Collusion in e-Book Pricing

Guest Post by Richard Brawer

There has been a recent article in the Wall Street Journal about the Justice Department investigating five large publishers and Apple for colluding to set prices on e-books.  As per the article, it is my understanding that this collusion came about because of the low prices Amazon has placed on books from these publishers.

I would like to point out that the Supreme Court reversed previous rulings about fair trade, and the new ruling states that manufacturers can set and enforce the retail price for their products and deny sales to those that try to discount their products.

For example I’ve been in the Apple store, Wallmart, Best Buy, and Radio shack and the Apple products they sell are within pennies of each other.

As I understand it in this case, the problem this article points out is not about publishers setting the price and denying to sell to anyone who discounts their product, but that they got together and colluded with Apple to all set the same price for their books and trying to force Amazon to try and sell for that colluded high price.  That is illegal.

If they had each gone to Amazon and Apple separately and said we will not sell you if you discount our books that would have been legal. But then of course they wouldn’t have had much sway over the book sellers because Amazon, the largest bookseller, probably would not sell their books until the publisher knuckled under and allowed Amazon to discount.

As a retailer, I personally had experience with this issue. Before the Supreme Court ruling, I had bought for my store some comforter sets from an upscale manufacturer who sold department stores. The price the big stores sold them for was $400.00. I was a discounter so I sold them for $300.00.

The manufacturer called me and told to cease and desist. I told him to sue me and if he stopped selling me I’d sue him. Back then once a manufacturer sold you they could not stop selling you for the sole purpose that they didn’t like the price you sold their item for.  Today they can.  (Of course your orders could be misplaced or you could be told they were out of stock and delivery would be extended.  If you were a large store you could force them to prove it, but as a single store, I didn’t have the financial means to hire a lawyer.)

Personally, I think the Supreme Court made the correct decision. A manufacturer should have control over his product. If a person doesn’t like the price, buy a competing product. However, I also agree that manufacturers of the same or similar products cannot get together and collude to all sell their product for the same price.  That creates a monopoly.

Competition always brings the prices down as Amazon has done with books. Monopolies always bring prices up which Apple and the publishers tried to do.

I agree that Amazon can be arbitrary at times as to who is allowed to post reviews on their sites, and is a predator in their pricing practices, but their positives far outweigh their negatives.  Many more people have become avid readers since Kindle, and look what they have done for authors whom might never have been able to get published.

I am published by a small press, but I also use Amazon’s KDP program for my back list and I think it’s fabulous.  I am making money I would never have made before.

Here is the link if you care to read the WSJ article:

Richard has published five novels in mystery, suspense and historical fiction genres.  When not writing, he spends his time sailing and growing roses.  He has two married daughters and lives in New Jersey with his wife.  Watch for Keiretsu in fall of 2012


Posted on March 20, 2012, in Publicity & Writing, Writing & Publishing. Bookmark the permalink. Leave a comment.

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