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Authors and booksellers to DOJ: investigate Amazon for antitrust (updated)

Groups representing  authors, agents and independent booksellers have asked the Department of Justice to investigate Amazon for antitrust violations.

The New York Times reported Monday that the requests for an inquiry are a result the recent squabble between Amazon and the Hachette, publisher of authors such as Kim Stanley Robinson and Douglas Preston. In the course of the contract dispute, Amazon made it more difficult for its customers to buy Hachette books, a move which infuriated authors published by Hachette and others in the book industry.

The Authors Guild, the American Booksellers Association, the Association of Authors’ Representatives and Authors United said in letters and statements being sent this week to the Justice Department that “Amazon has used its dominance in ways that we believe harm the interests of America’s readers, impoverish the book industry as a whole, damage the careers of (and generate fear among) many authors, and impede the free flow of ideas in our society.”

The letter from the American Booksellers Association itemizes what the association terms as “questionable business practices” that the groups want the DOJ to examine.

Last year’s dispute between Amazon and Hachette, pursuant to which Amazon decimated Hachette sales and author royalties in order to extract its preferred payment terms, is but one example of the company’s misuse of its extraordinary market power. Other examples include:

1. Predatory Selling: Huge numbers of book titles appear to be sold below cost, and indeed it is not clear whether Amazon makes money on its book sales at all, or simply uses the category as a loss leader to entice sales on other segments of its websites. Discounts of 50 percent or more on leading new titles are the norm in circumstances where the wholesale price is typically 50 percent of the recommended retail price.

2. Abuse of Monopsony Power Over Publishers: In addition to the Hachette dispute, Amazon has engaged in various punitive tactics designed to force major and smaller publishers to do as Amazon dictates. Measures include delisting books, delaying delivery, removing books from pre-order, discriminating by saying a specific title from a particular publisher is not available but similar titles are available from others, etc.

3. Closed Kindle E-book System: Unlike other e-readers, Kindle e-readers and the Kindle app are configured to allow readers to only read books sold by Amazon and using its proprietary format. E-pub and PDF formats, which are industry standard formats widely read on other devices, cannot be displayed on a Kindle, further enhancing and perpetuating the retailer’s 65 percent e-book market share.

4. Free Riding: Amazon is the classic free-rider. Amazon has long enjoyed three major competitive advantages over its brick-and-mortar counterparts: Without any physical stores, Amazon has low fixed costs, which enables it to offer lower prices than brick-and mortar stores, even when not selling below cost. Amazon can and does free ride off the sales and promotional efforts of brick-and-mortar stores (consumers browse the books at brick-and-mortar stores and then purchase them online at lower prices), greatly encouraging “showrooming.” Showrooming is the phenomenon whereby customers go to a physical bookstore to make a purchasing decision but actually purchase the item from an online retailer, in most cases Amazon. Amazon has even created an app to facilitate this practice, which allows customers to scan the barcode of a book in a brick-and-mortar shop and complete the purchase from Amazon’s website through their smartphones. Multiple industry research studies demonstrate that this is occurring, and publishers themselves have noticed increased Amazon sales during author events at bricks-and-mortar bookstores. State governments have subsidized Amazon with sales taxes avoidance. (Unlike bookstores, Amazon does not have to collect sales taxes in many locales.)

The DOJ is well versed in the ebook market, having successfully sued Apple for colluding with book publishers to increase the price of ebooks.