PublishersLunch
The Wall
Street Journal says that the Justice Department's lengthy investigation of
the agency model for ebook pricing has escalated, with the government
threatening to sue the "Agency Five" publishers and Apple "for
allegedly colluding to raise the price of electronic books, according to people
familiar with the matter." The paper says that "some but not
all" of the publishers involved have held settlement talks with Justice.
Those same people said "the Justice Department believes that Apple and the
publishers acted in concert to raise prices across the industry, and is
prepared to sue them for violating federal antitrust laws."
One publishing executive says the
discussions have been underway for a long time and "negotiations have
taken many turns." Another executive said "a settlement is being
considered for pragmatic reasons but by no means are we close." That
person added, "You have to consider a settlement, whether you think it's
fair or not." Under the Sherman Act, corporations face a maximum fine of
$100 million for violations. A Justice Department "antitrust primer"
notes that "in addition, collusion among competitors may constitute
violations of the mail or wire fraud statute, the false statements statute, or
other federal felony statutes."
Among the possible solutions, "one
idea floated by publishers to settle the case is to preserve the agency model
but allow some discounts by booksellers, according to the people familiar with
the matter." The paper notes that BN ceo William Lynch is said to have
testified to Justice that the agency model promoted a marketplace that provides
consumers with choices, arguing that without it a single player--the one that
can afford to lose money, using what some argue is predatory pricing--would
have an even more dominant market share.
In an "antitrust
primer," Justice maintains that proving illegal price-fixing
"does not require us to show that the conspirators entered into a formal
written or express agreement. Price fixing, bid rigging, and other collusive
agreements can be established either by direct evidence, such as the testimony
of a participant, or by circumstantial evidence, such as suspicious bid
patterns, travel and expense reports, telephone records, and business diary
entries."
There has been tension in the
interpretation of the Sherman Act ever since the Supreme Court's 2007 ruling in
the Leegin Creative Leather Products case. The Court reversed almost 100 years
of judicial precedent that found vertical price restraints were illegal per se,
and substituted a "rule of reason" and recognized retail price
maintenance can in some cases have a "procompetitive effect that are in
the consumer's best interest."
Meanwhile, Google Play's new promotion
offering a different ebook every day for 25 cents is doing wonders for Amazon.
Jonathan Safran Foer's Extremely Loud and Incredibly Close rose to No. 1 on the
hourly Kindle bestseller list when Amazon matched the 25-cent price and is
still there, at least for now, at the revised price of $7.03. Gaining on it is
Chuck Palahniuk's FIGHT CLUB, the next Google promotion, now at No. 8 on
Amazon's list (after ranking in the 40,000s last night).
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