Monthly Archives: June 2012
The Guild does not support the DOJ’s proposed e-book settlement. We believe it will allow Amazon to resume its predatory pricing practices, discouraging competition in the e-book marketplace.
June 25, 2012
John R. Read, Esq.
Chief, Litigation III
Antitrust Division, United States Department of Justice
Washington, D.C. 20530
Re: United States v. Apple, Inc., et al., 12-cv-2826 (DLC) (SDNY).
Dear Mr. Read,
I’m writing to express the Authors Guild’s firm belief that the proposed settlement of the Justice Department’s lawsuit alleging that five publishers and Apple colluded to introduce agency pricing to the e-book market is not in the public interest. The settlement is flawed by an astonishing provision, specifically requiring three large publishers to allow e-book vendors to routinely sell e-books at below cost, so long as the vendors don’t lose money over the publisher’s entire list of e-books over the course of a year.
The proposal, by allowing targeted predatory pricing of e-books, would give governmental sanction to a practice long considered destructive to a free and fair market. It was precisely this practice – selling frontlist e-books at below cost to discourage and destroy competition – that helped Amazon capture a commanding 90% of the U.S. e-book market. Agency pricing, which the Justice Department believes was introduced through collusion, has allowed Amazon’s competitors to gain a foothold, driving Amazon’s market share down to 60% in two years.
The Justice Department has made clear that it intends to irreversibly reshape the literary market. Allowing Amazon to resume its predatory ways with e-books will likely accomplish that, but not in the way the Justice Department intends. The proposed settlement will almost certainly backfire and harm readers in the long run.
The Justice Department needs to rethink and revise its proposal: it can stop the alleged collusion without requiring publishers to allow Amazon to resume predatory pricing.
Comments on the Justice Department’s proposed e-book settlement are due Monday, June 25th. If you haven’t yet done so, consider writing a brief note to John Read (firstname.lastname@example.org) with your thoughts on whether the settlement is in the public interest. Keep it simple, if you’d like: A healthy, competitive book market is vital to our culture. It’s not in the public interest for the government to help Amazon use e-books to target traditional brick-and-mortar bookstores.
Here’s the background (for more see our earlier member alerts: E-Book Proposal Needlessly Imperils Bookstores; How to Weigh In and Letter from Scott Turow: Grim News).
The Justice Department alleges that Apple and five large publishers colluded to introduce “agency pricing” to e-books.* The DOJ’s proposed settlement would allow Amazon to resume the predatory pricing that allowed it to capture 90% of the e-book market while undermining its offline competition. (Amazon could select which e-books to sell at a loss, so long as it doesn’t lose money over the publisher’s entire list of e-books over a 12-month period.)
This summer, U.S. District Judge Denise Cote will review the Justice Department’s proposed settlement of its lawsuit alleging that five large publishers and Apple colluded in introducing agency pricing for e-books. Judge Cote’s task is to determine whether the proposal is in the public interest. We encourage you to submit your own comments on the settlement, which the Tunney Act requires the Justice Department to read, consider, address, and deliver to the court. We’ll get to the mechanics of submitting comments (it’s quite simple) in a moment.
First, here’s our view, in a nutshell: the proposed settlement is not in the public interest, because it needlessly imperils brick-and-mortar bookstores while it backs an online monopolist and discourages competition among e-book vendors and e-book device developers. The settlement needs to be rethought, and substantially modified.
Agency pricing, in which the e-book vendor acts as the publisher’s “agent,” with no authority to change the retail price of the book, was a reaction to a specific anticompetitive provocation – Amazon had been routinely selling frontlist e-books at below cost. Amazon’s predatory tactic wasn’t scattershot; it was (and remains – Amazon continues to deploy this weapon with the titles of non-agency publishers) highly targeted. When not constrained by agency pricing, Amazon chooses to absorb substantial losses on e-book editions of a specific subset of new hardcover books: those that are most likely to be stocked by traditional bookstores.
The Justice Department’s proposal, which would permit Amazon to resume using the frontlists of three major publishers for anticompetitive purposes, appears to be based on a fundamental misunderstanding of the market for trade books, particularly the interplay between the online market for print books and the e-book market. Amazon, which has long commanded 75% of the online market for print books, clearly understands that relationship well. The story of the introduction of the Kindle is largely a story of Amazon exploiting its dominance in the online market for print books to gain control of the e-book market.
Our book-scanning lawsuit against Google cleared a major hurdle today, as Judge Denny Chin certified the class of U.S. authors. A copy of the decision is here.
“We’re one big step closer to justice being done for U.S. authors,” said Authors Guild president Scott Turow.
The class of authors includes all U.S. authors and their heirs with a copyright interest in books scanned by Google as part of its Library Project. Google has scanned 12 million books in that project, the majority of which are believed to be protected by copyright. Books from all over the world were copied, but U.S. works predominate.
Google’s liability for copyright infringement has not yet been determined by the court. Google’s primary defense to infringement is that its actions are protected by fair use. Judge Chin is scheduled to hear summary judgment motions on the case in September.
If Google is found liable for infringement, copyright law prescribes statutory damages for willful infringement of not less than $750 and not more than $30,000 per work.