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Old 12-12-2010, 12:57 PM   #1
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Is the Agency Model price fixing and subject to U.S. laws and treble damages?

The Agency pricing model, somewhat forced on Amazon by the major publishers in the U.S., definitely has aspects that are essentially price-fixing. If you tried to enforce the pricing on printed books, you'd put yourself in a somewhat "adverse legal environment", I'm not sure why that shouldn't also apply to eBooks. And the publishers pretty obviously acted in a collusive fashion, so Rico could probably come into play, monopoly laws, so the increased prices could be subject to treble damages (and not just on eBooks, but on physical books that were judged as sold because the eBook was priced too high). And the limitations on book resales, pretty much the same thing, since it's a further limitation beyond the physical model. It seeks to keep the backlist revenues higher, as via the Agency model, the eBook is still being priced higher than the paperbacks, although it's far cheaper to produce and distribute. Is this the next Tobacco or asbestos for U.S. lawyers, seeking to find a good case and a nice class action law-suit? Just might be. If they found a smoking gun in the form of some meetings of the book executives to discuss the Agency model and getting eBook pricing higher, and you know those went on privately and with Apple, you could pry those out as a lawyer with discovery and/or side-deals to admit it first and get a reduction of damages, then you would have all the elements. And you have the monopolistic act as each withdrew their eBooks from Amazon, until it caved. Just sue in a plaintiff friendly state, pick some kid or somebody trying to get through college by working, show how much they were damaged by the greedy publishers in NY and Boston, etc. Maybe some nice librarian saying how in tough times, they cannot afford to buy books, and eBooks would have been perfect, but the limitations just kept increasing the poor publicly funded libraries costs. You can almost see this one coming.
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Old 12-12-2010, 01:31 PM   #2
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The thing is though, try finding a politician that doesn't have a book deal. They don't even have to go through lobbyists.
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Old 12-12-2010, 01:42 PM   #3
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Quote:
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The thing is though, try finding a politician that doesn't have a book deal. They don't even have to go through lobbyists.
In terms of a lawsuit, it's the 3rd. rail of American of the system, it actually does very little to have politicians on your side, might actually hurt you. Politicians here are not popular. Any one that spoke out on the lawsuit, and had a book deal, would be viewed as an involved party, part of the system of price fixing that the lawsuit is against. The lawyers might even pick an unpopular politician or two to drag into the case on subpeona, especially if they had met with the book publishers on eBooks or agency model or even how much their book would be priced at.
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Old 12-12-2010, 01:51 PM   #4
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An interesting blog:

http://seekingalpha.com/article/2087...e-ebook-market

shows that at least one attorney general is looking into the Agency model. It was as much the attorney generals as anyone that eventually broke the Tobacco lawsuit dam, and the amounts involved eventually were in the $billions.
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Old 12-12-2010, 01:59 PM   #5
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Another point of light, this time the Connecticut Attorney General:

http://www.walletpop.com/2010/08/04/...-fixing-probe/

I'm not sure I would have included Amazon in what might eventually bridge from an investigation into a lawsuit, seems like it got dragged into the Agency model kicking and screaming, but Connecticut is where a lot of the NY based publishers live, so they'll probably said "The Devil made me do it" (price fixing). The devil to them is of course Amazon. So it could get interesting...

Still, I see this playing out more for the free market lawyers in private practice. The AGs are in it partly for the politics, it plays well for them (big companies taking from the small, defenseless consumer (aka the voter)), but the financial benefits accrue more to the big-Tobacco type lawyers.
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Old 12-12-2010, 02:06 PM   #6
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Of course, the publishing industry isn't quite the cash cow that big tobacco is, so there's less incentive to go after them.

That said, I'm not entirely convinced that the agency model fits into the price-fixing laws, since the sellers aren't actually buying and reselling the product. It's more akin to consignment sales. The retailers are just contracting to act as an agent for the publisher. A real estate agent can't arbitrarily set the price on a property without the seller's consent, no matter how many realtors have the listing.
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Old 12-12-2010, 02:08 PM   #7
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Another article on the last:

http://www.ipadweek.ly/2010/08/price...kindle-ibooks/
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Old 12-12-2010, 02:34 PM   #8
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Quote:
Originally Posted by jasonkchapman View Post
Of course, the publishing industry isn't quite the cash cow that big tobacco is, so there's less incentive to go after them.

That said, I'm not entirely convinced that the agency model fits into the price-fixing laws, since the sellers aren't actually buying and reselling the product. It's more akin to consignment sales. The retailers are just contracting to act as an agent for the publisher. A real estate agent can't arbitrarily set the price on a property without the seller's consent, no matter how many realtors have the listing.
Yes, that's essentially the definition of the Agency model, and the Publishers will of course try to make that case, but where it fundamentally falls apart is that there was a previous pricing model where they did not control retail prices, and they forced Amazon into the newer Agency model. Thus they acted in a collusive and monopolistic fashion, largely washes away any arguments they might have had. In the U.S., you cannot force licenses or consignment agreements solely to enforce prices, that won't hold up as a defense in court. Even in the U.S., an agent can cut their commission to make a deal, which is essentially precluded by the fixed eBook prices of the Agency model. Properly executed collective marketing agreements did hold up until fairly recently, although Intel recently lost some cases on what were deemed essentially kickbacks to maintain their prices. However, since Amazon (and B&N and Apple and Sony) does the distribution, not the publishers, they are not acting purely as agents, they have value add in the chain between the publisher and the buyer. And mostly the plaintiff lawyers can shop jurisdictions and courts to bring the lawsuit, so all they have to do is find one that's friendly to the legal theories behind their case. This isn't as big as tobacco, $-wise, but it's not small, lots of books are sold (and I described the play to turn it into whole market instead of just eBooks), and it would be much cheaper to litigate, since the price-fixing is recent, and all the main parties are around to testify, no nasty government labels saying "Warning: Purchasing of this price fixed eBook product may be Dangerous to your financial health" to get in the way of your suit, the potential defendants have some pretty deep pockets and reasons to settle quickly, good bang for the buck lawsuit wise.
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Old 12-12-2010, 02:39 PM   #9
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Another, more recent, price-fixing observation:

