Originally Posted by Frood
Why? The two have no legal correlation to each other.
My doctor charged me an outrageous medical fee. That made me sad and broke and looking for a way out. I went out and robbed a bank. Can you believe I was tried and found guilty of robbing a bank?! Clearly I did it because the doctor made things tough for me, he should be on trial, not me.
Apple and the publishers colluded to raise ebook prices. They were found guilty. I don't doubt that Amazon put a lot of pressure on their models that made them sad and looking for a way out- but their solution to fixing their problem was illegal.
Just as Amazon has no bearing or justification in the collusion case, Apple and the publishers colluding has no bearing on whether Amazon is engaged in predatory pricing or not.
Amazon was examined, but it was found they had no evidence to meet the Sherman Act criteria for predatory pricing. "Low prices" in and of themselves are certainly not the criteria since that benefits consumes. Specifically to meet the 'crime' criteria the predatory pricing must be targeted to drive competitors out of the market, must be priced at a loss, and the big toughie, it must be proven that there is potential for a 'payoff' from the predatory pricing- a high barrier to entry must exist so you can raise prices once there is no competition. A classic example would be steel dumping. The low prices drive competitors out and they shut down their very expensive steel mills and lose their specialized workers. The predator can than safely raise prices and recoup their losses because new entrants have a huge barrier to entry (no knowledgeable workers, and no steel mills).
The barriers to trying Amazon under the Sherman act would be:
Amazon's pricing has not forced competitors out of the market. Since its entrance to the market and despite its pricing, *more* competitors have entered the market (including: B&N, Kobo, Google, Samsung, Apple, Baker & Taylor).
Amazon has shown slight profits on ebooks (not all titles specifically, but overall).
There are nearly zero barriers to entry on ebooks. If Amazon set prices at $1 and drove all the above competitors out of the market, they could not recoup their losses by setting a ridiculously high price and reaping the rewards. Competition would spring up immediately at lower prices. There are almost no barriers to entry.
If the DoJ had evidence which could meet the criteria, they would have a case. They don't.
Whether Apple colluded with publishers also obviously has zero impact on the issue of whether Amazon is engaged in predatory pricing.
1. There's nothing inherently illegal about the agency model.
2. The Supreme Court ruled a number of years ago that manufacturers could indeed set minimum selling prices. Prior to that ruling, manufacturers could set only minimum advertised prices. And companies such as Sony and Nikon are now enforcing minimum selling prices on their high-end products. (Apple also does this, but indirectly, by making its wholesale price so high, there's no room for discounting.) So if this is fine for manufactured goods, why is not fine for publications?
3. Apple's deal with publishers would have raised eBook prices, but it also would have preserved an industry. The publishers were desperately trying not to go the way of the music industry, which is now far less than half of its 1999 peak. On the other hand, when you sell items below cost, as Amazon frequently has done to gain market share, while that does provide a price advantage to consumers, it also can be considered predatory, which is illegal.
4. Amazon's tactics have destroyed their competitors as well as destroying physical bookstores. The chains killed most independent bookstores and Amazon is now killing the chains. The last large national chain, Barnes & Noble, is on the brink. Generally, when a lease is up, it doesn't get renewed. And as Amazon destroys that competition, they will (and have) raise prices.
5. While one can make the argument that any retailer can decide what to sell and/or not sell, Amazon is acting as a monopolistic bully in its dealings with Hachette and other publishers. You don't suddenly declare books unavailable just because the publisher won't give you an additional discount on the wholesale price.
If the major publishers had any guts, they would immediately send Amazon a message by not shipping them any product. How long would Amazon's bookstore survive if they couldn't buy titles from the top 5 publishers? Bertelsmann alone has about 22% of U.S. trade publishing (via Random House and Bantam-Doubleday-Dell). And if Amazon went around the publishers and bought from the distributors like Ingram and Baker & Taylor, they'd have to pay at least 10% more than what the publishers are currently charging them.
Amazon has just a bit too much arrogance. And if consumers had any sense, they would steer their online orders to other vendors, such as B&N, even if it means paying a little more. In the long run, they'll be better off. Unfortunately, the publishers don't have any guts and they won't stop shipping to Amazon. They'll probably eventually cave to Amazon's pricing demands which will eventually lead to lower salaries and layoffs in the publishing industry as well as fewer books being published. It could also lead to further consolidation among the publishers just as it has in the record industry where there are now only three major record companies in the U.S.
Book Expo begins next week in NYC. I bet they'll be a lot of discussion about Amazon's dealing with publishers at the show.