Nine independent publishers have combined to file joint comments objecting to the pending settlements of the Department of Justice's lawsuit with Hachette, HarperCollins, and Simon & Schuster related to e-book pricing. The publishers noted that while they continue to sell e-books under the wholesale model, they have “benefitted significantly”--along with authors, booksellers and consumers,-- from the ability of the Big Six publishers to adopt the agency pricing model with Amazon, since those arrangements, “contributed dramatically to increased competition and diversification in the distribution of e-books.”
In their comments, the publishers argue that the ruling would effectively ban the use of agency pricing at the three houses, something that would “harm rather than enhance competition—allowing one large retailer (Amazon) to regain a monopoly or near monopoly position through below-cost pricing.” Once that monopoly is achieved, the publishers wrote, Amazon would be unlikely to continue to indefinitely price e-books at below cost since “basic economics dictates that decrease competition will ultimately lead to higher prices, not lower prices.”
To buttress its argument that Amazon has used its market power, and what they contend is its ability to absorb losses to drive out competition, the publishers -- Abrams Books, Chronicle Books, Grove/Atlantic, Inc., Chicago Review Press, Inc., New Directions Publishing Corp., W. W. Norton & Company, Perseus Books Group, The Rowman & Littlefield Publishing Group, Inc. and Workman Publishing-- pointed to a study they did among six of their members on Amazon’s pricing policies. In comparing the discounts on over 600 titles for which there was a corresponding hardcover, the publishers found that the average discount at which Amazon was selling each of those titles was 61% in March 2012, up from 49% in November 2010 and 53% in August 2011. Using the average rule of thumb that the average wholesale discount is 50%, the publishers stated that “where it can (i.e., where there are no agency agreements), Amazon engages in widespread below-cost pricing.” It is the agency model, that by preventing Amazon from using its scale to price e-books below cost, that has allowed other companies to compete for the distribution of e-books “and for the sales of physical books through bricks and mortar retail.”
The publishers, who noted that they were never contacted by the DoJ to get their views on industry issues, concluded by stating that if the defendant publishers did indeed collude, competition should be restored in a way that does not ban the use of the agency model, something that would “harm innocent third parties such as the Independent Book Publishers, other trade book publishers, authors, booksellers and consumers.”
