Home » Amazon, Bookstores, PG's Thoughts (such as they are) » ABA Urges Federal and State Investigation of Amazon’s Business Practices

ABA Urges Federal and State Investigation of Amazon’s Business Practices

3 March 2016

From the American Booksellers Association:

This week, the American Booksellers Association launched a national advocacy campaign with letters urging the U.S. Congress, the 50 state attorneys general, and the 50 state governors to investigate Amazon for violations of antitrust laws.

In the letters, ABA CEO Oren Teicher wrote that the association strongly believes that “Amazon’s abuse of its dominance and its growing monopolization have had a negative impact on free expression and the health of America’s book industry, including a chilling effect on the diversity of, and access to, books and information.”

In conjunction with the antitrust campaign, ABA launched its Antitrust Action Kit, which provides booksellers with state-specific letters that they can adapt and send to both their state and federal lawmakers as well as other key officials.

“We strongly encourage booksellers to use the templates in the Action Kit to reach out to their federal and state lawmakers, as well as their attorney general and governor,” said Teicher. “Antitrust laws exist to protect consumers, their communities, and small businesses from the very business practices now being employed by Amazon.”

. . . .

Teicher also pointed out that Amazon’s business model is very similar to the A&P grocery store chain’s business model prior to 1949, when the U.S. Court of Appeals ruled that A&P violated antitrust laws.  “Like A&P,” he wrote, “Amazon is not keeping prices artificially high. Indeed, it is keeping prices artificially low, and extending its reach into production and distribution. This spurs further growth for Amazon, while forcing smaller competitors to do business with it even as it simultaneously competes against them. In the process, Amazon has garnered great influence among policymakers in states and in the federal government, garnering tax subsidies that only increase its market advantage at the cost of tax revenue and millions of jobs.”

Link to the rest at the American Booksellers Association

PG is continually amazed at all the instant experts on antitrust law that keep popping up in the book business these days.

The most common antitrust case they cite is Standard Oil Co. of New Jersey v. United States, decided in 1911. PG notes that, while Standard Oil still stands for some antitrust principles, it hasn’t been 1911 for a long time and the competitive world has changed a bit since then.

Amazon’s supposed sin is “predatory pricing,” known in some circles as low prices, great prices, wonderful prices, affordable prices, etc.

Here’s the theory about how predatory pricing is supposed to work and why it is dangerous:

  1. Big Bad Company lowers prices.
  2. Competitors wither and die.
  3. After finishing off competitors, Big Bad Company raises prices to ruinous levels.

Bullet Points 1. and 2. simply describe free market capitalism as practiced in many parts of the world.

Bullet Point 3. – raising prices to high levels after putting competitors out of business hasn’t happened, at least in the modern US.

If any company was in a position to jack up prices in recent times, it would have been Walmart which, in many small towns, became the only grocery store, the only clothing store, the only book store, etc., after local competitors selling those products did go out of business. Did Walmart raise prices? Nope. Everyday low prices.

Sam Walton understood there was always some mini Sam Walton lurking around waiting to underprice Walmart if Walmart raised its prices. And people would travel further for low prices in 1990 than they would in 1911.

Plus Sam Walton had good lawyers who told him that if he did raise prices under these circumstances, he would check the box for Bullet Point 3 and be guilty of predatory pricing.

Twentieth century antitrust law was often based on companies gaining monopoly power in one or more geographic areas. With poor transportation options or goods too bulky to ship very far, a competitor one hundred miles distant might still be shut out of a geographical market because customers wouldn’t travel that far to purchase goods.

Of course, Amazon lives on the web where, in most of the world, geography doesn’t matter. PG could set up an ebook store today that competed with Amazon on book prices (for a limited selection of ebooks). Baen, which is way smaller than Amazon, has an ebook store for its own books and offers some products Amazon can’t.

Amazon even enables hundreds of used book stores to directly compete with it on price by including used book listings beside Amazon’s new book listings. PG has no inside information, but he bets that Amazon loses a significant number of new hardcopy book sales to used book stores. Abe Books looks to be well-positioned to compete in in this market should Amazon ever decide to shut out used book stores.

PG says there is nothing noble about the efforts of the ABA or Authors United or any of the other whiners who are trying to prevent Amazon from selling books at low prices. They have no interest in defending the great principles of antitrust law. They are simply trying to use government agencies to protect their right to sell expensive books. This crusade provides no public good and is entirely self-serving.

The future of books is here and there’s not much room for expensive middlepersons.

