Stephen Foley: Price-fixing is bad for the book buyer so let's leave it in the history section
Stephen Foley is a former Associate Business Editor of The Independent, based in New York. He left in August 2012. In a decade at the paper, he covered personal finance, the UK stock market and the pharmaceuticals industry, and had also been the Business section's share tipster. Between arriving with three suitcases in Manhattan in January 2006 and his departure, he witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.
Saturday 14 April 2012
US Outlook Is the US Justice Department going to smash the book publishing industry cartel? Let's hope so. The collusion set out in this week's competition lawsuit against Apple, Penguin, Macmillan et al reveals not just a gang of executives colluding to jack up prices, but a conspiracy to save an industry that is ripe for disintermediation.
The authorities here turned up some juicy detail about book publisher chief executives meeting quarterly "in the private dining rooms of upscale Manhattan restaurants" to complain that Amazon was squeezing their margins in e-books (e-books that have no printing costs, remember) by selling titles at knock-down prices.
When the publishers ganged up on Amazon, with the help of Steve Jobs at Apple and the new iBookstore he was building for the iPad, they probably added several dollars to the cost of the average e-book. It is a rum episode, and bad for the book buyer, without a doubt.
It is also a concerted attempt to protect the power of the publishers as intermediaries between authors and the public, into which Amazon was threatening to muscle. The Kindle-maker has made no secret of its desire to support self-publishing by authors, effectively inserting itself as an alternative "publisher" of new work.
That is what the existing publishing houses want to prevent at all costs. That, as much as specific pricing on specific titles, was the issue that pushed publishers into their pact with Mr Jobs.
Book publishers have a long history of anti-competitive practices. For most of the last century in the UK they fixed prices using something called the "net book agreement", under which they threatened to cut off supply to bookstore chains that marked down their publications.
The paternalistic justification then, as now, was that these price controls support new authors and culturally important works that might never get a blockbuster following.
To the vast benefit of consumers, the net book agreement collapsed in the Nineties thanks to a bookseller revolt and, eventually, a competition authority ruling.
Three publishers – Hachette, Simon & Schuster and Rupert Murdoch's HarperCollins – settled with the US government and have dropped restrictions that prevent Amazon and others discounting e-books. Macmillan and Pearson-owned Penguin are fighting the US government, saying the risk of Amazon gaining a monopoly is a bigger threat to consumers.
Amazon may have quickly built a dominant position in e-books, but new online bookstores and e-reader ecosystems – including Apple's – and the self-publishing opportunities of the web provide it with a genuine competitive challenge. This is the vibrant future we should nurture in the e-book market.
Cooking up a price fix is so 20th century.
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