Authors United and ABA Want to Bring Down Amazon, But Do They Have A Case?

Now that the price fixing case against Apple and has presumably ended authors and booksellers are out to turn the tables on Amazon, the whistleblower that first called the Big Six and Apple's price fixing scheme to the Department of Justice's attention. On Monday Authors United, the Authors Guild, the Association of Authors' Representatives, and the American Booksellers Association wrote several letters to the DOJ with their concerns that Amazon is leveraging its power as a monopoly to control prices and limit competition within the book industry.

Authors United (AU), as some may remember, was formed during the long-standing Amazon-Hachette dispute in 2014. AU petitioned Amazon to lift the sanctions on Hachette titles which were often buried on retailer's site. When the dispute ended, AU promised to make Amazon's monopolistic practices known to the DOJ. And on Monday, along with these other author and bookseller associations, it finally did.

But do these organizations have a case against Amazon? Several pundits have voiced doubts. Author Joe Konrath argues that though Amazon may be a monopoly in the sense that it controls over 70% of ebook sales it is not using that power to disadvantage consumers. In fact its ecommerce technology and low prices are making books more accessible to the consumer, argues Konrath, which should protect the retail giant from the DOJ's scrutiny.

While I agree that Amazon is not hurting the readers of the world by offering a massive library of books and keeping prices low, I think that Amazon still has some questionable practices. In particular, during its contract dispute with Hachette, the retailer showed the type of power it could leverage to sway negotiations in its favor. Hachette was able to hold out and perhaps received favorable terms. But if the same move was pulled on a small or mid-sized publisher, could they withstand Amazon's power? I doubt it.

Another argument from the letters' critics, specifically Julie Monroe of Teleread, is that these letters are complaints from companies that have failed to innovate to keep up with Amazon. Instead of entering a legal battle, the publishing industry should focus on evolving to better compete. That overlooks the great strides many publishers and booksellers have made in the last few years to revamp their business. Penguin Random House, HarperCollins, and most recently The Quarto Group have launched consumer-facing websites that sell books directly and build communities of avid fans through original content. These strategies are reinventing the publishing game. But building new ecommerce platforms and marketing those platforms to consumers requires massive investment, which is why only the largest publishers have pursued this tactic. That still leaves the majority of the industry at Amazon's mercy.

Amazon is already being investigated in the EU. That investigation will determine the legality of Amazon's publisher contracts which require publishers to inform Amazon when they are offered more favorable terms from other retailers. The EU fears that this practice will limit competition and innovation from other retailers. But the difference between this investigation and the proposed DOJ investigation comes down to different laws. "In the U.S., firms can enjoy and exploit their dominance as long as they don't do so in plainly anticompetitive ways," said Daniel Crane, an antitrust expert at the University of Michigan Law School in an article for The New York Times. "But in Europe, they have to take special pains not to do things that extend their dominance."

I'd like Amazon to be investigated, but I too have my doubts as to whether there is a legal basis for it. But to assert that Amazon is essentially harmless to the book industry and dismiss the concerns of the ABA and other groups, in my view is rather naïve.