May 8, 2017

Amazon settles e-book antitrust dispute in EU (kind of)

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In January of this year, Amazon proposed a five-year moratorium on some of the harshest clauses in their e-book contracts with publishers in order to satisfy an antitrust inquiry by the European Union. The settlement would excuse Amazon from paying any fines, as well as prevent them from forcing publishers to give the same terms to Amazon that they offer the company’s competitors — for five years, at least. Reporting by Philip Blenkensop and Foo Yun Chee at Reuters confirmed yesterday that the European Commission had accepted Amazon’s offer and would be dropping the inquiry.

Before we get into what this might mean, let’s step back.

While antitrust enforcement isn’t new, the mechanisms of corporate anti-competitiveness have recently grown more complex. Much of America’s antitrust legislation originates in the robber-baron era — when John D. Rockefeller controlled the oil market, sugar and whiskey manufacturers fixed prices with each other, and so on. But in light of contemporary corporate strategy, much of this now looks like child’s play. Instead of working with other businesses to control the market, corporations like Amazon in effect aim to become the market.

The global market in e-books is one area where Amazon has pursued this strategy most aggressively. They control nearly the entire e-book market in North America and Europe. Amazon’s lawyers have made the claim that e-books are part of the overall book market, rather than a market of their own, but the common sense test can’t square that circle. A print book contains a single, fixed set of contents. An e-book is part of an electronic ecosystem that can do so much more, and benefit not only the party that sells it, but also the seller of the device on which it’s read. As more e-reading shifts to cell phones and tablets, an e-book’s contents can expand, with links to additional content, audio, video, and more. It’s hard for me to imagine anyone who picks up their phone and says, Eureka!, this is really in the same category as a printed book made with technology from the fifteenth century!

Thus, we’re left with the question of whether we’re comfortable with Amazon controlling the e-book market. In the EU, the answer, apparently, is no, at least for the next five years. Imposing contractual limits on publishers is only one of the ways Amazon dominates the market, and the EU did not pursue any other options to limit Amazon’s power or punish them for creating the market conditions that have led us here.

In the US, we’re in the same situation with Amazon (possibly a worse one), and at the moment we have less leverage to create a fairer marget. Our only hope, in my humble opinion, is the courts. The rule of reason is a doctrine courts have been applying for more than a century to determine whether companies are violating antitrust law; in essence, in situations where it is not clear whether companies are behaving unlawfully, the role requires judges to base decisions on their own best sense of whether the challenged conduct unreasonably restrains trade. I’m not sure when we’ll reach that point with Amazon, but I sense the day may be quickly approaching.

 

 

Peter Clark is the sales manager at Melville House.

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