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According to the Justice Department's complaint, the agreement was reached as part of an effort to raise online retail giant Amazon’s e-book prices, which many publishers and authors thought were far too low. (Before the agreement, Amazon found wild success selling new and best-selling e-books for $9.99, a far lower price point than most vendors could offer.)
“Publishers saw the rise in e-books, and particularly Amazon's price discounting, as a substantial challenge to their traditional business model,” the lawsuit reads. “The Publisher Defendants feared that lower retail prices for e-books might lead eventually to lower wholesale prices for e-books, lower prices for print books, or other consequences the publishers hoped to avoid.”
"Amazon is a victim in this story,” Hovenkamp says. “They had an aggressive pricing strategy going, and publishers and authors didn’t like it very much. Apple took advantage of that.”
The casting of Amazon in a victim’s light is worrying to some in the publishing industry industry, who fear that the company could gain a monopoly on e-book sales. With the “$9.99” plan, Amazon was already selling some e-books for less than it paid publishers, a practice that smaller vendors could never afford.
“We have no way of knowing whether publishers colluded in adopting the agency model for e-book pricing,” Authors Guild President Scott Turow wrote in an open letter last month in response to news of the Justice Department’s investigation. “We do know that collusion wasn't necessary: given the chance, any rational publisher would have leapt at Apple's offer and clung to it like a life raft. Amazon was using e-book discounting to destroy bookselling, making it uneconomic for physical bookstores to keep their doors open.”
“The irony bites hard: our government may be on the verge of killing real competition in order to save the appearance of competition,” he continued. “This would be tragic for all of us who value books, and the culture they support."
Indeed, according to the New York Times’ Media Decoder blog, Amazon seemed ready to drop e-book prices on their website in response to the lawsuit, and a spokesman for the company stated that the lawsuit and settlements were “a big win for Kindle owners, and we look forward to lowering prices on more Kindle books.”
At the Wednesday press conference, too, the question was raised whether driving down prices would result in fewer e-book titles for readers, as smaller publishing houses and vendors might not be able to compete with big online merchants.
“Our aim was to restore competition in the marketplace,” replied acting Assistant Attorney General Sharis Pozen.
But does the antitrust suit mean that e-book prices will be lower for consumers from now on? “Hard to say,” says Hovenkamp. “The government will not order the firms to charge any particular price, it will just order them to stop. Whether or not the prices will come down or not is anybody’s guess.”