Amazon’s Book Monopoly : A Threat to Freedom of Expression?

[dgatwood]

Originally Posted by emellaich

1. As I said earlier, I don't see where Amazon's actions are censorship or restrictions on my freedom of speech. There are many other places, like here on mobileread where I can 'speak' and due to the openness if the Internet I can always start up my own outlet.

Yes and no. If your preferred form of speech happens to be books, the ability to make that content discoverable in a place where people who read books are likely to find it is crucial to that speech actually being heard by anyone. So although Amazon cannot possibly destroy your right to free speech, if Amazon became malicious, they could easily undermine that right in a way that would cause you material harm. It's a subtle distinction, but an important one from an antitrust perspective.

Originally Posted by emellaich

They are undoubtedly strong, but unlike a true monopoly there are few barriers (regulatory or scarce resources) to keep new competition away.

It is really hard to imagine new competition being successful against Amazon at this point. They're truly so big that there are only about three or four companies in the world that could compete with them—basically Apple, Google, Microsoft, Exxon Mobil, and Berkshire Hathaway... and I'm not sure about the last three, and the first two don't seem interested.

Here are the main barriers to entry into competition against Amazon:

1. Near-complete availability. Amazon is pretty much the only site that can claim to be able to sell you very nearly any product ever manufactured. As a result, a sizable percentage of online buyers go straight to Amazon when searching for goods, which means that even if another store were better and cheaper, most people would never know.

2. Scale. Amazon's U.S. division sells more goods online (when measured by revenue) than all the other companies in the U.S. put together, and that number is growing pretty quickly.

Because of their high sales volume, they can demand deeper discounts on products than smaller businesses could, which means they can't realistically be undercut in price unless somebody is willing to operate at a staggering loss.

They also get special deals from the shipping companies that no new company starting out could possibly hope to get, which gives them another way to undercut any possible competition.

Finally, their scale means that they are able to do acceptably on what would otherwise be unsustainably low per-unit margins. Even if somebody else could manage to get all the same deals, without the volume, they'd never make enough money to break even like Amazon (almost) does.

3. Infrastructure. The amount of work required to create an Amazon replacement is staggering. Amazon isn't just a bookstore. It is also an online marketplace that anyone can use to list products and fulfill arbitrary products, an author/publisher interface for fixing metadata errors, a huge, highly automated system for order fulfillment (that brings costs down below what any newcomer to the industry could possibly hope to achieve), etc.

And that's just the physical product sales. Add to that the digital products and the hardware manufacturing needed to make those digital products useful, and it is pretty easy to see why competing with Amazon is a herculean task.

Maybe somebody will topple Amazon someday, but I wouldn't short your Amazon stock. Just saying.

Originally Posted by emellaich

3. There is nothing wrong with being a monopoly. It's legal and there is nothing bad about it. What is wrong is when monopolies abuse their power and are unfair. Even if you think Amazon is a monopoly, has it been unfair

I do not think it has been. As I said, my concern is not what Amazon does, but rather what Amazon's huge influence on the market has the potential to do in the wrong hands. The best way to explain is by suggesting a scenario:

Imagine that a bunch of powerful hedge fund managers get fed up with Amazon's frequent quarterly losses. So they get together and pool their votes to oust Amazon's board and replace them all with people who have very different values. Suppose that a week later, the new board ousts Amazon's CEO.

So now you have the same company with the same power, but it is led by a bunch of sociopaths. What impact would that have on the world of book publishing? I think the impact would be almost unimaginably huge.

One possible answer to that scenario is to say, "We'll deal with it when it happens." Another possible answer is to ensure that no company gets too big to fail. I personally prefer the latter approach.

[darryl]

Originally Posted by dgatwood

So although Amazon cannot possibly destroy your right to free speech, if Amazon became malicious, they could easily undermine that right in a way that would cause you material harm. It's a subtle distinction, but an important one from an antitrust perspective.

I have knowledge and experience in the law of my Country and in particular my State. I am not a US lawyer let alone a US Anti-Trust lawyer, but am not unfamiliar with the concepts involved. Yet your statement quoted above and your other pronouncements on US Anti-Trust law in this thread, with respect, seem to me to be utterly ridiculous and without any reasonable basis. However, I do not purport to be an expert on US anti-trust law and am willing to be corrected. Are you a US anti-trust lawyer? A US lawyer? What expertise do you possess to make these pronouncements on US anti-trust law? If none, then you are of course still entitled to your opinion on the issue, though it does help the rest of us decide what weight to give to that opinion.

