Quote:
Originally Posted by stonetools
Well, Amazon was engaging in predatory pricing of ebooks so as to establish a monopoly in the eBook retail market. That's a bit different from just being a more efficient retailer.
That's what the publishers were pushing back against. Now of course, most folk here would like to just skip over Amazon's behavior and pretend that wasn't happening, but this is the publishers' stated reason for moving to the agency model.
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In the US, it is not at all clear that what Amazon did was actually "predatory pricing." In fact, it's fairly clear that it wasn't. Amazon didn't price its e-books below its costs; it only priced a handful (20-30) of its 500,000 - 700,000 e-books (at the time) below its costs. Second, to show predatory pricing (in the US), you also have to show that the result of the below-cost pricing was likely to be the monopolization of the market *followed by* the ability of the seller to raise prices high enough *above* the market rate to make supracompetitive prices sufficent to recoup the amount lost due to the below cost pricing.
And of course it's probably relevant in some context that Amazon's pricing was largely done to create a real e-book market in the first place. It's not like Amazon, B&N, and Kobo all had similar pricing and then Amazon dropped its bestseller prices to $10; Amazon's bestsellers were at $10 before the Nook or Kobo existed.
There may be countries were merely selling any item below cost is illegal predatory pricing. But that's not the case in the US, where the supreme court said (in the lead predatory pricing case):
"Without it [monopolization and recoupment], predatory pricing produces lower aggregate prices in the market, and consumer welfare is enhanced. Although unsuccessful predatory pricing may encourage some inefficient substitution toward the product being sold at less than its cost, unsuccessful predation is in general a boon to consumers."