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Macmillan: DOJ 'too onerous,' Amazon would regain monopoly

updated 12:40 pm EDT, Wed April 11, 2012

Macmillan CEO insists company innocent

Macmillan CEO John Sargent in an open letter blasted the Department of Justice for its e-book antitrust lawsuit. He insisted that his publishing company had "done no wrong" and that he, alone, had Macmillan switch to an agency model that hiked e-book prices. Revealing more than the DOJ had mentioned itself while confirming rumors, he said talks had broken down after "months" and that the DOJ's terms would allegedly let Amazon go back to the wholesale model and unfairly dominate through artificially low prices.

"The terms the DOJ demanded were too onerous," Sargent wrote. "After careful consideration, we came to the conclusion that the terms could have allowed Amazon to recover the monopoly position it had been building before our switch to the agency model. We also felt the settlement the DOJ wanted to impose would have a very negative and long term impact on those who sell books for a living, from the largest chain stores to the smallest independents."

He agreed with Author's Guild president Scott Turow's view and saw the DOJ as ironically hurting the very competition it was trying to save.

The remarks still sidestepped Apple's call for "most favored nation" status, where agreeing to sell through the iBookstore prevents offering a lower price anywhere else. Revoking this while keeping the agency model would theoretically allow sales and other competitive offers while preventing Amazon from selling below cost. Three publishers are believed to have already settled and would make Macmillan's case more difficult by implying that the collusion was real.

According to the lawsuit, Macmillan executives, including Sargent, allegedly attended numerous one-on-one meetings with other publishers between 2009 and 2010, a practice that was common in between the other major publishers as well. The discussions reportedly referred to Amazon's Kindle store as "the $9.99 problem" and turned to Apple when the companies couldn't make Amazon bend on price by themselves. One publisher's e-mail from July 29, 2009 mentioned talks between publishers to "create an alternative platform" to Amazon specifically to push prices higher.

The lawsuit stops short of directly showing that Apple was aware of any collusion, although it was accused of at least orchestrating a similar effect by demanding the agency model and the best prices from every publisher. Sargent did make clear that Apple's iBookstore and the imminent iPad launch were main factors, as he only made the decision at an odd hour just five days before the iPad was unveiled.

"After days of thought and worry, I made the decision on January 22nd, 2010 a little after 4:00 AM, on an exercise bike in my basement," he said. "It remains the loneliest decision I have ever made, and I see no reason to go back on it now."



By Electronista Staff
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  1. Bobfozz

    Fresh-Faced Recruit

    Joined: Jul 2008

    +17

    DOJ

    With all the s**** ups Holder's department had had in the past year this looks like another one. This isn't price fixing or collusion at all (Amazon was guilty of strong arm tactics and had no problem with anyone else losing money)... the CONSUMER which the DOJ pretends to protect (but not in gas pricing!!) always has the RIGHT to say "No. I don't want that at that price!" What happened to the word NO? Some people have NO discipline, the incorrect use of the word NO.

  1. mjtomlin

    Fresh-Faced Recruit

    Joined: Oct 1999

    +22

    Favored Nation

    Sorry, but people keep interpreting what Apple asked for backwards. Apple didn't say the publishers weren't allowed to sell their content elsewhere for cheaper. What they said was, they retain the right to match the lower price if the publishers did.

    That's the complete opposite of how everyone seems to be making this to be; that Apple is forcing publishers not to sell cheaper. Apple wasn't in a position to dictate such terms.

    It would appear to me that Apple was protecting its users from being unfairly gouged by publishers.

  1. facebook_Samuel

    Via Facebook

    Joined: Apr 2012

    +18

    I see the future of this decision

    ...this is to get digital textbooks to bargain basement prices on Amazon. They will then sell Kindle Fires to the Dept of Education (public schools) when the digital switchover occurs. Someone is getting kickbacks big time! The timing of this couldn't be more suspicious.

  1. Feathers

    Grizzled Veteran

    Joined: Oct 1999

    +15

    Below cost...

    What also appears to have been forgotten is that the predatory below-cost-selling that a huge organization like Amazon or Walmart can afford puts many smaller businesses out of business and out of work. In other parts of the World, below cost selling is prohibited for a range of goods. It definitely appears that the greater amounts of money that Amazon spends on lobbying (compared with Apple or even Google) is paying off. It's so nice to see that money still buys the best justice that you can afford![/sarcasm]

    Comment buried. Show
  1. RoboBobo

    Fresh-Faced Recruit

    Joined: Nov 2011

    -12

    Amazon didn't set the wholesale price

    One bit of confusion that is constantly being tossed around in discussions, is the idea that Amazon was setting the price of the book that the publisher received. They were not - and could not.

