After receiving 868 comments regarding its proposed settlement with Simon & Schuster, Hachette and HarperCollins in its e-book price fixing lawsuit, the Department of Justice has determined that the proposed “final judgment” provides “an appropriate and effective remedy” for the antitrust violations alleged in its complaint “and therefore is in the public interest.” It dismissed critical comments to the settlement as largely being submitted “by those who have an interest in seeing consumers pay more for e-books, and hobbling retailers that might want to sell e-books at lower prices.”
The DoJ further noted that many of the critical comments were more born from frustration with the “evolving nature of the publishing industry” in which e-books are putting pressure on the prevailing model that is built on physical supply chains and bricks-and-mortar stores. “Many critics of the settlements view the consequences of the conspiracy—higher prices—as serving their own self-interests, and they prefer that unfettered competition be replaced by industry collusion that places the welfare of certain firms over that of the public. That position is wholly at odds with the purposes of the federal antitrust laws—which were enacted to protect competition, not competitors,” the DoJ lawyers wrote.
The DoJ response showed little interest in comments from Barnes & Noble, Books-A-Million, the ABA and the Authors Guild that the “collusive limits” were a necessary response to Amazon’s anticompetitive behavior. Observing that “there is no mistaking the fear that many of the commenters have of the prospect of competing with Amazon on price,” the DoJ noted that low prices and fierce rivalries are among the core ambitions of free markets and that contrary to many commenters views, “the goal of antitrust law is to use rivalry to keep prices low for consumers’ benefit. Employing antitrust law to drive prices up would turn the Sherman Act on its head.”
It called arguments that Amazon will eventually monopolize the e-book market “highly speculative at best” and noted that with Apple, Microsoft, Google and Sony all in the e-book market “there is no shortage of competitive assets” being brought to bear on the e-book industry.” The DoJ said charges of predatory pricing by Amazon lacked any persuasive evidence and the DoJ repeated that based on its investigation and review of data from Amazon and others that “from the time of its launch, Amazon’s e-book distribution business has been consistently profitable even when substantially discounting some newly released and bestselling titles.” Its stressed that under the settlement, publishers have the right to limit the annual total discounts retailers give on e-books to the discount retailer’s receive from publishers in order to avoid predatory pricing. “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,” the Do J determined. “The presence and continued investment by technology giants, multinational book publishers, and national retailers in e-books businesses renders such a prospect highly speculative.”
While the DoJ was dismissive of critics of the settlement it embraced the opinions of some of the 70 comments that backed the deal. The DoJ cited comments from the Consumer Federation of America whose analysis, the DoJ wrote, “debunks the procompetitive benefits of collusive pricing,” while also concluding that the agreement is not overbroad. The CFA said that contrary to many commentators’ position, many new competitors had entered the e-book market before the agency model went into effect, countering the argument that is was the implementation of the agency model that led to a reduction in Amazon’s share of the market.
The DoJ also noted that not all authors objected to the settlement, in particular self-published authors. It cited arguments from David Gaughran, writing on behalf of 186 self-published authors who thanked Amazon for “creating, for the first time, real competition in publishing by charting a viable path for self-published books” away from the hegemony of traditional publishers. He compared publishers and literary agents to “all kinds of middlemen which have gone from being indispensable to optional with the rise of the Internet.”
In response to arguments that books and publishing need to be protected because of the role they play in the culture of the country, the DoJ said that any arguments that a particular industry deserves a blanket exemption from the antitrust laws “should be directed to the Congress.”