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If the publishers are paid on the wholesale model, where they make a certain amount per sale, regardless of Amazon's price, they'd have to track all their books to find out if any are being sold below retail price--and then they'd need a way to force Amazon to hand over the record of how many they sold at the lower price.
Since Amazon's not a party to the lawsuit, I don't see how they can be required to comply with this. The DOJ doesn't have the ability to require businesses to change their record-keeping and accounting methods because someone else was found guilty of breaking a law.
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EW puts her finger on a major problem with the settlement: the enforcement mechanism. Shatzkin (
ahem! ) expands on this. Let me repost from his letter to the DOJ:
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My second concern relates to the terms of the proposed settlement with three publishers which the Court is being asked to approve. In apparent partial recognition of the dangers of discounting by retailers, particularly the deep-pocketed Amazon, the settlement limits a store’s discounting to the total amount of margin it earns from a publisher within a year. As I understand it, that means that if a store were to sell $10-million of a publisher’s books in a year, the store could not discount more than the $3 million margin (assuming a 30% agency “commission”) it would have earned across all the sales it made.
This isn’t bad as a principle, and perhaps some variation of it could even address the concern I express about enabling publishers to sell direct. However, translating the principle into action is complicated. It will require reliable data collection, forecasting, and some means of enforcement. I see none of those elements spelled out in the settlement agreement.
At a minimum, it would seem that ebook retailers would have to report actual sales prices of all relevant transactions to the publishers, or have them summarized in a clearly defined and agreed-upon way. This is not data that any retailer, to my knowledge, now shares with its trading partners although, of course, the publishers monitor prices for compliance with publisher-set agency prices.
But even with the data being provided, when one comes to the last period of the year it will require forecasting and close monitoring to keep track of where things stand in every instance where a retailer is anywhere close to its contractual limit with any publisher.
And, then, what is the penalty if a retailer exceeds its discounting allowance? And who gets compensated? The publisher? Other competing retailers? The other publishers whose sales were compromised by the excessive discounts given to a competitor’s ebooks?
In the extremely contentious environment that exists in our business at the moment, I submit that these matters need to be clearly defined in advance if there is any hope for this solution to lead to anything except more litigation.
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LINK
Boil it down to bullet points :
1.The publishers need detailed sales data to calculate whether a publisher exceeds its"discount quota".
2. The retailers don't provide such data now, and won't, unless ordered by the courts.
3. The courts don't have the legal authority to order retailers to do this, since they are not in the lawsuit.
4. Even if the publisher could correctly calculate the "discount quota", its unclear what the remedy is.
5. Even if 1-4 could be fixed, its unclear who would have a right to recover.
Now can all that be fixed? Maybe-there's some smart folks over at the DOJ. What's clear though, is that there's more work to do to make the settlement into a legally enforceable process.
Why does all this matter? Because the settlement must be accepted by the judge in order for it to go into force.The judge may just reject the settlement if she thinks its going to unenforceable or otherwise unacceptable. An example of this is the Google book-scanning case. The judge has twice rejected settlement proposals and has cleared the way for the lawsuit to proceed.
Until the judge in the current case accepts the settlement, all existing arrangements will remain in force-which means no changes in prices . The process of settlement renegotiation may take months, or even years-assuming that they can fix the problems detailed above .