even if they can prove that the major players colluded, how are they
going to explain why they never came after Amazon, who, arguably, threw the first punch? And how are they going to handle a group of sellers who, even if they are found liable, were only acting to insulate themselves--and consumers--from the market effects of a monopolist?
It’s not often that the best interests of buyers and sellers
align, but in this case, I can’t help but wonder if that’s precisely what