Collusion and Business Models Are Not the Same

Earlier this year, the U.S. Department of Justice decided to sue several publishers and an eBook distributor, Apple, claiming that the named firms colluded to fix prices at a higher level.

In practice, the business model they all agreed to – agency pricing – may have helped sell some eBooks at higher prices than they otherwise might have been. It’s not clear if agency actually resulted in a widespread price increase.

A wide array of posts have commented on the folly of the DOJ’s lawsuit, many pointing out that Amazon has a de facto monopoly on eBook distribution in the United States. The common refrain seems to center around the “competition” that agency inspired by bringing Apple and others into the market.

I think the consensus commentary misses three points:

 

  1. The lawsuit alleges collusion. It doesn’t say that agency pricing is illegal; it says that several parties acted in a way that is not legally permissible.
  2. It’s true that Amazon is a dominant force. But who gave Amazon the tool to lock customers into a Kindle platform? Publishers did. They could change that without creating or maintaining agency pricing.
  3. There’s no evidence that Amazon pushed for higher prices (there may be some evidence that Apple did). In fact, in its history, Amazon has consistently pushed for lower prices. 

That Amazon is a force to be reckoned with (and not just in publishing) does not give publishers the “right” to collude to improve their lot. The agency business model may make good sense, but if publishers broke the law while putting it in place, they still broke the law.

Brian O'Leary

About Brian O'Leary

Founder and principal of Magellan Media Consulting, Brian O’Leary helps enterprises with media and publishing components capitalize on the power of content. A veteran of more than 30 years in the publishing industry and a prolific content producer himself, Brian leverages the breadth and depth of his experience to deliver innovative content solutions.