Originally Posted by dgatwood

As I said, my concern is not what Amazon does, but rather what Amazon's huge influence on the market has the potential to do in the wrong hands. The best way to explain is by suggesting a scenario:

Imagine that a bunch of powerful hedge fund managers get fed up with Amazon's frequent quarterly losses. So they get together and pool their votes to oust Amazon's board and replace them all with people who have very different values. Suppose that a week later, the new board ousts Amazon's CEO.

So now you have the same company with the same power, but it is led by a bunch of sociopaths. What impact would that have on the world of book publishing? I think the impact would be almost unimaginably huge.

One possible answer to that scenario is to say, "We'll deal with it when it happens." Another possible answer is to ensure that no company gets too big to fail. I personally prefer the latter approach.

Ah. Now I understand. Your argument hinges not on Amazon's actual conduct at all, but on its hypothetical future possible conduct, no matter the probability of such conduct occurring. Shades of Philip K Dick's Minority Report. You rely not on the current state of anti-trust law, but what you think it should be. In particular, it seems your basic argument is that a company should be broken-up or otherwise dealt with by anti-trust law, irrespective of its current or even future planned conduct, if:

1. It has become "too big to fail";
2. Or it has become a monopoly;
3. Or it has become a "near monopoly".

Even if this was within current anti-trust law, and it is not, I doubt Amazon qualifies on any of these points.

And by the way. Are all hedge fund managers really Sociopaths?

[SteveEisenberg]

Originally Posted by darryl

Your argument hinges not on Amazon's actual conduct at all, but on its hypothetical future possible conduct, no matter the probability of such conduct occurring.

It hinges on Amazon's actual current conduct changing back to what it was in 2012, when it was difficult to buy, on Amazon, one of the presidential campaign books:

http://bits.blogs.nytimes.com/2014/1...ng-books/?_r=0

Some posters here think Amazon has no social responsibility to impartially promote and distribute books from a wide range of political points of view. I disagree there. But I also think that, over the past few years, Amazon has been acting responsibly in terms of freedom to read, with the possible exception of this site where their market share isn't so high:

http://www.amazon.cn/Kindle%E7%94%B5...node=116169071

What about 2016, in the US? Is it likely that Amazon will favor books by certain presidential candidates, out of either political or, more plausibly, profit concerns? I'm saying no. I think they learned their lesson when the Hachette situation gave Amazon so much mainstream media bad publicity.

If Amazon starts appearing to Feel the Bern, or, God-forbid, wanting to Make America Great Again, I'll start attacking them again on this board as I did a few years ago.

[darryl]

@Steve. You have made this argument before. I don't agree with it, but I certainly don't think it is ridiculous. And certainly it does rely on Amazon's conduct. @dgatwood's argument does not, as his own words indicate, in particular (to take but one example;

"One possible answer to that scenario is to say, "We'll deal with it when it happens." Another possible answer is to ensure that no company gets too big to fail. I personally prefer the latter approach."

[fjtorres]

Originally Posted by darryl

Are all hedge fund managers really Sociopaths?

Only in Hollywood movies.
In the real world they are mostly middle-class working stiffs.

As for US Antitrust law, contrary to some who like to claim antitrust at the drop of a hat, it is rarely used because it is actually very narrow in application and only applies when there is verifiable *consumer* harm.

https://en.m.wikipedia.org/wiki/Unit..._antitrust_law

There are a range of activists that would like the standard to be the more nebulous "harm to competition" (which is the standard in protectionist countries) or *premptively* in the service of "the common good" or hypothetical future damages. No case has ever been launched under the latter "justification" nor is it likely to ever be.

