Aug 24 2012
Friday News: DOJ delivers a sharp retort; Amazon sets date to announce new Kindles; and Tom Sawyer + Steampunk?
The DOJ filed its response to the resistances filed against the request that Judge Cote approves the settlement with HarperCollins, Hachette, and Simon & Schuster. If you’ve read Courtney Milan’s brilliant piece that books are not special snowflakes, you’ve read the DOJ’s retort which uses the same case law (and admittedly why wouldn’t they) and the same language, falling short of implementing the term “special snowflake.”
If you haven’t read Milan’s piece, the upshot is this. Every industry in the history of antitrust law dating back to the turn of the century has argued that their industry is special and deserving of special exemption from the antitrust laws but it is Congress, not the courts, who decide if there is an industry that deserves to be exempted. Thus, books and the book industry must abide by the same rules that govern oil and gas; doctors; lawyers; engineers; and newspapers.
DOJ’s response to Apple is probably the best part of the reply. Apple, if you remember, argued that the DOJ’s settlement would interfere with existing contracts and impose a penalty on Apple before it got its day in court. Hogwash, DOJ says. Apple’s contracts with the publishers are all on a month to month basis and the settlement only requires the termination steps to be taken but not for the termination to be effective within seven days of the settlement. Further, the DOJ points out with some faux incredulity, why would Apple resist more flexibility in pricing?
Apple’s last grievance, that the decree changes who has responsibility for setting pricing, is even more bewildering. Under the decree, retailers, including Apple, gain certain pricing discretion with respect to Settling Defendants’ e-books. Given that Apple is free to not exercise that authority, see U.S. Response (Docket No. 81) at 50, it is difficult to understand how this contractual change possibly could harm Apple.
In reality, what troubles Apple is that the decree returns pricing discretion not just to Apple, but also to its retail competitors — competitors which Apple fears may choose to exercise that restored authority in order to lower e-book prices. In that event, Apple’s e-book customers might find less expensive alternatives. Apple’s desire to avoid price competition for as long as possible is the unstated reason why it seeks to undo or forestall the settlements.
To Penguin, the DOJ says that the cases Penguin cites in support of its argument that the DOJ isn’t providing enough information (the economic analysis) don’t actually support Penguin’s argument:
In fact, in the two Tunney Act cases Penguin cites, the court found government analyses of evidence not to constitute determinative documents.
DOJ then rebuts Penguin’s strange price argument (I found it strange). DOJ notes that the prices for Penguin’s books increased by an average of 21% after Agency pricing took hold.
However, straightforward analysis of Penguin’s prices before and after conspiracy culmination reveals that Penguin did indeed raise its prices as soon as it gained the power to do so. In four weeks spanning the time when Penguin took retail pricing power from Amazon, the average price for a Penguin e-book sold through Amazon increased 17 percent, and the average price for a Penguin “new release” e-book sold through Amazon increased 21 percent.
In response to Macmillan, the DOJ says that there is no evidence that returning ebook pricing to retailers will result in Amazon redominating the market and points to the Microsoft investment in Barnes & Noble and the recent launch of the new Sony Reader.
Finally, the DOJ addresses the B&N and ABA amici curiae briefs which argued that the “public” is represented in the 900 comments, most of which rejected the settlement. DOJ returns to its position that the majority of the comments were from those who stood financial gain from keeping agency pricing in place.
The next step will be for Judge Cote to determine whether she needs a hearing, more evidence, or whether she’ll simply issue a ruling on the judgment. My best guess? She approves within the next week.
“The drama hails from Detroit 1-8-7 duo Jason Richman and David Zabel and is described as an adventure-themed reinvention that revolves around the two famed literary characters who re-meet as young men in their 20s and form an investigative firm in a bustling and steampunk New Orleans.” Hollywood Reporter
Conventional textbooks for kindergarten through 12th grade are a $3 billion business in the United States, according to the Association of American Publishers, with an additional $4 billion spent on teacher guides, testing resources and reference materials. And almost all that printed material, educators say, will eventually be replaced by digital versions. NYTimes.com