The Federal Trade Commission, supported by 17 state attorneys general, finally filed its long-awaited antitrust lawsuit against Amazon yesterday. In a 172-page complaint, the government alleged that the e-tailer “uses a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power.” The use of that power, the government continued, allows Amazon “to stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon.”
The immediate industry reaction to the news of the suit was uniform: “What took so long?” Or, in the words of Melville House publisher Dennis Johnson, that it was “about fucking time.” An industry lawyer, who wished to remain anonymous, gave a more nuanced view in wondering why it took the government so long to act, pointing to the infamous buy button case in 2010, when Amazon pulled Macmillan’s buy buttons in a dispute over e-book terms. (The fight is detailed in former Macmillan CEO John Sargent’s new book, Turning Pages.)
Even with Amazon’s dominant position over the sale of e-books and print books, the suit doesn’t mention books, which, of course, were Amazon’s first line of business. The suit does, however, highlight Amazon’s hold over the companies who use its online marketplace to sell a range of products, including books, to consumers.
Jed Lyons, CEO of Rowman & Littlefield, was skeptical about how the case will play out, pointing to the government’s “sketchy” track record in lawsuits against major corporations. But even though the FTC lawsuit is more about third party sellers, Lyons said, if “it shuts down unauthorized sellers of new books, which we know are not new books, then that will be a win for book publishers.”
Independent booksellers, which were the first physical retailers impacted by Amazon and the steep discounting on books it employed to attract customers, praised the FTC’s long-awaited action. The lawsuit, said ABA CEO Allison Hill, “is good news for indie bookstores and good news for all small business. ABA applauds the FTC and states’ effort to release Amazon’s stranglehold, and we look forward to the transparency this lawsuit will provide into Amazon's business practices.”
In a letter to members, Hill pointed to ABA’s long struggle to get the government to investigate ABA’s policies. Those efforts included a recent trip to Washington, where she and other ABA officials met with the government to discuss Amazon’s anticompetitive behavior. Other industry groups, including the AAP and Authors Guild, have also long advocated that the government investigate many of Amazon's practices.
No bookseller has been more active in attacking Amazon’s book practices than Danny Caine, owner of the Raven Book Store in Lawrence, Kans., and author of How to Resist Amazon and Why. Caine acknowledged that, “while the suit doesn't go after Amazon's book business in particular, it can still do a lot to level the playing field. For one thing, it can prove that Amazon is acting illegally or anti-competitively via tactics like preferencing its own products, placing unfair pressure on sellers who list their products for lower prices elsewhere, and forcing sellers and customers onto their Prime platform.”
The head of one independent publisher, who wished to remain anonymous, said that if the government prevails, “it could be very beneficial to publishers.” She then laid out the many challenges publishers face in dealing with Amazon: “I think [the suit] could affect tactics around the negotiation of discounts and fees, etc., with publishers. This would also be a good thing. The negotiations over the years between publishers and Amazon have been brutal. At first, Amazon got big discounts since they were buying non-returnable. Then, predictably, they started returning books and kept the discounts."
She continued: "Publishers were simply too fearful and too powerless to stand up to their biggest customer. And then Amazon started added all manner of fees, effectively increasing their discount even further. To the extent that Amazon was able to discount books to lure customers away from other booksellers, publishers were effectively subsidizing Amazon's growth and dominance while watching their margins erode.”
Melville’s Johnson made many of the same points, lamenting that the government’s lack of action up until now and allowing Amazon to use books as a "loss leader" got the company to where it is today. The government further strengthened Amazon’s hand, Johnson maintained, when it sued the major publishers over their e-book pricing policies. That decision “really pounded Amazon's suppliers, and thus altered the business of making and selling books, probably irrevocably.”
While Johnson holds out hope that the government might prevail, he wonders what action it can take to reverse the damage already done. "I can't imagine Amazon being so crippled as to allow for a serious competitor to arise, at least so far as the book business is concerned," he said.
Caine had a more hopeful point of view: “By limiting Amazon's anticompetitive toolkit, all retailers will feel the benefit of a more level playing field, including booksellers. But no matter what happens, today's suit is great news. Best case scenario? Amazon gets broken up to ensure they have to fairly compete with rivals. Worst case scenario? Even if the suit doesn't go very far, Amazon self-regulates due to increased government pressure, and discovery exposes data to confirm information about their tactics that we've long suspected. Though not ideal, even that would be good news. A big day for people who believe in a level playing field!”
The FTC, along with its state partners, are seeking a permanent injunction in federal court that would prohibit Amazon from engaging in what the government called its "unlawful conduct," and would "pry loose Amazon’s monopolistic control to restore competition.” Amazon has denied all charges, and in a blog post sent to its partners contends that if the government prevails, consumers will suffer.