So no, US law is not insane.
And antitrust law is most often applied to *groups* of companies, cartels and conspiracies, or vertically integrated companies that control the production, distribution, and consumer sale of the product. It has yet to ever be applied to a middleman distributor alone. There are other laws that apply to distributors, namely the Robinson-Patman act, but again, the onus is on the producer, primarily:

https://en.m.wikipedia.org/wiki/Robi...0%93Patman_Act

Two notable examples of the latter:

In 1994, the American Booksellers Association and independent bookstores filed a federal complaint in New York against Houghton Mifflin Company, Penguin USA, St. Martin's Press and others, alleging that defendants had violated the Robinson–Patman Act by offering "more advantageous promotional allowances and price discounts" to "certain large national chains and buying clubs."[6] Later, complaints were filed against Random House and Putnam Berkley Group, and these cases also were later settled with the entry of similar consent decrees. Eventually, seven publishers entered consent decrees to stop predatory pricing, and Penguin paid $25 million to independent bookstores when it continued the illegal practices.[7]

In 1998, the ABA (which represented 3500 bookstores) and 26 individual stores filed suit in Northern California against chain stores Barnes & Noble and Borders Group, who had reportedly pressured publishers into offering these price advantages.[8]

Not mentioned here: the ABA won when suing publishers and *lost* when suing the distributor benefitting from publisher practices. They were forced to pay all legal costs.

A recent case brought by booksellers against Amazon and the BPHs over walled-garden DRM. The claim was that the BPHs, in court at the time for conspiring *against* Amazon, were simultaneously conspiring with Amazon to create a monopoly. (Not unlike certain claims in this thread.)

The case was summarily dismissed before discovery even began.
(Essentially laughed out of court.)

US law has its quirks--all systems do--but insanity isn't one of them.

[SteveEisenberg]

Originally Posted by fjtorres

In the real world they ["hedge fund managers"] are mostly middle-class working stiffs.

http://www.prnewswire.com/news-relea...300017634.html

The 2015 Hedge Fund Compensation Report revealed that hedge fund professionals received increases in both base salary and year-end bonuses. The average reported cash compensation was up again in this year and came in at $368,000. Base salary grew by single digits this year, as bonuses grew by double digits again this year.

I suppose the median pay is less than that average. On the other hand, managers surely make more. In any event, $368,000 would seem to be about ten times the US median wage.

Now I just have to figure out what the heck a hedge fund is

[Cinisajoy]

Originally Posted by SteveEisenberg

http://www.prnewswire.com/news-relea...300017634.html


I suppose the median pay is less than that average. On the other hand, managers surely make more. In any event, $368,000 would seem to be about ten times the US median wage.

Now I just have to figure out what the heck a hedge fund is

Here you go.
hedge fund
noun
a limited partnership of investors that uses high risk methods, such as investing with borrowed money, in hopes of realizing large capital gains.

I was curious too.

[Cinisajoy]

I just thought of something, there are a few things Amazon won't sell as far as ebooks go.
If you are into those things, the other "big" ebook distributor does sell them.

[Rizla]

Originally Posted by dgatwood

It is really hard to imagine new competition being successful against Amazon at this point. They're truly so big that there are only about three or four companies in the world that could compete with them—basically Apple, Google, Microsoft, Exxon Mobil, and Berkshire Hathaway... and I'm not sure about the last three, and the first two don't seem interested.

Here are the main barriers to entry into competition against Amazon:

1. Near-complete availability. Amazon is pretty much the only site that can claim to be able to sell you very nearly any product ever manufactured. As a result, a sizable percentage of online buyers go straight to Amazon when searching for goods, which means that even if another store were better and cheaper, most people would never know.

2. Scale. Amazon's U.S. division sells more goods online (when measured by revenue) than all the other companies in the U.S. put together, and that number is growing pretty quickly.

Because of their high sales volume, they can demand deeper discounts on products than smaller businesses could, which means they can't realistically be undercut in price unless somebody is willing to operate at a staggering loss.

They also get special deals from the shipping companies that no new company starting out could possibly hope to get, which gives them another way to undercut any possible competition.

Finally, their scale means that they are able to do acceptably on what would otherwise be unsustainably low per-unit margins. Even if somebody else could manage to get all the same deals, without the volume, they'd never make enough money to break even like Amazon (almost) does.

3. Infrastructure. The amount of work required to create an Amazon replacement is staggering. Amazon isn't just a bookstore. It is also an online marketplace that anyone can use to list products and fulfill arbitrary products, an author/publisher interface for fixing metadata errors, a huge, highly automated system for order fulfillment (that brings costs down below what any newcomer to the industry could possibly hope to achieve), etc.

