Amazon, Apple and antitrust | As It Turns Out

Anyone with a connection to the Internet has probably purchased a book from Amazon. Seattle’s own darling and Fortune 500 corporation is the world’s biggest Internet retailer, bringing in $48 billion last year.

Anyone with a connection to the Internet has probably purchased a book from Amazon. Seattle’s own darling and Fortune 500 corporation is the world’s biggest Internet retailer, bringing in $48 billion last year.

The U.S. Justice Department has brought an antitrust lawsuit against Apple and five big-time book publishers — Macmillan, Penguin, Hachette, HarperCollins, and Simon & Schuster — for having colluded in order to fix e-book prices. Amazon, Macmillan and Penguin will fight the charges in court while the others have agreed to settle.

Although Amazon is not named as plaintiff, it is mentioned throughout the complaint and directly benefits the most. Here’s what led up to the lawsuit.

In 2007, Amazon released its e-book reader Kindle and began selling newly released e-books for $9.99, which is below wholesale price. Each e-book Amazon sold was at a loss, but thanks to Kindle, the e-book industry began to soar.

The business “wholesale model” — selling books at a lower price, with retailers setting the price — was in use at that time. Publishers get a 50 percent cut, but have no control in pricing.

In 2010, Apple and the publishers agreed to shift to the “agency model” where publishers set the retail price, and where independent bookstores could then participate in selling e-books online. Contrary to the claim of colluding to fix prices beneficially, these publishers are said to have actually taken a willing loss in order to get out from under Amazon.

Apple’s iPad e-book reader was introduced at this time. Without having to sell at a huge loss, even Barnes & Noble got into the action with its Nook e-book reader. It seems to many of us that the Justice Department may have missed the boat on taking aim at Apple and book publishers when it wasn’t that long ago that Amazon had 90 percent of the market and was being a big bully to boot.

It appears Amazon is selling e-books as cheap software so that it can sell the Kindle. Ironies aren’t missed here — for example, this is what Apple did to music when selling its iPods.

Book publishing is enduring an enormous transition. Amazon has the billions to finance the process in its favor. It has millions of items for sale online that it can make up the difference on. Publishers can’t compete with this tactic.

Bookstores have also been trying to keep up under the pressure from Amazon’s book discounting. They’re not able to sell e-books at a loss in order to compete with Amazon.

Seattle Mystery Shop owner J.B. Dickey said, “If there’s an upside, I don’t see it yet. My fear is that the major publishers won’t be able to stay in business just selling e-books. You can’t bring in enough money to support the infrastructure. If that happens, there goes the marketing, the editorial, the author tours, the expertise of the book industry.”

Author Scott Turow said, “It is breathtaking to stand back and look at this and believe that this is in the public interest. The only rationale is e-book prices will go down, for how long? What happens when there is no one left to compete with them?” Competition can only disappear as the ever widening abyss between e-books and regular books continues. Once the competition is eliminated, there’s no longer a reason to continue selling goods cheaply. Low prices can’t and don’t last.

The best solution may very well be to hoof it down to local independent booksellers like Kingston’s Mr. B’s Bookery, Port Gamble’s Dauntless Books, Bainbridge Island’s Eagle Harbor Books, or Poulsbo’s Book Stop and Liberty Bay Books. They each deserve our support.

— Contact Marylin Olds at marylin.olds@gmail.com.