Earlier this month, the publisher Macmillan finally threw in the
towel and settled a Justice Department antitrust suit accusing
it and four other major publishers of conspiring with Apple to
raise the price of e-books by changing the pricing model
previously imposed on publishers by Amazon. As my Reuters
colleague Andrew Longstreth has reported, the Macmillan
settlement leaves Apple as the only remaining defendant in the
Justice Department case, which is headed for a June trial date.
Justice is only asking for injunctive relief, but if Apple
loses, it will face liability for steep damages claims by state
attorneys general and private e-book buyers.
Apple and the publishers have long contended that the real
villain in the e-books business is Amazon, which controls
something like 60 percent of the market. According to Apple and
the publishers, when Amazon introduced the Kindle e-book reader,
it insisted upon a wholesale pricing model that permitted the
bookseller to sell popular titles at below-cost prices, with the
goal of establishing monopoly of the e-books market. Apple's
agency model, in this version of events, was a response to
Amazon's predatory pricing - an attempt to break Amazon's
stranglehold.
Unfortunately for Apple (and the hundreds of public
commenters who supported its view of Amazon), the Justice
Department doesn't regard Amazon as an e-books predator. The
Antitrust Division disclosed last summer that it investigatedAmazon as part of its e-books probe, but decided not to bring a
case. "In the course of its investigation, the United States
examined complaints about Amazon's alleged predatory practices
and found persuasive evidence lacking," the government said in a
response to objectors to its initial settlement with three
publishers. "No objector to the proposed final judgment has
supplied evidence that, in the dynamic and evolving e-book
industry, Amazon threatens to drive out competition and obtain
the monopoly pricing power which is the ultimate concern of
predatory pricing law."
Tell that to a class of independent bricks-and-mortar
bookstores that sued Amazon last week for antitrust violations.
In a complaint filed in federal court in Manhattan, the
bookstores' lawyers at Blecher & Collins claim that Amazon and
six publishers violated the Sherman Act when they entered
agreements to distribute e-books through Amazon Kindles. Those
agreements, which supposedly permitted Amazon to use "digital
rights management access control technology" to restrict e-books
from being read via any devices except Kindles, were an illegal
restraint of trade, according to the complaint, which also
accuses Amazon of monopolization and attempted monopolization.
I asked Alyson Decker of the Blecher firm whether the
bookstores' case suffers from the Justice Department's decision
not to pursue Amazon. She said no, that the allegations in the
new suit don't involve the predatory pricing allegations Justice
investigated, but alleged restraint of e-books competition from
independent booksellers. The key to the new case, she said, will
be the contracts between Amazon and the publishers, which have
not yet been publicly disclosed. Decker said there's no irony in
alleging a conspiracy between Amazon and the publishers to
establish the Amazon market dominance that the Justice
Department claims to have been the target of the very same
publishers' conspiracy with Apple. If you believe the
allegations in both the new complaint and the Justice Department
case - a big if, of course, considering that the publishers seem
to have considered Amazon a bully, not a co-conspirator - major
U.S. publishers in the e-books era have behaved like lost
puppies, willing to go home with whatever master offers a bone.
I called Amazon for comment but didn't hear back.
(Reporting by Alison Frankel)
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