16 July 2013

The New Yorker: “The E-Book Conspiracy comes to a Close”

Should Amazon find itself overwhelmingly controlling book sales, it’s unlikely that the Justice Department would act—that is, unless Amazon were to abuse its position. The law is not anti-monopoly, it’s anti-abuse of monopolies, Picker said. And Amazon has shown, again and again, that it has little interest in battering its customers, even if it is more than happy to abuse the industries whose products it sells.

Matt Buchanan

So the effective difference is that Amazon has the power to influence prices on a distribution channel it more-or-less controls, but chooses not to, while the publishers together with Apple formed a price cartel and took deliberate actions to raise prices – and got punished for it. The problem with accumulating power is that it will get abused, sooner or later. Amazon’s size is already affecting the market, pushing smaller players out of business and creating high barriers to entry for other companies. On the other hand Amazon is, for now, carefully balancing their profits, in effect avoiding other tell-tale signs of a nascent monopoly and the possible public scrutiny of their business.

It’s very hard to understand the publishers’ strategy behind this deal, if there even was one. They were simultaneously raising prices – which almost guarantees fewer sales – and reducing their profit margin, because they were paying 30% commission to Apple. So in effect they were hurting both the consumers and their own businesses in the process! It’s almost an emotional reaction, the fear of becoming dependent on Amazon driving them to enter an unfavorable deal.

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