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Dispatches from the Digital Revolution

Dear DOJ: Get a clue

Wednesday, April 11, 2012: the day had finally come. Rumors of an inquiry into the dealings between Apple and the big six publishers had been swelling for months. The question on every publishing professional’s mind was, is the agency model a breach of United States antitrust law?

The U.S. Department of Justice certainly thinks so, according to the lawsuit filed in the U.S. District Court of the Southern District of New York. According to the suit, the defendants—Apple, Hachette, HarperCollins, Penguin, Macmillan, and Simon & Schuster—were in breach of section one of 15 U.S.C. § 1, otherwise known as the Sherman Antitrust Act. For a refresher on how the agency model has impacted ebook selling since 2010, check out Leah Thompson’s article, “Understanding the agency model.”

The DOJ alleges that Apple and five of the big six publishers partook in an “anticompetitive agreement in restraint of trade.” It claims:

…Publishers had concluded that unilateral efforts to move Amazon away from its practice of offering low retail prices would not work, and they thereafter conspired to raise retail e-book prices and to otherwise limit competition in the sale of e-books. To effectuate their conspiracy, [the five publishers] teamed up with [Apple], which shared the same goal of restraining retail price competition in the sale of e-books.

The DOJ has really missed the point, here. The lawsuit paints a portrait of six companies blood-thirsty with greed, taking out any “innocent” bystanders (specifically, Amazon and American consumers) in their path to ebook market domination. This is simply not the case, and I’ll explain why soon. Later in the document, the DOJ further asserts:

Millions of ebooks that would have sold at retail for $9.99 or for other low prices instead sold for the prices indicated by the price schedules included in the Apple Agency Agreements—generally, $12.99 or $14.99. Other price and non-price competition among book publishers and among book retailers also was unlawfully eliminated to the detriment of U.S. consumers.

Ah, where to begin. Let’s start with our old pal, Amazon. To say Amazon is a victim of restrictive trade practices established by publishers and Apple is the biggest joke I’ve ever heard. Amazon itself had been engaging in borderline-monopolistic practices for years before the agency model was even a twinkle in Steve Jobs’ eye. Amazon’s standard ebook price of $9.99 was not indicative of market conditions: it was indicative of a deliberate conspiracy by Jeff Bezos to destroy the value of a book in an effort to sell more Kindle devices. Pricing ebooks below cost “would shield [Amazon] from e-book competitors that lacked Amazon’s deep pockets,” Author’s Guild president, Scott Turow, explains in a scathing letter to the guild’s members on March 9. By eliminating the ability of other booksellers to complete, Amazon was effectively pursuing a monopoly.

The DOJ also claims the agency model has actually been detrimental to ebook consumers. How so, I ask? By providing for increased competition among retailers? By ensuring that the power to promote literature lies in the hands of many instead of the hands of a single corporation? What the DOJ fails to understand is that books are not a commodity to be bought and sold: they attend to a higher purpose, that is, the development and perseverance of our culture. By pricing books arbitrarily without regard for the inherent cultural value of the object itself, Amazon was essentially killing book culture. And without it, we, as a society, would be lost.

It is painfully clear that our justice department has gotten this one wrong. Why else would book retailers, publishers, and writers alike all perceive the lawsuit with a real sense of impending doom? Apple responded to the suit by saying they are only guilty of “breaking Amazon’s monopolistic grip on the publishing industry.” The CEO of Macmillan, John Sargent, released a statement that said, “we made the change to support an open and competitive market for the future, and it worked.  We still believe in that future and we still believe the agency model is the only way to get there.”  John Makinson, CEO of Penguin, the only other of the five publishers named in the suit that will fight the charges, said, “we understood that the shift to agency would be very costly to Penguin and its shareholders in the short-term, but we reasoned that the prevention of a monopoly in the supply of e-books had to be in the best interests, not just of Penguin, but of consumers, authors and booksellers as well.” The Los Angeles Times interviewed author Michael Connelly, who told the newspaper, “‘Amazon spreads my work far and wide. You can’t beat that. I’m very grateful. But I don’t want a world where there are no bookstores or other venues for discovering my work or the work of any other writers.'”

The only one who’s smiling, it seems, is Amazon. Immediately following the announcement of the lawsuit last week, the Wall Street Journal reported that “Amazon said it looks forward to ‘being allowed to lower prices on more Kindle books.'” Could that statement be any more telling of its interest in this suit?

11 comments on “Dear DOJ: Get a clue

  1. Lana Popovic
    April 17, 2012

    You’ve really hit the nail on the head with this one. The problem is that books are not a product like any other. We’re not talking about price-fixing toilet paper or shoelaces or something. How something that obvious could have escaped the DOJ’s notice is beyond me.

  2. j
    April 17, 2012

    Apple does with music what Amazon does with ebooks

  3. Keira Lyons
    April 18, 2012

    Apple did what the recording industry was incapable of doing: change the way music was packaged and sold. Previously, the recording industry forced consumers to buy a collection of 12 or so songs in one unit, and Apple capitalized on the untapped market for individual songs. There’s no parallel to that in what Amazon has done to ebooks.

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