Quote:
Originally Posted by LakeLoon
Since the term "price-fixing" is being thrown around, we should be careful about how we're using it. The "Agency 5" agreements may indeed restrain a certain amount of competition, but not in a way that is normally termed "price-fixing."
We normally think of anticompetitive agreements, such as price-fixing, in two ways: "horizontal" and "vertical." A horizontal restraint is one between direct competitors: for example, between different publishing houses. If two publishers said "we're both going to charge $20 for every new release," that would be a naked horizontal price-fix and almost certainly illegal per se.
A "vertical" agreement involves different steps of the production or distribution chain. For example, if manufacturer A makes widgets, and sells them to retailer B, and they agree that B will resell those widgets for $20, that is a vertical restraint. These types of agreements are sometimes illegal, but not automatically. The circumstances of the agreement must be examined carefully, and various factors considered, pro and con.
An "agency" agreement is a type of vertical arrangement that is often considered legal. An agent acts on behalf of someone else; it does not have independent authority. The publishers hiring Amazon as an agent is a little like hiring a guy off the street and telling him "go sell these books to whoever you can for $20." If the guy sold the books at a discount, he'd be violating the terms of his agency agreement.
There appears to be no evidence (of which I'm aware) that the prices of ebooks are uniform across publishers--in fact, the opposite is true: we have more variety now. Nor do I know of any direct agreements between Amazon and another retailer (e.g., Amazon and B&N agreeing with each other on retail prices). So, we do not appear to have a case of "horizontal" price-fixing here. Rather, we have a vertical restraint in the resale market. Amazon, by switching from an independent reseller to an agent, no longer has the ability to compete with other resellers by cutting prices through reducing its own margins.
However, it's important to note that no other retailer sells Kindle-format ebooks anyway. There is no direct competition to Amazon, only indirect competition from paper books and ebooks in incompatible formats. And the publishers have a legal monopoly, via the copyright laws, on their content, so they have more leeway regarding how their works are ultimately sold.
Now, with all of that said, I find the "Agency 5" agreements unfortunate, because so far they have led to price increases in some cases. I prefer Amazon's having the ability to cut prices by reducing its margins; I like lower prices. Accordingly, I think it's appropriate for regulators to go through the (detailed, fact-dependent) analysis of whether these restraints unreasonably harm competition. But calling them "price-fixing" is not really accurate, unless there's something going on we don't know about.
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Interesting explanation of the subtleties of these laws. I would ask how the Maryland consumer protection law wrt MAP agreements might apply here.
As a reference, it's one I had on hand:
Quote:
http://online.wsj.com/article/SB124087840110661643.html
The Wall St Journal
Apr 28, 2009
In a move that could lead to lower prices for consumers across the country, Maryland has passed a law that prohibits manufacturers from requiring retailers to charge minimum prices for their goods.
The law, which takes effect Oct. 1, takes aim at agreements that many manufacturers have been forcing on retailers, requiring them to charge minimum prices on certain products. The practice has surged since a controversial 2007 U.S. Supreme Court ruling that no longer makes such agreements automatically illegal under federal antitrust law.
Under the new state law, retailers doing business in Maryland -- as well as state officials -- can sue manufacturers that impose minimum-pricing agreements. The law also covers transactions in which consumers in Maryland buy goods on the Internet, even when the retailer is based out of state. That could potentially affect manufacturers throughout the country.
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Henry Posner
B&H Photo-Video
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Link to original:
http://forums.dpreview.com/forums/re...8&changemode=1
The thing about the law is it applies to internet merchants selling to Maryland residents. Far as I know it has yet to be run through the courts but I do remember that WSJ article referenced in the above quote indicated several other states had similar laws in the process of being voted on which were likely to pass easily. But I haven't followed it since last year.
And yes, I know it's not a Federal law but due to the inclusion of internet merchants there is the potential for other states to simply add the same law on their books. I understand it's more complicated but thought it was worth mentioning here.