Pressure Mounting for Judge Cote to Reject E-Book Settlement

[HarryT]

Originally Posted by Kali Yuga

To put it another way: The publishers should not be prevented from using a legal pricing method as punishment for collusion, and the DoJ should not degrade competition (and inexplicably favor Amazon) in order to fix anti-competitive behavior.

Precisely. I entirely agree with you. It would be wrong for publishers to be banned from using agency pricing (a perfectly legal thing to do) as "punishment" for a different illegal act (collusion). They should certainly be fined for their illegal act, but to ban them for engaging in entirely legal business practices would be unjust.

[DiapDealer]

OK. I can see your point(s). And they seem logical (and fair) to me. The punishment/settlement should address the illegal activity (collusion) only, and not force them to abandon the legal practice of agency pricing itself.

The problem lies with the fact that many believe there would have been no way any individual publishing house would have been able to get retailers to accept an agency pricing contract with them (without the knowledge that the pendulum was swinging that way en masse). So why should they be able to retain what they never would have been able to achieve without collusion?

Surely a "legal" advantage can be voided if it was gained illegally? Otherwise these kinds of end-runs around the law would become commonplace. Maybe they already are. *shrugs*

[stonetools]

First of all, federal judges are pretty good at resisting public pressure, so I wouldn't worry over much about public pressure forcing the judge to reject the settlement. At the end of the the first linked article, there is this LINK

Given the details of the settlement and what has already occurred in the case, Judge Denise Cote is likely to approve the e-book price-fixing settlement between the Department of Justice and three of the largest U.S. publishers, according to an antitrust lawyer familiar with the case.

Nonetheless, it isn't surprising that just about every one in the book industry not named Amazon opposes this settlement. If you are a supplier to Amazon or a competitor to Amazon this settlement is for you just a bag of hurt.
IF you are a supplier, then once Amazon regains say, an 80 per cent domninance in the market, it can tell you" Sell your books us us at our price, or face financial ruin".
If you are a competitor, your choice is to match Amazon on price discountsand suffer heavy losses or not to match and lose market share. Those aren't great choices.

JUdge Cote will most likely approve the settlement, but with tweaks. Problems with the settlement include these:

What is different in this case is the prohibition that the publishers enter into an agency agreement with another bookseller, according to Cooper.

“’We’re going to make you get out of the contracts that were a key part of this alleged conspiracy,’” said Cooper, speculating on the Justice Department’s thinking. “And then we’re going to go further and say ‘you can’t have those kinds of contracts with any other retailer.’”

What’s unusual about this is that in most settlements, the Justice Department will regulate the relationships between the parties involved in the case but no others, said Cooper. This nuance could have a significant effect on the industry.

“There’s a lot of detail in the proposed settlement is that greatly restrains if not completely eviscerates the ability of these publishers to control retailer pricing,” said Cooper.

One other point in the settlement that has been discussed widely in publishing circles is the discounting clause that stipulates that Amazon and other book retailers can now control the price of the settling publishers’ books but have to break even or make a profit on the business they do with each publisher. So, Barnes & Noble, for instance, would be allowed to discount Walter Isaacson’s Steve Jobs e-book at will, taking a loss on each copy sold, but would have to make up that loss by profiting on the rest of Simon & Schuster’s catalog that it sells.

Publishing industry observers have raised many questions around this: When does the fiscal year start and stop for each of the parties? How will this practice be monitored? How are overall profits and losses on e-books going to be accounted for in terms of a large, overall digital business that sells devices and services along with digital downloads? Will there be penalties if a retailer is unable to make a profit at the end of the year after selling books at a loss throughout the year?

According to Cooper, this detail in the settlement was likely negotiated by the lawyers for the settling parties as a way to prevent predatory pricing on the part of some e-book retailers.

[DiapDealer]

** Humorous typo corrected... snarky post giggling about it made irrelevant/removed. Move along, nothing to see here. **

[stonetools]

Man, you are quick. I did correct it.

[fjtorres]

Originally Posted by HarryT

We've already discussed at length the fact that many European countries impose fixed prices for books on the grounds that doing so benefits society.

Yes.
But is that "solution" actually effective? Does the gouging of consumers to protect retailers actually protect *retailers* as the conspirator apologists claim?

You'd know better than me what the retail scene is in the UK but on this side of the pond, the case has been made (compellingly, to me) that the Price Fix conspiracy was a total backfire that froze the market of reading *devices*, foreclosing new entrants who are unable to compete with the pricing of the walled-garden devices, and effectively locking in Amazon and B&N's market share, with the primary beneficiary being Amazon. (B&N's market share is a respectable 25% or so but it didn't acually *grow* under Agency.)
So Agency protected B&N's share, protected Amazon's share, and blocked new hardware entries which means all new ebook adopters have been funneled to the *existing* vendors. And since ebookstore choice is tied to the hardware, the result is a marginalization of the device-independent ebookstores.

Even Google has been a failure and they have since discontinued their ebooks through indie bookstore efforts.

Things may be different elsewhere but here the only measurable outcomes of two years of ebook Price Fxing here are a stronger Amazon, a Nook that is still bleeding $77 million per quarter, and *less* competition for devices and ebooks.

That doesn't look to be much of an advertisement for Price Fixing.
Not. Here.

Price fixing may or not work elsewhere but *here*, as implemented, it hasn't achieved any social good and the DOJ for calling a two year hiatus in its use by the conspirators may force them to actually take a look at what they've been doing to themselves, their authors, and their readers. And maybe they'll come up with a *legal* approach to selling their product at a time of technological disruption.
Or not. Maybe they'll just go back to Price Fixing the first chance they get.

