US Senator Charles Schumer lambasts DOJ for its antitrust lawsuit against Apple over eBook pricing

Tue, Jul 24, 2012

Legal, News

Nearly three months ago, the US DOJ curiously decided to sue Apple and a host of other publishers alleging that the parties conspired togeter in an efort traise the price of eBooks.

Apple, along with the publishers in question, have vhemently denied the allegations while explaining that their pricing agreements actually serve to further competition in a space currently dominated by Amazon. Specifically, Apple has said that it simply wants to sell as many eBooks as possible and that it’s therefore in their interest to have the price of eBooks be as low as possible. And as has been raised before, it’s interesting, if not downright dumbfounding, that Apple is being taken to task here when Amazon effectively has a complete monopoly in the eBook market.

In light of the DOJ’s investigation, US Senator Charles Schumer – who is typically rallying against Apple for one thing or another – penned an article in the Wall Street Journal articulating why the DOJ needs to drop its suit against Apple. Schumer comes out guns a’blazin, stating that the DOJ could destroy the publishing industry as we know it today.

The reason? The suit will serve to keep Amazon as the top retailer in the eBook market, creating an environment where consumers will simply have to accept whatever pricing scheme Amazon comes up with.

… They could allow their books to be sold at the prices Amazon set, thus undercutting their own current hardcopy sales and the future pricing expectations for digital books—or stay out of the e-books market entirely. In an increasingly digital age, the latter was simply not an option.

Then the market changed. Apple entered and negotiated an agency model with publishers, in which the publisher could establish a retail price and Apple would take a percentage cut. The result was increased competition. Amazon’s market share quickly eroded to 60%, and consumers had multiple platforms through which to purchase digital books. Amazon was forced to expand its catalog, invest in innovation, and reduce the prices of its Kindle reading devices.

Most importantly, the average price for e-books fell to $7 from $9, according to a filing in the case.

The Justice Department has ignored this overall trend and instead focused on the fact that the prices for some new releases have gone up. This misses the forest for the trees. While consumers may have a short-term interest in today’s new release e-book prices, they have a more pressing long-term interest in the survival of the publishing industry.

Schumer goes on to say that if Amazon is allowed to effectively control 90% of the market, both consumers and authors will be held hostage to the whims and business decisions of the company.

“Choice is critical in any market”, Schumer writes, “but that is particularly true in cultural markets like books. The prospect that a single firm would control access to books should give any reader pause.”

via WSJ


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