collusion

Sharis Pozen

DoJ Assistant AG Sharis Pozen

Sharis Pozen
DoJ Assistant AG Sharis Pozen

Jeffrey Tucker recently discussed the Department of Justice’s decided to launch antitrust litigation against Apple and five of the Big Six publishers — Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster, but not Random House — for alleged price fixing. Three of them — Hachette, HarperCollins, and Simon & Schuster — decided on the same day to settle straight away. The alleged sin was that Apple and the publishers decided to go with the agency pricing model in which the publishers get to set the prices for their books in the iBooks Store, while Apple takes a 30% cut.

As you’d expect, I’m with Jeffrey Tucker in believing that price fixing, collusion, cartels should not be illegal. In a free market, these practices are not stable and will end up harming the companies in the long run if they dissatisfy customers. What I want to highlight in this news post is not what so much what libertarian justice has to say about the matter but some bad economic-tech journalism about the business side.

I recently read this article on Mashable by Lance Ulanoff, the site’s Editor-in-Chief:

How Steve Jobs Got Apple Into Trouble Over Ebooks.”

Wow, is this guy clueless.

And if Steve Jobs really thought Amazon screwed up in alienating major publishers by not adopting the agency model, he was clueless as well. Amazon is WINNING.

Jobs pushed the agency model on the publishers? I don’t think so. They preferred that model but couldn’t get Amazon to go along with it without Apple’s help. It’s the screw-your-customers model and it wouldn’t have been good for the publishers over the long haul. They want high ebook prices so that they can hang onto their outdated IP-dependent business model of selling paperbacks and hardcovers in big-box brick-and-mortar stores for as long as possible.

That antiquated business model is particularly insane in the United States. The origin of the current wasteful publisher/brick-and-mortar bookstore relationship is fascinating. The strip-and-return system has its origin in the Great Depression (thanks Fed!).

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Sharis Pozen

DoJ Assistant AG Sharis Pozen

Sharis Pozen
DoJ Assistant AG Sharis Pozen

Get this: The federal bureaucrat who last month started the litigation against Apple and book publishers for ebook pricing is the same person who, back in the stone age, represented Netscape in its lawsuit against Microsoft.

Recall that Microsoft was trying to give away its Internet Explorer to computer users for free. Netscape went nuts and got the government to clobber Microsoft for being so nice to consumers. It put the company through litigation hell and even demanded that Microsoft change its operating system code to untie it from IE.

The person’s name is Sharis Pozen, and she is acting head of the Justice Department’s antitrust division and a political appointee of the Obama administration. She claims that she is threatening state violence against Apple and publishers for pricing collusion — and that it’s her job to protect consumers.

Interesting. She began her career trying to protect the rights of an old-line company to rip off consumers. To her, a price of zero was unfair competition. She was sure that a browser should be a paid product. The progress of history flattens that argument. Today, dozens of companies beg you to download their browser for free. Browser use is all over the place, sort of like a free market. There is no Microsoft monopoly, contrary to the overheated predictions.

Given that history, one might suppose she would retire from public life and maybe go into flower arranging or something. Instead, she is still at it. Last year, she denied a proposed merger between T-Mobile and AT&T that would have improved your cell service. This year, she says that a deal between publishers and Apple is harming consumers, so she has to act.

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NEWS | Can a bookseller destroy bookselling by selling books? Should writers be paid for their writing? Thumbnail

As you may have heard, the Department of Justice is looking into opening an antitrust case against the Big 6 publishers and Apple for allegedly colluding to set prices via an agency model which the publishers set the prices for their books in the iBooks store, not Apple. They were then able to put enough pressure on Amazon to coerce it into accepting the agency model as well, which it had previously resisted. This is why you see ebooks being sold on Amazon for $9.99 or more nowadays.

Now, there’s a contingent of publishers and authors who fear change and have grown complacent and dependent on their IP-based, physical distribution model; they tend to see Amazon as an evil corporation out to destroy publishing, bookselling, and writers.

Scott Turow, president of the Authors Guild — does anyone else find the idea of an authors guild disturbing, like modern-day feudalism? some would say the same about the Big 6 publishing houses — recently wrote an open letter speaking out against the antitrust investigation and in defense of the agency model. Quelle surprise! Though it’s ironic to see someone defending big corporations against antitrust investigations who, under normal circumstances (i.e., ones in which his bottom line isn’t directly affected), would probably be in favor of antitrust suits against monopolistic big corporations.

Anyway, Turow types some rather outrageous falsehoods about Amazon. Indie powerhouses Barry Eisler and Joe Konrath1 do a pretty god job of showing how ridiculous Turow’s claims are. Richard Lea summed it up on Twitter with question that makes up the first half of this blogpost title: “Can a bookseller destroy bookselling by selling lots of books?”

I do disagree with Eisler and Konrath on one thing, however, and that is their opposition to the collusion between Apple and the Big 6 publishers. As a libertarian, I don’t have a problem legally speaking with collusion, or price fixing. Without government support, cartels are unsustainable. Of course, believing some practice shouldn’t be illegal doesn’t mean I approve of said practice.

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  1. Full disclosure: Both men recently made publishing deals with one of Amazon’s new fiction imprints but were extremely successful self-publishers beforehand and are still self-publishing other work. 

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