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Summary:

In his letter to the Department of Justice on the proposed e-book settlement, American Booksellers Association president Oren Teicher calls Amazon a “classic free-rider” and argues that settling publishers shouldn’t have to drop agency pricing as a requirement of the settlement.

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In his letter to the Department of Justice on the proposed e-book settlement, American Booksellers Association president Oren Teicher calls Amazon a “classic free-rider” and argues that settling publishers Hachette, Simon & Schuster and HarperCollins should not have to drop the agency pricing model as a requirement of the settlement.

The end of agency will hurt indie bookstores

Elimination of the agency model would “significantly discourage new entry, and will lead to the departure from the market of a sizeable number of the independent bookstores that are currently selling e-books,” Teicher writes. He says indie bookstores were only able to start selling e-books because “the market was commercially viable as a consequence of adoption” of the agency model and that 380 indie bookstores are now selling e-books through ABA’s IndieCommerce platform. (They’re doing that through Google, but Google’s affiliate program will end at the end of this year and ABA plans to find a new partner something Teicher doesn’t mention in this letter)

Without presenting data, Teicher says agency “has clearly lowered retail prices to indie bookstore customers…indie bookstores report that average prices to booksellers dropped $2-$5 per unit or more after Agency was introduced, while sales of e-books have significantly increased.”

Amazon is “a classic free-rider”

“As a power buyer and power seller that regularly sells its books and e-books below cost, we believe that Amazon is a much more dangerous industry participant than the publishers or any other retailers,” Teicher writes. He cites Amazon’s fight with distributor IPG and Amazon’s fights against state sales taxes as examples of its “mercurial attitude toward its business partners with devastating results for those partners given Amazon’s market share.”

Amazon is “a classic free-rider” that “can and does free ride off the sales and promotional efforts of bricks-and-mortar stores” and “does not collect sales taxes in many locales,” Teicher says. “Showrooming” — the practice of discovering books in a bricks-and-mortar store and then buying them online — has resulted in “lost revenue to indies of as much as $260 million,” he says, citing Verso Advertising research.

Teicher argues that since the agency model itself has not been declared illegal, “no final consent decree should prevent publishers from independently choosing to adopt that business model for their own independent business reasons, which might include promoting a diverse distribution base.” (Barnes & Noble makes a similar argument in its letter to the DOJ.) He says that “IndieCommerce and its ABA member stores should not be penalized by having their and the Google agency agreements set aside, when these were freely negotiated contracts that no one has alleged were the product of collusion.”

If Apple and book publishers colluded, they should be punished, Teicher says. But “a two-year hiatus from the agency plan will not punish any alleged colluders. It will only punish indie booksellers and other e-book distributors who entered the market after the Agency Model was adopted by changing the terms of their business arrangement in a way that facilitates below cost-pricing by power buyer, and likely leading to a monopoly for that buyer.”

Photo courtesy of Flickr / TheCreativePenn

See also

B&N: DOJ e-book suit endangers consumers, bookstores and copyrighted expression

Everything you need to know about the DOJ lawsuit in one post

What the DOJ lawsuit means for readers now

Penguin, Macmillan respond to DOJ in e-book pricing suit

Apple digs in on e-book lawsuits, says Jobs’ quotes “will speak for themselves”

Letters to the DOJ: Public speaks out on e-book pricing case

  1. Great piece, but one quick notes: The ABA letter to the Dept. of Justice notes in the first footnote that “before January 2013, ABA’s IndieCommerce subsidiary will fulfill e-book orders through a provider other than Google e-books since Google is discontinuing its business as a reseller of e-books.”

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    1. This is fixed – thanks Dan!

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