And that's just the physical product sales. Add to that the digital products and the hardware manufacturing needed to make those digital products useful, and it is pretty easy to see why competing with Amazon is a herculean task.

Excellent real-world points. Too often we hear people crying if you don't like it, shop elsewhere, or build your own Amazon. These arguments are silly. It is only reasonable to be concerned at Amazon's unassailable domination of several markets.

[DiapDealer]

Originally Posted by Rizla

It is only reasonable to be concerned at Amazon's unassailable domination of several markets.

To what end? Concern to what end?

History is littered with "unassailable giants" that eventually got "assailed" by a better idea. But if you want to think facts are "silly" and speculative fear-mongering is the only "reasonable" response, then have at it. Just be careful up there on that wobbly soapbox.

[tubemonkey]

Originally Posted by Cinisajoy

Here you go.
hedge fund
noun
a limited partnership of investors that uses high risk methods, such as investing with borrowed money, in hopes of realizing large capital gains.

I was curious too.

And here I thought it was a gardening term where you save up money to get your hedges trimmed

[murg]

Originally Posted by dgatwood

Yes and no. If your preferred form of speech happens to be books, the ability to make that content discoverable in a place where people who read books are likely to find it is crucial to that speech actually being heard by anyone. So although Amazon cannot possibly destroy your right to free speech, if Amazon became malicious, they could easily undermine that right in a way that would cause you material harm. It's a subtle distinction, but an important one from an antitrust perspective.

Sorry, but in America you have a right to speech (publish), but you don't have a right to discoverability. You have a right to not have the discoverability being artificially limited by the government, but that's about it.

Before the Internet, crackpots managed to publish all kinds of things. And managed to work out how to distribute them.

[murg]

Originally Posted by SteveEisenberg

It hinges on Amazon's actual current conduct changing back to what it was in 2012, when it was difficult to buy, on Amazon, one of the presidential campaign books:

http://bits.blogs.nytimes.com/2014/1...ng-books/?_r=0

This wasn't a content related event, but collateral damage from Hachette picking a fight with Amazon during contract negotiations.

The books were available from Amazon, it was the publisher that was slow in fulfilling the orders.

So, basically, the publisher decided to make this and other books difficult to purchase on Amazon. They were readily available at other sites, and just as easy to purchase.

Originally Posted by SteveEisenberg

What about 2016, in the US? Is it likely that Amazon will favor books by certain presidential candidates, out of either political or, more plausibly, profit concerns? I'm saying no. I think they learned their lesson when the Hachette situation gave Amazon so much mainstream media bad publicity

There was no lesson for Amazon to learn. The publisher's distribution system is not their responsibility.

The real question that should be asked here is: did the publisher learn their lesson?

The publicity doesn't seem to have hurt Amazon. And hindsight has shown that the sources of the bad publicity are the people that would be generating bad publicity about Amazon anyways.

[fjtorres]

Originally Posted by murg

The real question that should be asked here is: did the publisher learn their lesson?

The others did.
They actually negotiated in private, the way professionaly-run companies do. And they didn't wait for their contracts to expire.

[dgatwood]

Originally Posted by murg

Sorry, but in America you have a right to speech (publish), but you don't have a right to discoverability. You have a right to not have the discoverability being artificially limited by the government, but that's about it.

I guess I wasn't precise enough in that comment. Freedom of expression is not a right, except in the very limited context of the government not being allowed to limit it as a rule, so even though discoverability impacts your freedom of expression, it isn't a right, either.

However, competitors do have a right to exist and to be viable. When one company gets big enough to make competition infeasible (and Amazon is rapidly approaching that point), it impacts their right to make money by selling books (and thus expanding your books' reach). In that context, an antitrust judge would see limits on your books' discoverability as a symptom of a larger market distortion (violating the rights of their direct competitors) rather than a rights issue per se.

Of course, there's another legal approach that might actually make discoverability a more direct rights violation. Because Amazon sells books through its own self-publishing platform, it is serving as an agent of the publisher, which in effect makes it a publisher itself. This in effect means that it is competing with any publisher whose products are disallowed on Amazon's selling platform. This is stretching the definitions pretty thin, but there's a small possibility that such an argument might fly....