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emellaich · 08-10-2011, 08:49 PM

So, I would be happy to hear from some lawyers on this, but here is my understanding/guess.

1) It used to be illegal for manufacturers to set fixed retail prices, but as of a recent court case (was it as recent as 2004??) it is now OK.

2) Furthermore, as I understand the term 'agency' pricing, it means that Amazon (and Apple) are not really retailers selling a product. The actual seller is now the publisher and Amazon is acting as a distributor for delivering the product. This means that the manufacturer sets the price and negotiates a handling fee (30 percent) that it pays the distributor (Amazon).

Given points one and two above, I believe it would be quite possible / legal for a publisher to decide that it will no longer sell/license electronic books to retailers. There is nothing in the law that forces a company to sell a product if it doesn't want to. Instead the publisher will contract with sales agents to provide a distribution service. For this reason, I would expect the company to establish the same business model across all distributors. Furthermore, it is quite understandable that the commission is the same 30%. The publisher will negotiate one benchmark deal that others will follow. Even if either Apple or Amazon got a special percentage, each of them are large enough to demand that they also get the same percentage.

However, there is an anti-trust question here. Prices can not be set in collusion by a set of manufacturers. It does seem that there are standard price points that the publishers all use. Furthermore, to the extent that these price points are negotiated (even with Apple) to end up at a common point, it may show collusion. The later publishers may have been 'forced' to agree to prices that other publishers already agreed upon.

Anyway, I'm not arguing whether agency pricing was a 'smart' move, or the resulting prices are correct. Frankly, I think the publishers should have been happy with Amazon subsidizing the publisher business model. I personally would have been more happy as a consumer.

In my (uneducated) opinion; however, agency pricing and similar deal structures across entities is legal. However, if the specific price levels match across publishers, then there may be legal issues.

08-10-2011, 08:49 PM	#27
emellaich Wizard Posts: 1,101 Karma: 4388403 Join Date: Oct 2007 Device: Palm>Ebookman>IPaq>Axim>Cybook>Kndl2>IPAD>Kndl3SO>Voyager>Oasis	So, I would be happy to hear from some lawyers on this, but here is my understanding/guess. 1) It used to be illegal for manufacturers to set fixed retail prices, but as of a recent court case (was it as recent as 2004??) it is now OK. 2) Furthermore, as I understand the term 'agency' pricing, it means that Amazon (and Apple) are not really retailers selling a product. The actual seller is now the publisher and Amazon is acting as a distributor for delivering the product. This means that the manufacturer sets the price and negotiates a handling fee (30 percent) that it pays the distributor (Amazon). Given points one and two above, I believe it would be quite possible / legal for a publisher to decide that it will no longer sell/license electronic books to retailers. There is nothing in the law that forces a company to sell a product if it doesn't want to. Instead the publisher will contract with sales agents to provide a distribution service. For this reason, I would expect the company to establish the same business model across all distributors. Furthermore, it is quite understandable that the commission is the same 30%. The publisher will negotiate one benchmark deal that others will follow. Even if either Apple or Amazon got a special percentage, each of them are large enough to demand that they also get the same percentage. However, there is an anti-trust question here. Prices can not be set in collusion by a set of manufacturers. It does seem that there are standard price points that the publishers all use. Furthermore, to the extent that these price points are negotiated (even with Apple) to end up at a common point, it may show collusion. The later publishers may have been 'forced' to agree to prices that other publishers already agreed upon. Anyway, I'm not arguing whether agency pricing was a 'smart' move, or the resulting prices are correct. Frankly, I think the publishers should have been happy with Amazon subsidizing the publisher business model. I personally would have been more happy as a consumer. In my (uneducated) opinion; however, agency pricing and similar deal structures across entities is legal. However, if the specific price levels match across publishers, then there may be legal issues.