Amazon’s Power Play
Amazon, the online retailer, has often described itself as obsessed with making customers happy. But lately the company has been making some of its users extremely unhappy by making it hard or impossible for them to buy books published by the Hachette Book Group in the United States and delaying the deliveries of titles from the Bonnier Media Group in Germany.
Details of the contract negotiations at the heart of these disputes are hard to come by. The negotiations reportedly deal with the pricing of electronic books, but the companies are not discussing them publicly. What seems clear is that Amazon is using its market power — the company accounts for about 40 percent of new books, print and digital, sold in the United States and more than 50 percent in Germany — to get the best deal for itself while it squeezes publishers, annoys its customers and hurts authors by limiting their sales.
In a short statement about its dealings with Hachette, Amazon admitted that it was clamping down on the supply of Hachette’s printed books by ordering fewer of them. The company said it was acting “on behalf of customers” and that this was essentially business as usual, or something retailers do “every day.” The company has used similar tactics in the past, against the publisher Macmillan and the Independent Publishers Group, a Chicago-based distributor for small presses.
At one level, this dispute appears to be the kind of hard-nosed negotiations that always take place when distributors and producers try to figure out how to split the profits from a relatively new business, in this case e-books. Even as publishers battle Amazon, they themselves are facing demands from some authors and their agents for a bigger slice of e-book profits. Spirited price negotiations between buyers and sellers are a fundamental part of capitalism.
But when a company dominates the sale of certain products as Amazon does with books, it has the power to distort the market for its own benefit and possibly in violation of antitrust laws. Legal experts say there is not enough evidence for the Federal Trade Commission or the Justice Department’s antitrust division to investigate Amazon’s treatment of Hachette. (In Germany, publishers have called on lawmakers to change antitrust laws so they can band together and negotiate contracts jointly with Amazon.) But regulators should keep an eye on this case. There may be grounds to investigate Amazon if its squeezing of Hachette drags on for months or if it engages in similar actions against other publishers.
There is precedent for government involvement. In 2012, the Justice Department sued Apple and five large publishers, arguing that they illegally colluded to fix and raise the price of e-books. Publishers were unhappy that Amazon was deeply discounting some digital books and selling many for $9.99, which, in some cases, was lower than the wholesale cost of the e-book. Apple, by contrast, allowed publishers to set the retail price of e-books and took a commission on each sale. The publishers then forced Amazon to agree to adopt that model of selling e-books, too.
The Justice Department eventually settled with the publishers and last year won its case against Apple, which is appealing the decision. The settlements and ruling against Apple allowed Amazon to again discount e-books, which led to lower prices but also strengthened Amazon’s already strong position in that segment of the business.
It would be best if Amazon simply dropped its bullying tactics and spent its energy reaching agreements with Hachette and Bonnier. The longer this dispute drags on, the more likely it is that some readers will reconsider their relationship with Amazon and start buying books from other retailers. That would surely damage Amazon’s goal of becoming the seller of everything to everyone.
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