Trust Busting

A lot of people are blogging lately about the civil antitrust suit the US Department of Justice filed against Apple and 5 of the Big 6 publishers. Some authors are saying some pretty ridiculous things to paint Amazon as the bad guy and the Big 6 as the underdogs, and of course the publishers themselves want you to see them this way. I found it kind of disappointing today that John Scalzi recommended people read that drivel by Charlie Stross, especially since Scalzi’s earlier points on the matter were so rational. I found this section of Stross’ diatribe both humorous and galling (emphasis mine):

I’m not going to comment on the Agency model which has drawn down the current US Department of Justice enquiry into Apple and the big six publishers. Let’s just frame it as a desperate attempt by the publishers to get away from the wholesale model, which was allowing the monopsony incumbent (Amazon) to extort ridiculous discounts from their suppliers. If anything, the agency model simply means selling books the same way they were sold 30 years ago

Funny way to not comment, but at least he’s nice enough to directly state that he is attempting to spin things. There are so many things wrong with just this quote, and the original post has plenty more. The wholesale model had Amazon paying for ebooks at fixed prices, which were in many cases higher than what they were charging the customer, and in virtually all cases higher than what the publishers make per unit on the agency model. Amazon was not the only ebook store (monopsony incumbent), and the agency model is nothing like the way books were sold thirty years ago (the wholesale model).

I just read the actual document for the suit and found it fascinating. When these things were happening I was talking about it and posting on forums about it, so I was incredibly surprised to find that I hadn’t actually blogged about it here. This document filled in a lot of blanks from that time, and reads almost like a story rather than a legal document. I can see this turning into a book or movie along the lines of The Social Network.

April L. Hamilton posted a nice rebuttal of some of the silly arguments people are making to defend Apple and the Big 6. Some people would have you believe that breaking up the agency model would hand Amazon a monopoly, which is not true (this should be obvious).  All it would do is break up the agency model, at least for a while. As Scalzi pointed out, none of these companies are actually on your side, though their interests may be aligned with yours at times.

As far as whether or not this was illegal collusion, for me, after reading the document, the facts boil down to a few pretty simple points:

  • The adoption of the agency model was not intended to be a competitive move; competition (in a commoditized market) drives prices down. This was intended to drive prices up, which is seen in the fact that that is exactly what happened.
  • If a single publisher had adopted the agency model and raised prices, they would have quickly lost market share since competitors’ ebooks would still be set at more attractive prices. The shift couldn’t have happened without collusion; no lone CEO would have been willing to sign without knowing in advance that his competitors wouldn’t punish him for it.
  • This type of conspiracy among competitors to raise prices is illegal.

When the publishers spin things to say they were trying to promote a healthy market, they’re talking about the paper book market, not the ebook market. It was meant to stifle the growth of the ebook market in order to hang on as long as they could to the dead tree business where their advantages lie. Remember that publishers make less money per ebook under the agency model in order to charge you more. They’re trying to fight disruption.

The word right now is that three of the five accused publishers are working on settling, and the other two (plus Apple) are still fighting the suit. I found a really nice explanation on which is largely free of spin for one side or the other (which makes sense since it was written by a reader) and includes reasonable predictions about what might happen with ebook prices in the near future as a result of this. I’m not sure where the author got the details about what happens next, but if true I find it interesting. I hope when this is all over I will finally be able to buy books at the reasonable prices which were available before this all went down.

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