 

Amazon, Bookstores, PG's Thoughts (such as they are)

55 Comments to “ABA Urges Federal and State Investigation of Amazon’s Business Practices”

  1. I detect the distinct scent of desperation in this anti-Amazon antitrust approach.

    • I suggest that any time a company/corporation/group urges Fed/State investigations, that there should be a commensurate investigation of the petitioning group. Let’s make sure they aren’t being merely vindictive or hiding their own dirty practices

      This must makes me think less of the ABA.

  2. LOL. Amazon, which allows anyone to publish legal material and make it free all over the world, is suppressing free speech and access to information.

  3. A friend of mine is a self-published author who recently went around to local bookstores trying to interest them in carrying his book. He’d been tradpubbed and had won awards. Some wouldn’t even consider talking to him. This wasn’t based on the content of his book but solely is based on the identity of his publisher. How does that support free expression? How does that support fair competition? What legal recourse does he have?

    • IANAL, but I am skeptical there would be legal recourse — how would a bookstore be legally obligated to sell a particular book? Such a law would be wrong, and easily fall into the wrong hands. May there never be one.

      Your friend’s situation makes me think of an anecdote my father tells, of a time he was in a band. Some club refused to let them play there, and was quite snotty about it. But then the band became popular, and the club came calling … but the band remembered how they were treated.

      If the bookstore wants to continue driving people to do their book-shopping at Amazon, let them. That’ll be their loss. For the record, though, a few people here did mention getting into bookstores. I think they took the expanded option in CreateSpace.

      • How does that support free expression?

        Free expression includes both the right to speak, and the right to remain silent. The bookstore is choosing to remain silent by refraining from carrying the book. It is exercising its right to free expression.

        How does that support fair competition?

        It supports the idea that any retailer is free to carry the goods he chooses. He is under no obligation to expend his money, time, and resources to help someone else sell their goods or advance their ideas..

        What legal recourse does he have?

        None.

        • Meaning Amazon can act just like a bookstore and sell what it pleases, not sell what it doesn’t wish to, and charge whatever prices it feels like as long as no contractual terms are violated. And since they aren’t a monopoly, maybe they should sue the ABA for fibbing. Also sue for the other lies.

          Oh, wait, they’re too busy being relevant and innovative and promoting free expression in literary form to sue the ABA dorks.

  4. Amazon acquired AbeBooks in 2008.

    • Oops. You’re correct, Gordon. My flying fingers were traveling faster than my brain.

      Thanks for letting me know.

      • And I’ll add that if you regularly find yourself tempted by used books on Amazon for a penny plus shipping, you might consider expanding out to AbeBooks, where the prices are often even lower than that.

        • Even better than lower prices, you can also refine your search on Abe. When I like a book enough I want to actually own it, I go there to buy a signed first edition for my shelf. Even then, it’s usually less expensive than whatever the publisher has listed the hardcover for.

      • I think all it means is if Amazon.com the website stops selling used books, Amazon.com the company can still make money on used books via AbeBooks.

  5. The “Antitrust Action Kit” sounds like something that should have been advertised in the backs of comic books in the 70s, along side x-ray goggles and secret decoder rings.

    And why do I picture it looking like an empty parachute pack?

  6. Funny they won’t go after the qig5 with those concerns, they’d have more of a case methinks …

  7. When I see these posts, I wonder what the lawyers involved are doing: helping their clients in something they know is not likely to win (because, presumably, they DO know about antitrust law) seems to me to be a way of churning up fees for themselves.

    Of course it is a great principle of our democracy that you don’t get in the way of someone who is determined to sue, and provide that someone with the best legal advice – or they will go to a different lawyer who might not be as good.

    Do these cases get laughed out of court, PG?

    • You have to remember the only case they have is a case in popular opinion. The only thing the ABA asks their lawyers is ‘could we be sued for posting these lies?’

      Sadly for them, popular opinion likes Amazon, it’s the qig5 and their lap dogs (AG/AU/ABA) that has a problem with Amazon cutting them out of the loop between writer and reader.

      Almost like they are too dumb to walk and chew gum at the same time … which doesn’t say much for their members.

      • It’s the ABA’s money paying for their lawyers (unless they win, and the court awards them costs?) – so I’m guessing the publicity value is somehow worth it to the ABA? It does get them headlines and attention. I’m not sure what for, though, unless it is for their members to think the association is doing something useful with their dues (if there are dues).

        ‘Follow the money’ is always a useful exercise.

        • ” … launched a ‘blah blah’ campaign …”

          No lawyers, no courts, just a ‘campaign’ in the hopes someone thinks they have something other than their heads stuck up their a**. Since the ‘U.S. Congress, the 50 state attorneys general, and the 50 state governors’ will all be asking the ABA to provide something ‘illegal’ for them to ‘investigate’, that’s as far as they can take it.

