September 12, 2014

WSJ editorial: “Amazon loves government”

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Foreboding government building via Shutterstock.

Foreboding government building via Shutterstock.

The Wall Street Journal ran a concise editorial this week titled, “Amazon loves government,” arguing that Amazon is not choosing lower prices for the consumer’s benefit, but to drive out its competitors. It’s well worth reading in full.

The article reviewed the details of the publishers vs. DoJ trial:

In February 2010 Amazon posed as the victim, and associate general counsel David Zapolsky submitted a confidential white paper to the Federal Trade Commission and Justice’s antitrust division on “the collective nature of the publishers’ action to take control of digital book pricing.”

DoJ then picked up Amazon’s legal argument and used it to sue Apple. DoJ claims that the iPad and the publishers’ acceptance of Apple’s new arrangement “forced” Amazon to flip to the agency model and thus higher (albeit temporary) consumer prices.

The irony is that over the same 2009-10 period Amazon was also exploring a conversion to agency contracts.

And concluded that the government has been very good to Amazon, even if it holds the majority of the market:

Amazon can claim a consumer interest in lower prices. But prices aren’t the only measure of consumer benefit, especially if lower prices discourage new investment in quality and innovation and consumer choice. Publishers are literary venture capital firms that finance writing and research that may not pay off for years if it ever does. They deserve some influence over how intellectual property is distributed.

The larger point is that the executive and judicial branches intervened to aid Amazon, a quasi-monopolist incumbent at a crucial competitive juncture amid the shift to digital from print, preventing a market resolution. Apple is appealing Judge Cote’s ruling as a matter of antitrust law, and the outcome is by no means clear. What is clear is that Amazon ought to stop claiming to be a tribune of the market when its chief patron is government.

The DoJ trial ended last year. So why run this editorial now?

HarperCollins is owned by NewsCorp, as is the Wall Street Journal. Guess which of the Big Five will be next to negotiate with Amazon? You’re right, I set you up there. It’s HarperCollins. This seems to be another preemptive move on the part of the publisher, or at least the corporation that owns the publisher.

 

Kirsten Reach was an editor at Melville House.

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