According to The Wall Street Journal, Senator Charles Schumer warned the U.S. Department of Justice that its suit against Apple and two major publishers could possibly “wipe out the publishing industry as we know it” by giving Amazon the chance to regain a monopoly share of the market. In his opinion piece titled “Memo to DOJ: Drop the Apple E-Books Suit: Restoring Amazon’s monopoly in digital publishing is not in the public interest,” Schumer asserts that Apple’s stake in the e-book industry is vital for competitive consumer pricing and for young writers who hope to showcase their work.
Senator Schumer wrote, “The e-books marketplace provides a perfect example of the challenges traditional industries face in adapting to the Internet economy. Amazon took an early lead in e-book sales, capturing 90% of the retail market. Because of its large product catalog, Amazon could afford to sell e-books below cost." He went on to say that publishers faced with a Hobson’s choice between going with Amazon’s sales scheme or ignoring the march toward digital content. According to him, publishers “could allow their books to be sold at the prices Amazon set, thus undercutting their own current hardcopy sales and the future pricing expectations for digital books—or stay out of the e-books market entirely. In an increasingly digital age, the latter was simply not an option."
The senator was referring to Amazon’s “wholesale model” which the company adopted when they first entered the e-book market. On the other end of the spectrum is Apple’s “agency model” which places the power with publishes to set content prices under a “most favored nations” clause. The Department of Justice feels that the agency model may infringe on antitrust laws, which is why the court took Apple and its publishing partners to court. Apple denies the allegations saying it broke up a perceived Amazon monopoly.
The Wall Street Journal post also noted the Department of Justice’s focus on the prices of new books which have risen since Apple’s iBookstore was launched. Senator Schumer noted that the justice body ignored the overall downward trend of average e-book prices. He qualified this statement by saying that although consumers have a short-term interest in new releases, they have “a more pressing long-term interest in the survival of the publishing industry.” Last but not least, the senator voiced concern that the price-fixing suit has empowered monopolists and hurt those trying to innovate. Such an event is likely to have a “deterrent effect” to companies in the broader U.S. economy that are trying to adapt to the digital change. The department of Justice’s trial against Apple, Macmillan, and Penguin Group is set to begin in 2013 so we’ll have to wait and see what the outcome turns out to be.
Source: The Wall Street Journal
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