          Just like FedExing the DoJ and a full page NYT ad, but even cheaper, and with the same results: Not A Dang Thing.

        • What was the quote? “80% of my publicity is no good, I just don’t know which”.

          THAT 80%,

          Take care

  8. Patricia Sierra

    Meanwhile, in the reality-based world, consumers are begging not to be protected from Amazon.

  9. This story is far more exciting if you read the title “ABA” and think it is the American Bar Association! I was like, “WTF???? Oh, Booksellers.”

    P.

  10. PG,

    IANAL, but the ABA appears to be acting like the AMA in Wilk v. American Medical Association.

    https://en.wikipedia.org/wiki/Wilk_v._American_Medical_Ass'n

    –On September 25, 1987, Getzendanner issued her opinion that the AMA had violated Section 1, but not 2, of the Sherman Act, and that it had engaged in an unlawful conspiracy in restraint of trade “to contain and eliminate the chiropractic profession.” (Wilk v. American Medical A**’n, 671 F. Supp. 1465, N.D. Ill. 1987). She further stated that the “AMA had entered into a long history of illegal behavior”

  11. I’d really like to hear what these folks think are the abuses. Exactly what specific action do they categorize as abusive?

    From what specific business practices do consumers, communities, and small businesses need protection?

  12. They are simply trying to use government agencies… This crusade provides no public good and is entirely self-serving.

    Exactly. Instead of competing in the marketplace as it is, they hope to get government to step in and thrash their competitor for them. That does not produce admiration in this reader’s breast. Ugh!

  13. Oh dear Lord, what’s next?

    There is something about the book business, maybe it’s the age of the institution, like a stodgy old person who won’t adapt to changing times. The music business at least submitted to a Nielsen point-of-sale scan, fell apart fast and then attempted to adapt.

    Not the publishers and the booksellers, they are going down thrashing and screaming.

    • The thing that immediately strikes me about the book business – both publishers and booksellers – is that more than any other business I know of, it is filled with people who cannot do sums and are proud of their innumeracy.

      I once had a newspaper editor tell me smugly that the world is divided into ‘word people’ and ‘number people’ – no other categories, no overlap – and that anybody who can handle numbers is ipso facto not a word person. And she did this in such a context as to make it clear that she was claiming that word people are categorically superior in culture to number people.

      The subsequent decline and fall of the newspaper business has never surprised me in the least. So far as my experience goes, booksellers are no better, and publishers generally somewhat worse. To themselves, their ignorance is not a bug but a feature. Dunning and Kruger should write another paper.

  14. Smart Debut Author

    Amazon is a threat to the freedom that publishers hold most dear:

    Freedom from competition.

  15. I must commend the ABA on the effectiveness of their propaganda/FUD/marketing campaign. Even PG fell for it, and took it as something that needed to be seriously discussed.

    IMO that was an error. This does not deserve to be discussed beyond labeling it as propaganda or FUD.

  16. You can tell they aren’t serious because they cite the A & P case. Spoiler alert, if that was a good argument Walmart would not exist.

    • Heh, I still wish Amazon would give in to their ‘demands’, just once.

      “Amazon has taken note that the ABA/AU/AG think we’re hurting them and the competition. We found their member lists online and will remove all e/books by those members from being sold on Amazon.

      Any of those ABA/AU/AG members that disagree with the ABA/AU/AG and actually want their e/books on Amazon, please let us know and we will post your name on our web page list as ‘for Amazon’s business practices’ and we will happily sell your e/books for you.”

      Want bet how long ABA/AU/AG will last if their members have to call them on it to sell on Amazon? And some of those one percenters will be at the head of the line …

      A pipe dream, but a fun one …

  17. Did ABA FedEx all the letters?

    • Na, presorted standard, so it’ll come like all the other political junk mail you’d find in your own mailbox …

      (They’re getting low on funds and FedEx costs money …)

  18. Oh, suffering cats. Not this again. Didn’t they kill this tired old turkey a couple of Thanksgivings ago?

  19. What would they have the DOJ do? Break up Amazon? [It’s already hundreds–my rep tells me–of small corporations]. Force it to raise prices? Stop selling books? I guess this is the part I just don’t get. Ordinarily in antitrust actions there’s been a harm–not a blessing–to the public welfare. Price fixing? [with whom could it be said to have colluded?] Cease and desist from offering free shipping? Take down it’s one-click-buy button? Cease making products findable usually in one click?

    In law school we took a class called Remedies. Surprisingly enough it covered the remedies that courts could offer litigants. We were never taught solutions to problems that didn’t exist, however. Has that changed since I was in law school? I doubt it.

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