But, the tipping point is *still* coming.

And all the time they're spending looking for anti-Amazon "magic bullets" is time they're not spending preparing for the future of smaller shelf-space, more quality ebook content, perpetual backlist, and less reader herd behavior (smaller "bestseller" sales volumes).
Gouging consumers isn't going to help them there.
Price Fixing is not going to help there, either.
They're so focused on Amazon they're ignoring the bigger threat of changing consumer habits. And, moving forward, the ower is moving to the consumers.
*That* is the real threat to the conspirators in their glass towers.

[HarryT]

Originally Posted by fjtorres

Yes.
But is that "solution" actually effective? Does the gouging of consumers to protect retailers actually protect *retailers* as the conspirator apologists claim?

"Gouging" is a very emotive word, don't you think?

You'd know better than me what the retail scene is in the UK but on this side of the pond, the case has been made (compellingly, to me) that the Price Fix conspiracy was a total backfire that froze the market of reading *devices*, foreclosing new entrants who are unable to compete with the pricing of the walled-garden devices, and effectively locking in Amazon and B&N's market share, with the primary beneficiary being Amazon. (B&N's market share is a respectable 25% or so but it didn't acually *grow* under Agency.)

In the UK, since the abolition of the "Net Book Agreement" (price fixing) in 1997, independent booksellers have virtually disappeared from the UK. While the agreement was in force, every shopping street has its independent bookshop. Now, they've almost all gone, and we have one chain (Waterstones) which completely dominates the market. I think personally that we're culturally poorer as a result.

[murraypaul]

Originally Posted by HarryT

In the UK, since the abolition of the "Net Book Agreement" (price fixing) in 1997, independent booksellers have virtually disappeared from the UK. While the agreement was in force, every shopping street has its independent bookshop. Now, they've almost all gone, and we have one chain (Waterstones) which completely dominates the market. I think personally that we're culturally poorer as a result.

And yet, with the advent of Amazon, we have cheaper access to a much wider variety of books than ever before. So no, you don't have a small bookshop down the road, but you have the worlds largest bookshop ready to post you whatever you want. I'd say access to books is higher now than then.

[tubemonkey]

Originally Posted by DiapDealer

OK. I can see your point(s). And they seem logical (and fair) to me. The punishment/settlement should address the illegal activity (collusion) only, and not force them to abandon the legal practice of agency pricing itself.

The problem lies with the fact that many believe there would have been no way any individual publishing house would have been able to get retailers to accept an agency pricing contract with them (without the knowledge that the pendulum was swinging that way en masse). So why should they be able to retain what they never would have been able to achieve without collusion?

Surely a "legal" advantage can be voided if it was gained illegally? Otherwise these kinds of end-runs around the law would become commonplace. Maybe they already are. *shrugs*

I agree. The legal activity was achieved illegally, so therefore, it should be stripped from them and they should be forced to start all over by doing it legally this time.

[HarryT]

Originally Posted by tubemonkey

I agree. The legal activity was achieved illegally, so therefore, it should be stripped from them and they should be forced to start all over by doing it legally this time.

You're contradicting yourself, aren't you? A few posts ago you were saying that the law should stay out of it and let the free market decide.

[tubemonkey]

Originally Posted by HarryT

You're contradicting yourself, aren't you? A few posts ago you were saying that the law should stay out of it and let the free market decide.

That was an ideal world. I'd rather the government stayed out of it, but they won't are are already involved. Therefore, these companies need to be punished for both collusion and illegal price fixing.

[HarryT]

Originally Posted by tubemonkey

That was an ideal world. I'd rather the government stayed out of it, but they won't are are already involved. Therefore, these companies need to be punished for both collusion and illegal price fixing.

This is not "illegal price fixing". It's illegal collusion; the price fixing is entirely legal.

[tubemonkey]

Originally Posted by HarryT

This is not "illegal price fixing". It's illegal collusion; the price fixing is entirely legal.

They achieved it illegally and shouldn't be allowed to reap the benefits from it.

[stonetools]

It woulld have been interesting to see what would have happened if the DOJ had just let the agency pricing situation play out. I think we would have ended up with more retailers and lower prices eventually, a la the iOS App store, but that's water under the bridge.

Price fixing may or not work elsewhere but *here*, as implemented, it hasn't achieved any social good and the DOJ for calling a two year hiatus in its use by the conspirators may force them to actually take a look at what they've been doing to themselves, their authors, and their readers. And maybe they'll come up with a *legal* approach to selling their product at a time of technological disruption.
Or not. Maybe they'll just go back to Price Fixing the first chance they get.

You should note that the settlement lasts only two years. At the end of two years, the realistic scenario would be fewer retailers (A LOT fewer indie booksellers) and Amazon with 80 per cent or more of the ebook market and the power to dictate terms to suppliers -authors and publishers. Also too, Amazon 's publishing arm will be in direct competition with publishers, including bidding for bestselling authors.

I expect that faced with such a scenario, the BPHs will RUN, not walk, back to full on agency pricing.. In the face of that kind of existential threat, they'd be idiots to be worrying about "smaller shelf-space, more quality ebook content, perpetual backlist, less reader herd behavior " and whatnot.
The only question will be whether they can individually face down Amazon, the way Sargent did.
In the meantime, expect the BPHs to invest big time in building direct sales channels to consumers (Bookish, Anobii, etc). Non settling publisher Macmillan is already moving in that direction with the Tor.com bookstore.

[DiapDealer]

Originally Posted by HarryT

the price fixing is entirely legal.

Even if one publisher never would have had the necessary leverage to get a retailer to agree to agency pricing all by their lonesome?