Agency pricing war of words heats up

A recent news article by reporting on the ongoing Attorney General investigation into Apple and the Big Five publishers’ conspiracy to fix the price of ebooks, as well as an ongoing civil class action suit, suggests a war of leaked words is the latest strategy to force a settlement. However, what is missing from these articles is that the act that triggered agency pricing — the decision by Amazon to sell ebooks at a loss — is also illegal. Called predatory pricing, it is illegal for a retailer to sell an item for less than the wholesale cost if there is an intention to create a monopoly. Jeff John Roberts, in outlining the AG’s case, states, “Amazon is the obvious winner here. A return to wholesale pricing could mean lower prices and consumers buying more e-books — which will in turn make them more dependent on devices like the Kindle Fire which Amazon has turned into a virtual shopping mall.” Since Amazon already has a monopoly on its format, the Kindle (or azw), while its competitors sell ePubs, selling Kindle books below cost to consumers who will then become dependent on the device is precisely the intent to create a monopoly that anti-trust laws require. While it would certainly have been harder for the publishers to prove predatory pricing — the standards are quite high — there was sufficient evidence to raise concerns and launch an investigation. Instead, publishers took what they perceived as an easier way out: they joined with Apple to create the agency pricing model for ebooks.

While it is not yet clear where this will all end, what is clear is that book publishers seem to have short memories. As has been said so eloquently, “Insanity is doing the same thing over and over again but expecting different results.” A Guardian article about the demise of the book industry in the UK points out that, when Amazon first came on the scene, publishers kicked their loyal customers, the bricks-and-mortar bookstores, to the curb and gave Amazon the deep discounts it demanded, allowing it to kill off the competition. This act of disloyalty extracted a high cost: the master became the servant. And yet when Amazon began selling its Kindle books at below cost, this time threatening the viability of the publishers themselves, they continued to supply product to Amazon instead of walking away and courting the ePub consumer market. Why? It was simple: Amazon had already cornered a large percentage of the ebook market and publishers wanted their fingers in this very big pie. Unwilling to take a interim loss and by doing so force consumers to abandon Kindle for the open-source and thus more competitive ePub format and devices, publishers once again became the architects of their own demise. And then in what can only be described as an act of delusional self-grandeur, they thought they could force the retail giant’s hand with agency pricing. But servants don’t own their masters. Which leaves publishers with three choices: stay and continue to take your beatings, run away and hope to find better shelter, or use the laws meant to protect you and stand up for your rights instead of foolishly thinking you can beat Amazon at its own game.

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