Is Amazon morally wrong but legally right?
Might Amazon, just this once, actually be in the right?
The publishing industry鈥檚 favorite punching bag du jour has gotten a lot of flack lately over a Justice Department antitrust lawsuit against Apple. As we reported earlier this spring, the DOJ filed a lawsuit against Apple and five publishers, accusing them of colluding to fix e-book prices.
The DOJ has gotten an earful ever since. Book industry advocates have lambasted the government agency for going after struggling book publishers and Amazon鈥檚 only real competition, thereby propping up the mega-bookseller鈥檚 dominance.
鈥淚 feel absolutely befuddled by the lawsuit,鈥� New York Sen. Charles Schumer told . 鈥淔or the Antitrust Division to step in as the big protector of Amazon doesn't seem to make any sense from an antitrust point of view. Rarely have I seen a suit that so ill serves the interests of the consumer.鈥�
鈥淭he irony bites hard,鈥� Authors Guild President Scott Turow wrote in an open letter. 鈥淥ur government may be on the verge of killing real competition in order to save the appearance of competition.鈥�
And David Carr of criticized the antitrust suit as the modern equivalent of leaving Standard Oil intact and 鈥渂reaking up Ed's Gas 'N' Groceries on Route 19 instead.鈥�
It鈥檚 time to take a step back.
Is it possible that amidst the deafening uproar over the DOJ鈥檚 suit 鈥� the protestations, the criticism, the comparisons 鈥� we鈥檙e missing the point? That, as much as book lovers love to hate Amazon, the online bookseller 鈥� and the Justice Department 鈥� may be actually be in the right?
That鈥檚 what Thomas Catan argues in a lucid, cogent must-read in titled 鈥淓xperts Say Government Had Little Choice in E-Books Lawsuit.鈥�
At the root of this criticism is a misperception of the antitrust law, writes Catan.
鈥�U.S. antitrust law doesn't seek to protect little companies against big ones, or even struggling ones against successful ones. Companies can grow as large as they want, as long as they do it through lower prices, better service or niftier innovations. Companies can even become monopolies, as long as they don't get there illegally or try to extend their power by unlawfully stifling competition.鈥�
In other words, just because Amazon dominates the book market and drives smaller competitors out of business through its low prices and convenience doesn鈥檛 make its actions illegal.
(As Herbert Hovenkamp, a law professor at the University of Iowa, told the Journal, 鈥淭he goal of antitrust policy is to protect consumer prices. It's not to protect inefficient firms from having to exit the market.鈥�)
What鈥檚 more, writes the Journal, 鈥渁ntitrust lawyers scoff at the notion that the Justice Department would refrain from bringing a case if it believes it has solid evidence."
鈥淧rice fixing is kind of the first-degree murder of antitrust violations,鈥� Prof. Hovenkamp, told . 鈥淭hey don't have discretion to just walk away from what appears to be a strong set of facts that, if true, are one of the most central of antitrust violations.鈥�
In fact, the DOJ may already have shown some leniency in bringing a civil, rather than criminal, case against Apple and the five publishers.
Let鈥檚 recall what鈥檚 at stake here. There are two competing models for distributing books: Amazon鈥檚 wholesale model, whereby a publisher sells its goods to a distributor (like Amazon) for a fixed price and the distributor is free to decide the actual price for the public; and Apple鈥檚 new agency model, in which publishers set the retail price and the distributer gets a fee (30 percent in the case of Apple).
Despite Sen. Schumer鈥檚 comments, Amazon鈥檚 pricing system has actually been better for consumers than Apple鈥檚 (although it鈥檚 not better for publishers, which is why they鈥檙e fighting the suit).
When it introduced the Kindle in 2007, Amazon began discounting e-books at its own expense, setting a $9.99 price for new best sellers. By contrast, when Apple launched its iPad in 2010, it shifted the publishing industry to a new system that let publishers control the price for e-books. Under that system, the price of most best sellers rose to $12.99 or $14.99.
鈥淲hat Amazon does may be harmful to the publishers, but so far it's been very good for consumers,鈥� Spencer Waller, a law professor at Loyola University Chicago, told the Journal.
In this case, the Justice Department may actually be doing consumers a favor.
And as far as the nuts and bolts of the legal suit against Apple, Amazon 鈥� at least in this case 鈥� appears to be entirely within the bounds of law.
What do you think? Is Amazon morally wrong but legally right?
Husna Haq is a Monitor correspondent.
