The Big Six

In the growing digital age, it is important to pass legislation protecting brick and mortar publishers and bookstores from the behemoth that is Amazon. In the US, discussions have begun about how Amazon should be treated in regards to anti-trust laws. Due to their immense access to data and size, big online companies like Amazon, Apple, Google, and Facebook are being scrutinized more and more, with the US Justice Department announcing they intended Attorney General Jeff Sessions to meet with state attorneys general to discuss “a growing concern that these companies may be hurting competition and intentionally stifling the free exchange of ideas on their platforms” (Bernstein 2018). Although Jeff Sessions is no longer Attorney General, the scrutinization of these major companies is likely to continue. This might be good news for the publishing industry, which has been put in danger by companies like Amazon.

 

It is hardly the first time Amazon and publishing have been linked in the press, demonstrating the bad blood and power moves on both sides of the aisle. Amazon had a falling out with Hachette books in 2014 in which it “delisted the publisher’s books from its website during business negotiation” (Khan 2017). In 2012, Apple and five of the top six publishers in the US; Hachette, HarperCollins, Macmillan, Penguin (now Penguin Random House) and Simon & Schuster- were accused of “collusion in e-book prices and sales models” (Carmody 2012). Mathew Ingram goes so far as to describe these publishers as a “cartel” in his article (Ingram 2015). With the rise of Amazon’s power in the ebook industry, these five publishers and Apple decided to band together, agreeing to “act collectively to force up Amazon’s retail prices and thereafter considered and implemented various means to accomplish that goal, including moving under the guise of a joint venture” (Carmody 2012). Publishers cited fear of driving not just ebook prices down, but print books as well. Ingram states that their actions originated, “[…]from a desire to maintain the existing favorable price structure for books, which allowed them to milk the market for high-priced hardcover versions of new novels before eventually releasing cheaper versions” (Ingram 2015). Apple, on the other hand, was accused of desiring to raise their own profit margin on ebooks, supplanting Amazon and other competitors (Carmody 2012). While the publishers saw this as an effort to supplant the growing monopoly of Amazon’s hold on ebooks, the US government saw it as an illegal attempt to break the American anti-trust laws. Although Apple, MacMillan, and Penguin initially intended to fight the lawsuit, these plans were rejected (Ingram 2015). It was determined that the companies “engaged in collusion with what amounted to an oligopoly” (Ingram 2015). A settlement was reached that called for a disbandment of Apple’s preference towards the publishing houses and for a “cooling-off period…during which agency relations would be potentially halted (a clause titled “most favored nation” in Apple’s contract with the publishers) and publishers could not renegotiate new contracts with retailers” (Carmody 2012).  It seems strange now to look back at this case, as it is clear that, although the publishers were in the wrong (they destroyed email evidence to attempt to hide their crime), they were fighting what we now know as a behemoth of ebook publishing that is driving the publishing business into danger. 

 

Anti-trust laws in the US do not affect Amazon the same way that they affect publishers. Anti-trust laws are not necessarily set up to stop monopolies or to protect corporations and business; rather, they exist to protect consumers from overpriced goods. Unfortunately for Hachette, HarperCollins, Macmillan, Penguin, Simon & Schuster, and Apple, Amazon’s particular strategy is to sell books at a lower price to establish an understanding of their customers through data and algorithm. Lina M. Khan’s focuses on this issue in her journal entry “Amazon’s Antitrust Paradox,” emphasizing the outdated nature of antitrust laws in the digital age. She states, “the current framework in antitrust—specifically its pegging competition to “consumer welfare,” defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output” (Khan 2017). Drawing from Khan’s findings, Lewitt writes that “it is therefore highly rational for online companies [like Amazon] to engage in predatory pricing” (Lewitt 2018). Although this is bad for publishers, who make less and less money on ebook and print sales through Amazon, it is great for the American consumer, who is the subject of anti-trust laws. The Guild and Author’s United writes, “unregulated and unchecked growth of the major internet monopolies has squeezed the publishing and news industries, resulting in lower pay for authors and journalists” (Authors Guild 2018). 