http://www.betanews.com/joewilcox/ar...ces/1291669402
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Old 12-12-2010, 04:50 PM   #10
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We're living in a world increasingly run by monopolies, mergers, and price-fixers. Nobody in power has any interest in breaking them up. It is my belief (and I'm not an anti-corporate stooge activist), that this is one of the key problems the world is all screwed up.
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Old 12-12-2010, 08:42 PM   #11
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We're living in a world increasingly run by monopolies, mergers, and price-fixers. Nobody in power has any interest in breaking them up. It is my belief (and I'm not an anti-corporate stooge activist), that this is one of the key problems the world is all screwed up.
add to that the current mindset of the cookie-cutter MBA's where one must continue to accelerate revenue growth. When you read buzz-word phrases like year-over-year and quarter-over-quarter read that as "....we must increase the rate we profit by every year..." The target appears to be at minimum 10% which is actually inflationary in many ways since this usually requires increasing the fees or charges to existing customers for products and/or services. In the end this sort of practice is simply unsustainable over the longer term. Look at the economies of the world to see this. In larger countries which were once the bread and butter of the corporate world since most in those economies live for the corporation, they are all in or near total financial collapse. It is simply because there is no more money to be squeezed out of those economies.

Once was a time that simply earning a profit every year was the sign of a solid company in it for the long haul. Now unless that company is constantly increasing their growth rate which is different from simply increasing growth and actually, after a point, untenable as far as I can see, but today just being a steady profit making company will get you fired. You must accelerate the rate of growth. Remember back to your basic exposures to log curves and statistics in high school or college, even your biology courses where comes a point in a population that it can no longer remain stable if that population is constantly increasing it's rate of growth. What happens? The population either dies off totally or it turns on itself until the competition for survival becomes normalized and near static again. Applying the same logic to the finite economies of the world would be an application to this system.

So, it seems things will need to collapse totally in order to return to a more stable daily existence. Sadly I know I'll be long dead before this happens.
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Old 12-13-2010, 08:55 AM   #12
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No, it's not price fixing.

• The publishers are not collaborating with one another to keep a lock on the industry. As evidenced, at least in part, by some larger publishers and numerous medium and small publishers not adopting the agency model.
• There is still plenty of competition going on.
• At least two major outlets asked for this type of pricing (Apple, Google).
• There's no outcry over software writers and publishers directly setting prices (e.g. Android Market, Apple's App Store)
• People were perfectly happy with authors setting prices for self-publishing (Smashwords, Amazon's DTP etc) or with Amazon demanding not to be undersold on DTP titles.
• People were perfectly happy when Apple "fixed prices" on digital music downloads at $1 per song.
• Walmart routinely demands that vendors hit specific price targets, which are then applied nationally in the largest company in the US. Isn't that also "price fixing?"
• Amazon has bullied the publishers for years, and got a taste of their own medicine. Characterizing them as a poor little victim of the big evil publishers is laughable.
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Old 12-13-2010, 10:21 AM   #13
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Hmmm... there are several US state attorney generals that don't completely agree with you. We shall see.
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Old 12-13-2010, 12:01 PM   #14
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The agency arrangement isn't price fixing, and the two (really one) attorney general who seem to be investigating this don't argue that it is.

(The "one" AG is the Tex. AG, who started an investigation back in June. CT AG Blumenthal also seemed to have started an investigation, but all he really did was call publisher reps to meet with him in August and issue a press release...not coincidentally in the midst of his campaign for the senate, which he won in the November election. I doubt that this was really an "investigation.")

The position of the TX AG isn't that the agency model is price fixing. Agency agreements aren't price fixing anymore than the wholesale model is price fixing (i.e., where the publishers "fix" the wholesale price of their goods).

The Tex. AG's concern is with the provisions of Amazon's and Apple's agreements with the publishers that prohibit the publishers from selling their books to other competitors at a lower cost. In other words, these "most favored nation" provisions might constitute price fixing. But the agency model doesn't.

The Tx AG is also looking into whether Amazon's "loss-leader" strategy of selling some books below cost (in the pre-agency days) may have been an antitrust violation as well.

Here's the most recent article I could find on Texas's investigation:

Quote:
On November 4, three Texas-based independent booksellers met with the antitrust division of the state Attorney General's office, in Austin, Texas, to discuss the digital content agency model and the dangers posed by below-cost pricing. Booksellers participating in the meeting were ABA Board member Steve Bercu of BookPeople in Austin, Valerie Koehler of Blue Willow Bookshop in Houston, and Claudia Maceo Sharp of The Twig Book Shop in San Antonio.

… The booksellers stressed to the antitrust division their support for the agency model for the sale of digital content because it prevents below-cost pricing and loss-leader marketing by online superstores seeking to acquire market share and to concentrate power. They also shared their belief that the agency model allows for a wide diversity of retailers in the marketplace and that it benefits consumers because it ensures the continued distribution of books by small, independent businesses with a wide variety of viewpoints.
Not really a ringing condemnation of the agency model.
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