If the Department of Justice gets its way, chances are that you will soon be able to purchase cheaper books on your Kindle, Nook, or iPad. The big winner, though, won't just be thrifty readers. It'll be Amazon.com.
On Thursday, the Wall Street Journal reported that the government is planning to file an antitrust suit against Apple and the five major New York-based publishing houses -- Simon & Schuster, Hachette, Penguin, Macmillan, and HarperCollins -- for allegedly conspiring to fix the price of eBooks. The case involves a series of events that took place in 2010, when Apple negotiated rights to start selling books on the iPad. At the time, Apple agreed to buy titles based on a so-called "agency model," where the publishers would get to set a minimum retail price for each book.
The deal was extremely peculiar. The industry had long operated based on a "wholesale model," where both brick and mortar stores and online merchants like Amazon could buy the books, then offer them to consumers at any price they liked. But Amazon had angered publishers by pricing eBook editions of new best sellers as low as $9.99, treating them as loss leaders to lure more customers into purchasing Kindles. The publishers worried that readers would become used to rock-bottom prices, hurting their long-term profits, and imperiling other important industry fixtures like Barnes & Noble.
After the Apple deal, Macmillan successfully pushed Amazon to accept the agency model as well. Other publishing houses followed, and eBook prices rose.
Why would Apple have agreed to pay higher prices for books while Amazon was still out there hocking them below cost? Good question. Those curious circumstances are why some, including Justice it now appears, think there might have been collusion on the part of the publishers. The European Commission opened its own formal investigation into the matter back in December.
If the regulators are right, and the big publishing houses really did get together with Apple to plot a price hike, it would seem to be a clear violation of antitrust law -- old fashioned price-fixing conspiracies are the sort of corporate skullduggery that can get an executive tossed in jail. Justice's suit could also mean a return to the wholesale system that gave Amazon its free hand to whittle down prices.
But one has to wonder if, in this instance, the law is really serving the best interest of the public. Consider this question: are readers really better off in a market dominated by the whims of one large company, even if it means they get to pay a little less for the new Tom Clancy novel?
Read the full piece at The Atlantic.
And here is Paid Content on the subject.
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