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U.S. is set for Apple’s ebook appeal, but maybe it should be looking at Amazon instead

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Late on Tuesday, the Justice Department filed its response to Apple’s(s aapl) appeal of a 2013 price-fixing verdict that found the iPhone maker had brokered a conspiracy among book publishers to fix the price of ebooks.

The government brief is 117 pages long and recounts familiar allegations: that Apple helped big publishers create a new pricing scheme in 2012 in order to get books on its new iPad device, and to wrest the ebook market from Amazon.

The new brief contains rhetorical flourishes such as “publishers fear and loathe $9.99 Ebook pricing,” and also makes the unlikely assertion that Apple organized the conspiracy because it “cared about iBookstore profits” and about earning a 30 percent commission (unlikely since ebook revenues are chickenfeed to a company that sells hundreds of millions of iPhones).

The most interesting part of the brief, however, may be the Justice Department’s descriptions of Amazon(s amzn). Even though Amazon is cast as one of the victims of the conspiracy, the brief reveals the immense power the retail giant held over the publishing world in 2011:

Amazon (the market leader in ebook retail sales) … The publishers were concerned that any single publisher who issued that ultimatum would face “retribution” – “the actual extreme of [Amazon] not putting our books up for sale.” If the publishers presented a unified front, however, it was less likely that any one publisher would be singled out.

Ironically, more than three years later, the publishers’ fear of “retaliation” and being “singled out” appears more well-founded than ever. As my colleague Laura Owen explained last week, Amazon is currently taking remarkable measures in its contract negotiations with the publisher Hachette — measures that are likely intended to scare the daylights out of other publishers who want to challenge Amazon.

All of this begs the question of why the Justice Department continues to train all of its antitrust fire on Apple, which continues to be an also-ran in the ebook market with a market share reportedly around 10 percent for most publishers. Why not investigate Amazon instead?

Section 2 of the Sherman Act holds that a company violates antirust law if it has monopoly power and uses that power in improper ways. I don’t pretend to be an antitrust expert but, from a distance, it sure looks as if Amazon’s roughing up of Hachette is worth the DOJ asking a question or two. In Europe, meanwhile, there are signs that regulators are already taking an interest.

Amazon, for its part, is framing the Hachette controversy as an ordinary dispute between a retailer and  supplier. The company may also feel it is on strong legal ground since U.S. antitrust law protects consumers not competitors, which means that Amazon’s practices may be fine so long as they result in cheaper books.

The Justice Department did not respond to an email request for comment.

As for Apple, the DOJ lawyers are in many ways just doing their job — it was Apple that appealed, and the government has an obligation to respond. Nonetheless, the Department has at times appeared overzealous in handling the case, even as its action may have helped Amazon grow ever more powerful.

Here’s the new DOJ filing (note the many references to Hachette) :

US v Apple Appellees Brief

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7 Responses to “U.S. is set for Apple’s ebook appeal, but maybe it should be looking at Amazon instead”

  1. Robotech_Master

    The Department of Justice has investigated Amazon for predatory pricing.

    In response to these arguments by Kohn and others, DOJ describes as “speculative” the fear that Amazon might use its monopoly power to raise prices in the future. DOJ claims that it closely examined allegations that Amazon engaged in predatory pricing, and found persuasive evidence lacking. It further notes that Barnes & Noble and Google had either entered or planned to enter the e-books market well before the Agency Agreements were signed. Similarly, Barnes & Noble was able to attract a $300 million investment from Microsoft in order to compete with Amazon even after the filing of the proposed Final Judgment shed doubt on the future of e-books agency pricing, and Google recently announced a new investment in a tablet computer intended to promote its e-book sales.

    —from page 38 of Judge Cote’s opinion approving the publishers’ settlement.

  2. Jack C

    The sway that eloquent writers have on the media industry is simultaneously fascinating and troubling.

    When Amazon engages in (utterly mundane) hardball negotiations with publishers, it’s an outrage. By coverage, Amazon’s offence is equivalent or perhaps worse even than when, say an “objective” media institution is caught making top-down editorial decisions avoiding or downplaying bad press that relates to them or their parent. An objective party might suggest that these two things are so vastly different as to be ethically incomparable, yet you might not know it by the writings of good story tellers and those they influence.

    Is Amazon’s tactic remotely novel or noteworthy? Is Hachette a plausible victim in the larger context? Does the coverage of this issue fit? If you’ve answered “no” to all three of these questions, then perhaps there is another story here that isn’t being covered…

    • Paul Sweeting

      Yep. There’s nothing “remarkable” or unusual about what Amazon is doing here re: Hachette. A big retailer is beating up a vendor for a better price. Yawn.

  3. The difference is pretty clear.

    In one case, one company’s actions limited what customers could do even if they were not it’s customer, in the other, the company chooses not sell several products and suggests the customers shop elsewhere.

    Amazon is not blocking anyone from buying these products elsewhere, it is choosing not to stock and sell these products itself.

    There is really no need for regulations in the case of Amazon, if customers run in droves because they do not offer these services, they will fail, but customers that want these products can buy them elsewhere and Amazon’s actions do not change the price/availability at other retailers.

  4. Oletros

    “All of this begs the question of why the Justice Department continues to train all of its antitrust fire on Apple, ”

    Because Apple appealed? Are your articles about this case just trolling?

    • Read the whole story, Oletros :) .. I acknowledge that in the piece. I do think that the DOJ has been overzealous, including with its press releases, and in its ganging up with Judge Cote on imposing the monitor. Apple’s own conduct hasn’t helped but, at this point, I think the way things have played out suggest that the case was misguided in the first place