the FTC's definition of price fixing

[rhadin]

Originally Posted by advocate2

Perhaps my command of English is not what it once was. When a seller says to its distributors "You must sell at this price and nothing lower" it is fixing the price in an anti competitive manor. It is the antithesis of the free market philosophy.

What am I missing that ebooks can be priced above the price of paperbacks? Can it really be true that the marginal cost of an ebook is higher than the marginal cost to the publisher of a paperback?

The price fixing must be between the publishers. If several publishers got together and decided that all of their ebooks would sell for $16.99 -- none less and none more -- that would be grounds for a price fixing lawsuit.

For a publisher to tell a bookseller that the selling price must be $16.99 for all ebooks, that is not price fixing under U.S. law.

If several of the largest publishers (all is not necessary) tell all retailers that all ebooks must sell for $16.99, even if there is no direct evidence that the publishers sat around a table and came to this agreement, under U.S. law this could (not will, just might) be price fixing.

There are several problems with the price fixing idea under U.S. law.

1. Not all ebooks in a particular genre will have the same selling price.
2. Not all ebooks will have the same selling price.
3. No group of publishers has sat down to establish a minimum sales price (the 70-30 split in the agency model doesn't amount to a minimum price because it fluctuates on a per book basis).
4. Gasoline is gasoline, a TV is a TV, but 1 book is not the same as another book, consequently there is no identity of product, which is needed for price fixing -- the commodity must be unique, and not replaceable (i.e., no substitute), which means that ll books would have to be identical in the marketplace.

There are other problems, but this gives you the idea of the problems of price fixing in the U.S.

[rhadin]

Originally Posted by djloewen

From what I can see, you guys (some of you anyway) have missed the point entirely. We're not comparing Stephen King to John Grisham. We're comparing Stephen King to Stephen King.

Let's say a publisher gives Book "A" to five distributors. If those distributors set their own prices and compete against each other, that's normal. If those distributors have a conference call and agree to artificially set the price for Book "A" at a uniform price and not compete with each other, it's price fixing, and it's in violation of antitrust law.

What's actually happening is dangerously similar to the second case. Rather than the distributors deciding it amongst themselves, it's the publisher that's fixing the price. In this example the distributor is fixing the price of a single product, Book "A", through every distributor. I am not a lawyer and don't fully understand the intricacies of antitrust law, but that sounds like something that should be illegal, for the same reason that it would be illegal if the distributors do it: it screws the consumers by robbing the system of its natural, competitive "free market" tendencies.

The problem is that the publishers have no obligation to sell the product to the retailer. Publishers could just as easily say to the consumer you must buy directly from us from our corporate website. Think Apple. Because that is legal, the agency model is also legal.

The U.S. Supreme Court has already held that manufacturers can set minimum resale prices without violating antitrust laws. Sony and Apple and do it all the time.

[rhadin]

Originally Posted by bevdeforges

A long time ago, in the US, there were certain manufacturers who attempted to set the minimum prices for which their products could be sold by stores - in a manner extremely similar to what it seems the big five publishers are trying to do now. This went on for a while, but ultimately was struck down as an illegal restraint of trade. Then, they got into that "anything goes" era, where the gummint simply caved to any and all requests of Big Business. But, AFAIK they haven't gone back to those sorts of minimum pricing agreements, at least not for physical consumer goods. They are still illegal. So, there is hope.

Sorry, but within the past few years the Bush Supreme Court reinvigorated those minimum reselling rights.