 

There need to be changes to the antitrust laws in the future to accommodate the growing power of these online companies that escape traditional antitrust laws with these law prices and discounts that run smaller business models out of business. These bigger companies might argue that they bring other opportunities to smaller business through distribution, with almost half of reported online sales coming directly through Amazon (Khan 2017). They might also argue that the old antitrust laws that protect consumers still stand up in the 21st century, which is in line with their consumer-centric business model. However, there is no denying that these companies are taking advantage of their size in order to control industries and crush competition. 

 

Khan argues that “gauging real competition in the twenty-first-century marketplace—especially in the case of online platforms—requires analyzing the underlying structure and dynamics of markets” (2017). It seems as though these issues are finally being addressed by the Federal Trade Commission, which is launching a series of hearings entitled “Competition and Consumer Protection in the 21st Century” (Authors Guild 2018). This commission will focus on how to deal with internet monopolies that cater to consumer interest but drive down prices for other business. Among the topics covered in these hearings are listed as things like “Antitrust Law; Mergers and Monopsony or Buyer Power”, “Algorithms, Artificial Intelligence, and Predictive Analytics”, and “Antitrust Evaluation of Labor Markets” (Hearings 2018). These hearings are ongoing, having begun in September 2018 and continuing well into February 2019. It is difficult to tell if anything definitive will arise from these hearings, but it is important to note the issues with Amazon’s power online are being addressed. 

 

Tech-based companies like Amazon force us to reexamine our understanding of antitrust laws in America. The Department of Justice needs to carefully analyze new antitrust legislation that does not give either side of the argument an advantage over the other and does not put customers in a difficult position. This is a particularly difficult task because of the vastness of the issue and the myriad of factors like data analytics and consumer rights. It is unclear what these changes might do to the publishing industry, but it is clear that there needs to be change in order to save traditional publishing from becoming a thing of the past.

 

Work Cited

“Authors Guild Comments to FTC on Internet Monopolies’ Impact on Creators.” The Authors Guild. August 22, 2018. Accessed November 24, 2018. https://www.authorsguild.org/ industry-advocacy/authors-guild-comments-to-ftc-on-internet-monopolies-impact-on- creators/. 

Bernstein, Leandra. “Does the Government Have an Antitrust Case against Amazon, Google and Facebook?” WJLA. September 10, 2018. Accessed November 24, 2018. https://wjla.com/ news/nation-world/does-the-government-have-an-antitrust-case-against-amazon-google- and-facebook.

Carmody, Tim. “DOJ Files Antitrust Suit Against Apple and 5 Publishers Over E-Book Pricing.” Wired. April 11, 2012. Accessed November 24, 2018. https://www.wired.com/2012/04/ doj-files-antitrust-suit-against-apple-and-five-publishers/.

“Hearings on Competition and Consumer Protection in the 21st Century.” Federal Trade Commission. November 14, 2018. Accessed November 24, 2018. https://www.ftc.gov/ policy/hearings-competition-consumer-protection.

Ingram, Mathew. “Apple’s Mistake Was Hooking up with the Book-publishing Cartel.” Fortune. June 30, 2015. Accessed November 24, 2018. http://fortune.com/2015/06/30/apple-court- books/.

Khan, Lina M. “Amazon’s Antitrust Paradox.” The Yale Law Journal 126 (January 2017): 710-806. Accessed November 24, 2018. https://www.yalelawjournal.org/note/amazons- antitrust-paradox.

Lewitt, Michael. “How Long Can Amazon’s Ingenious Antitrust Avoidance Last?” Forbes. May 01, 2018. Accessed November 24, 2018. https://www.forbes.com/sites/michaellewitt/ 2018/05/01/how-long-can-amazons-ingenious-antitrust-avoidance-last/#53dae6870ac0.