Amazon, a Longtime E-Book Discounter, Is Accused of Driving Up the Price of E-Books
By Jeffrey A. Trachtenberg and Dana Mattioli
Amazon.com Inc., which originally came up with the idea of
charging bargain-basement prices for electronic books, is now being
accused of forcing customers on other book sites to pay too much
A lawsuit filed Thursday in a federal district court in New York
alleges that a deal between Amazon and five major book publishers
has led to higher e-book prices for all consumers, because it
prevents rival retailers from selling any of these publishers'
e-books at a lower price than on Amazon.
The suit, which was filed by the law firm Hagens Berman and is
seeking class-action status, said Amazon charges high commissions
and other costs to publishers, "which in turn significantly
increases the retail price of the e-books they sell on Amazon.com."
As a result of the deal with the five big publishers, the price
they charge on Amazon also has to be the price they charge
"In a competitive market, the Big Five could sell e-books at a
lower price on their own websites or through Amazon's retail
competitors that offer lower commissions and fees," the lawsuit
Calling it a "conspiracy to fix the retail price of e-books,"
the suit alleges that the deal between Amazon and the five
publishers -- which it said account for 80% of all books sold in
the U.S. -- violates antitrust law.
"If you are Barnes & Noble and your stores are in trouble
and your Nook device didn't go as far as you'd have liked, you
would have liked to be able to say that your digital books are 10%
cheaper than on Amazon," said Gregory Arenson, an antitrust lawyer
and partner at Kaplan Fox & Kilsheimer LLP.
The five publishers cited in lawsuit are HarperCollins
Publishers, which like The Wall Street Journal is owned by News
Corp.; Lagardère SCA's Hachette Book Group; Penguin Random House, a
unit of closely held German media company Bertelsmann SE; Simon
& Schuster, the book publishing arm of ViacomCBS Inc., and
Macmillan. Penguin Random House has agreed to acquire Simon &
Schuster, pending regulatory approval.
Amazon and all five publishers declined to comment. Barnes &
Noble didn't have an immediate comment.
Under current U.S. antitrust law, a company typically isn't
viewed as being anticompetitive if customers aren't harmed by the
company's actions. One of the major ways customer harm is
determined is if a company agrees with others to increase prices
above the level they otherwise would have been at.
"All you have to show is the agreement, the impact on the
customer, and then seek damages," said Mr. Arenson of the deal
between Amazon and the five publishers.
Amazon is the dominant U.S. e-book retailer, accounting for 76%
of digital books sold in the U.S. in September, according to Codex
Group LLC, a book-audience research firm. Rival sellers of digital
books include Apple Inc., Alphabet Inc.'s Google and Barnes &
Noble, which is owned by the hedge fund Elliott Management
The suit challenges the notion that Amazon has been a force for
lower e-book prices. Amazon kick-started the business when it
introduced its Kindle e-reader in November 2007, a launch that
promoted digital bestsellers for $9.99. The discounted offering
helped Amazon build market share, but the company was criticized by
publishers at the time for hurting the industry.
A few years later, Apple entered the business as it launched the
iPad, with deals that allowed publishers to set the retail prices
of their books. That upended the old model, where publishers let
retailers set prices for consumers, and effectively blocked
discounting without publishers' approval.
The Justice Department subsequently filed its civil antitrust
suit against Apple and five major publishers. The publishers
settled. Apple went to trial but lost.
Amazon is currently at the center of a number of investigations
into the way it competes. In October, the House Antitrust
Subcommittee completed a 16-month investigation into Amazon and
other technology companies, concluding that Amazon has amassed
"monopoly power" over sellers on its site.
The U.S. Justice Department in 2019 launched a broad
investigation of the market power of large technology companies
including Amazon, and the Federal Trade Commission has oversight of
Amazon as part of a broader look into the business practices of big
The state of Connecticut is also investigating Amazon's business
practices in the electronic book market, the Journal reported, with
a focus on how the Seattle giant sells and distributes digital
books. In addition to Connecticut, investigators from California
are looking into Amazon's business practices, the Journal has
Third-party sellers in other categories on Amazon, such as toys,
have also complained about Amazon pressuring them to sell their
wares for lower prices on Amazon than at other retailers. Amazon
has received backlash for the practice and changed the terms in
recent years so as not to run afoul of regulators in the U.S. and
Write to Jeffrey A. Trachtenberg at firstname.lastname@example.org
and Dana Mattioli at email@example.com
(END) Dow Jones Newswires
January 15, 2021 17:25 ET (22:25 GMT)
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