"Apple E-Book AntiTrust Appeal Gains
Amicus Curiae Help from Several Sources
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Posted on 12/03/2015 6:46:01 PM PST by Swordmaker
In an amicus brief filed on December 2, a coalition of authors groups and booksellers urged the Supreme Court to overturn a lower court decision finding Apple liable for its role in a 2010 conspiracy to fix e-book prices. In the 37-page filing, the Authors Guild, Authors United (the group organized by Douglas Preston in 2014), the American Booksellers Association, and Barnes & Noble, argue that Apple’s entry into the market in fact benefited consumers.
“Absent correction,” the brief states, the lower court decisions against Apple “threaten to undermine the very objective of antitrust law—to ensure robust competition.”
The amicus brief comes in support of Apple’s petition this fall to have the Supreme Court review the case, after the Second Circuit Court of Appeals in June upheld Judge Denise Cote’s 2013 ruling finding the company liable for price-fixing. Apple attorneys argue that the lower courts erred in finding Apple liable for a “per se” case of price-fixing, rather than applying the more rigorous “rule of reason” standard, which, Apple contends, would exonerate their conduct.
“We are pleased to lend our support in this matter, critical to anyone interested in a competitive and diverse literary marketplace,” said Mary Rasenberger, executive director of the Authors Guild, in a statement. “We fundamentally question the wisdom of the Second Circuit’s use of antitrust law to punish a business arrangement that demonstrably increased competition in the e-book marketplace.”
In the brief, the Authors Guild seeks to bolster Apple’s argument, adding that that the outcome of the case is “critical to maintaining a healthy marketplace for the ideas and First Amendment-protected expression that authors and bookstores facilitate.”
Indeed, the brief argues that Amazon’s dominance, achieved through “a loss leader” strategy on new releases and bestsellers, was more than a disruptive force to authors and the book business, but was a threat to free speech.
“$9.99 is not a panacea for consumers or authors,” the Guild argues. “The Second Circuit’s panel majority ignored the positive impact Apple’s entry into the e-book market and the promotion of agency pricing had on ensuring the robust discourse that is vital to democracy."
The brief goes on to present to the court a bleak picture of the pre-Apple e-book days.
“With a 90% market share, nearly every customer who wanted to purchase an e-book had to do so through Amazon,” the brief states. “Amazon could exercise this power to suppress specific publishers, authors, or messages with which it disagreed, with impunity. It also could steer the culture toward the ideas it valued. Amazon controlled what e-books were promoted on its home page, what e-books were recommended to consumers, and what books appeared at the top of a consumer’s search results when she searched for e-books on the Amazon.com website."
And in a reference to Amazon's buy-button battles with Macmillan and Hachette, the brief notes that "Amazon could, and in fact did, cut off access to certain e-books, leaving many consumers with no practical way to purchase them."
The amicus brief is among the first filed in the Supreme Court case. The Department of Justice has yet to file a response in opposition to Apple’s petition the Supreme Court for review, and now has until January 4 to do so—although the DoJ declined comment on whether it intends to file an opposition brief at all.
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In the early days of e-book reading, Amazon insisted that bestselling books be listed for $9.99 max. After this ruling, prices for my favorite conservative titles have been $14.99, 17.99 - more expensive.
That is what is called predatory pricing. Since bestselling e-books and A-list books, which is what Amazon was selling below wholesale cost, not to mention retail price, accounted for 80% of the revenues of e-Books, there literally were no profits to be made in e-books so no competitor could even think about entering the e-book market. Even the publishers of e-books could not profitably sell e-books against the Amazon Leviathan at the pricing structure they were forcing on the e-book market. The sales of the balance of e-books, the non-best-sellers and non-A-List e-books, could not ever make up for best-sellers and A-list e-books being sold for $5 to $8 below cost. . . especially when Amazon was selling those books close to cost as well. Amazon's 90% stranglehold on the e-book market had to be broken and the retail prices of e-Book raised to rational levels to actually support the industry for the market to be healthy and support the authors and support the market. Amazon's artificial $9.99 price did not leave anything to do that.
Amazon turned the economics of books sales upside down. The Best-sellers and A-list books SUPPORTED the sales of every other book in inventory. Those were the bread-and-butter sales that paid the bills that allowed book sellers to even HAVE the rest in inventory. You cannot keep the doors open the other way around. Amazon had almost killed all of the brick-and-mortar dead-tree book stores by doing the same thing in paper and hardback books, selling the best sellers and A-list below cost. . . a price no one else could match or compete with and keep their doors open. Amazon could do it because they weren't supporting brick-and-mortar stores and subsidized the cut-rate sales with sales of other products and NOT EVEN TRYING TO MAKE A PROFIT!
For it to be predatory pricing in the US, Amazon would have to be selling the e-books at below sellers cost. If they are making any profit regardless of how small, it isn’t predatory pricing.
Amazon was selling e-Book that cost them from between $15 and $18 for $9.99. That is, very obviously, below wholesale cost. They were taking a huge loss on everyone of them they sold. No one, ever, did a forensic accounting audit on Amazon's e-book sales. Amazon claims they were making a profit on overall e-book sales, but that was merely their claim. . . without evidence. . . in years in which Amazon overall posted huge losses.
You apparently really don't know what predatory pricing is. It is using artificially low pricing to keep competition OUT of a market with the intention of making competition impossible. It is the EFFECT it has, not the pricing per se. Amazon claimed they were using this pricing as "a loss leader" to attract buyers to buy other e-books in the non-best-seller and non-A-list categories. This is a specious argument because there is absolutely no way they could possibly make up the losses of their "loss leaders" by selling close-to-cost junk sale books that are not attractive to customers who are attracted to best sellers and A-list titles. They are NOT at all the same customer base.
Best seller fans don't buy books titled "The Economic Collapse of the Hittite Empire and its Impact on the Punic Wars." Their tastes just don't overlap at all. They are just not the same kind of readers. To make up the loss from just one "loss leader," and show any kind of profit, Amazon would have to sell SIX to NINE non-"loss leader" e-books to someone who was attracted to Amazon by the "loss-leader" pricing to show a profit. Can you show me anyone who buys a bestseller and then buys junk history, tech manuals, non-A-list books, etc???? I know of no one who does that. No, they'll be back to buy another "loss-leader" or A-List book that is popular at a bargain price.
These buyers aren't going to buy much else but name brand books by known authors, the bread-and-butter books that pay the bills and keep bookstores in business and allow them to compete.
I am educated as an Economist. . . and have been a CEO. These are just the facts of economics and the way reality works as I see it.
So fundamentally Sherman is little but an invitation to activism. Myself, I advocate that it be used for that very purpose against the MSM. Because IMHO the MSM is actually just the Associated Press, which was founded in 1848 half a century before Sherman was enacted. And which not only has outlived the usefulness of its mission (in that conservation of bandwidth in the transmission of news is no longer indispensable now that every Tom, Dick, and Harry has Internet connectivity with probably more bandwidth than the AP employed back in 1945, when the AP was found guilty of violating Sherman) but functions to suppress ideological competition by its Style Book, and in other ways.
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