    It's up to the owner of the creative work to set whatever price they are willing to accept for it. And if you demanded $20 for a book, Amazon would pay it, and take a loss on many books in order to sell them at $9.99.

    Publishers were fearful that Amazon could develop a monopoly position - not that they had one.
    They didn't like the idea that consumers could be accustomed to paying $9.99 - not that they were.

    And one really should question publishers ability to expertly see into the future, because we know, for example in the Music industry, that they cannot. In Music they created rampant piracy by not understanding technology, what people wanted or how to deliver it to them, and at what price.

    Ebooks can't be pirated? Publishers owe a big debt of gratitude to Amazon for ushering in ebooks in a way that made sense to consumers. That could have gone wrong 1000 ways, publisher were absolutely clueless about how to introduce ebooks - not to overly blame them, Microsoft and Palm had tried earlier, and were also clueless.

    I think at this point, the moment for Amazon to establish a monopoly has passed.
    It's time to end the collusion - if there was any, I'm not aware of it myself - and allow the market to work.

    You can set your own price between yourself and the retailer, but you cannot demand the retailer not offer any promotions or sales or take a loss on a loss leader item - that's ridiculous and has to end.

    The DOJ is right.

  1. Fonejacker

    Fresh-Faced Recruit

    Joined: Jan 2010

    +3

    New name

    phone the DOJ, and ask them is that the Department of Jack Asses? They will answer, yes sir. Why are civil servants the dumbest people in a job?

    Comment buried. Show
  1. RoboBobo

    Fresh-Faced Recruit

    Joined: Nov 2011

    -10

    Challenge

    I'd like to challenge you all to remember Apple has been accused of having a monopoly in the mp3 space, and of fixing consumer expectations on a $.99 cent price point.

    And unlike Amazon which was buying the books at the publishers price and taking a loss from their own pocket, apple was not purchasing songs for $5 and selling them at a loss at $.99 - they clearly exhibited more power than even that.

    Still, it all worked out. These agreements where you fix what a retailer can do with a product on another website - are beyond the pale. That isn't free markets.

    All this confusion about large companies - Apple is one of the largest companies on the planet. Remember they have, at times, bought up nearly the entire supply of flash memory on the market - and other companies couldn't even introduce competing product for months at a time.

    These things aren't wrong when you see them at Amazon, and OK when you see them at Apple.

    I'll say this - economies of scale is a legitimate phenomena that favors large corporations, and that's just the way it is - and any company, Apple or Amazon understands that and wants to get in a new market, get there first, get there big, really big.

    What the DOJ needs to do, is keep competition alive, and in some cases you break up monopolies (all too rare, but they do occasionally), and in some cases - you sue to end collusion.

    Is Amazon, in 2012, have the market clout now, given the entrenched competition, to establish a monopoly? Guffaw - RIDICULOUS. That window is slammed shut.

    So, why the up in arms, about the DOJ saying, let retailers run sales - and when Amazon wants to run a sale on a book - Apple should have zero say in that.

    Frankly the DOJ is right - at this point, these types of entangling agreements are anti-competitive and probably illegal.

  1. Salty

    Professional Poster

    Joined: Jul 2005

    +11

    On the Publisher's Side

    As someone who wrote a book ... ironically who I couldn't get a major agent let alone a publisher to express more than a passing interest in, I'm still on the side of the publishers.

    It's one thing if authors working independently want to price their works at a dollar or two, it's another for someone else to come out and cheapen their work against their will. The fact is there is a principal involved. If you've spent two and a half years writing something then you and the people you choose to work with should be the ones determining the price of it which does go toward the perceived value. Amazon's strategy was clearly to manipulate the market. All they needed to do was discount a few best sellers and then suddenly everyone is conditioned to think that the standard price of an eBook is 10 dollars. Suddenly everyone else HAS to drop their prices to compete whether or not they want to, and whether or not they would have had to if Amazon hadn't manipulated the market.

    Accusing the publishers of colluding simply because they worked together to fix a problem involving price is stupid. There was a force that could have bankrupted all of them and sent the book industry in a direction that nobody but Amazon wanted, and they're being punished for that. As per usual the US DOJ is busy s******* with the people who are trying to avoid your country's perpetual race to the bottom.

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