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The issue isn't whether it is hard to compete, but whether it is possible to compete. Given the large share of epubs, I don't think you could say Amazon's proprietary format harms the market. Given the fact that one of my online libraries only offers epub or Axis 360, leads me to think that competition is alive and well.
Remember Betamax? They didn't argue Sony was a monopoly, just came up with a better system.
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