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Anger, Antitrust, and Amazon

“Amazon is the Darth Vader of the literary world.”

“Amazon is a monopoly in absolutely every sense of the word.”

“We face the prospect of a nuclear winter in book publishing.”

These were just a few of the statements made at an event hosted at New America titled, “Amazon’s Book Monopoly: A Threat to Freedom of Expression?” The answer to that titular question was a resounding “Yes,” an answer given by a dozen featured speakers: Scott Turow, former president of the Authors Guild; Douglas Preston, President of Authors United; Susan Cheever, author; Mark Coker, self-published author; Franklin Foer, former editor of The New Republic; Jonathan Kanter, antitrust partner at Cadwalader; Eric Simonoff, literary agent at William Morris Endeavor; Maurice Stucke, professor of antitrust law at the University of Tennessee; John R. MacArthur, President of Harper’s Magazine; Jeffrey Rosen, legal academic and expert on Justice Brandeis; and Lina Khan and Barry C. Lynn, both with New America’s Open Markets Program.

The answer was also full of anger, expressed both by those who spoke and on behalf of those who felt they could not. Eric Simonoff noted that the publishing industries’ relation to Amazon is “marked by fear.” Barry Lynn mentioned in his opening remarks, “Many of the people we asked to stand with us today chose not to do so...they were afraid to speak in public about their experiences with Amazon.”

The arguments presented at the event centered around two points: whether Amazon has or will constrain literary content, and whether Amazon has or will conduct price discrimination. For readers, the benefits of Amazon’s sale of books have been numerous: lower costs, always-available stock, fast shipping, and ebooks. There have been downsides, too—the collapse of independent brick-and-mortar bookstores, the shuttering of many literary and editorial publishing outlets, and a more risk-averse environment for publishers and authors.

Some of these downsides might be seen as evidence of changing times, but many of those angry with Amazon are so because, as speakers at the event noted, it appears Amazon increasingly “controls the marketplace of ideas.” As summarized by Vauhini Vara last year in The New Yorker, the argument is that “Amazon has used its market power both to influence which books get attention (by featuring them more prominently on its Web site)...These practices, the authors argue, squeeze publishers, which makes them more risk-averse in deciding which books to publish....And this is bad not only for the non-famous writers who go unpublished, but for their would-be readers, who are denied the ability to hear those voices.” Foer extended this argument by discussing how Amazon’s book ratings have created “an ethos of quantification” in book publishing, a paradigm shift away from literary content to books purchased, positive ratings received, and pages read. “The economics of book making,” Foer continued, “shape the actual books themselves.” Cheever mentioned that midlist authors specifically have suffered and “have decided to write less” because “advances are lower” and they can’t financially justify publication at Amazon’s low prices. Coker noted that Amazon has created a “caste system” in ebooks between authors who have agreed to sell their books only on Amazon and those who want to sell with all retailers. In effect, Coker said, this system functions likes “a gun to the heads of authors” to force them to deal exclusively with Amazon.

One could, of course, raise the point that some of these arguments sound more about a change in middle-men than in negative impacts on readers—it might be one business has simply replaced another business. The cultural monopoly argument demonstrates an impact on readers, but the data on that diminished supply of ideas is anecdotal from authors and publishers.

Indeed, publishing houses have always reserved the right to say no to a manuscript, and when it was around, Borders got to decide which books were featured in the window display. The difference here, however, is that the authors believe Amazon has inordinate influence over publishing—hence its actions can make or break a book, an author, or a publisher. The infamous example is Amazon’s tangle in 2014 with the publisher Hachette. The publisher objected both to the way Amazon priced its books and to the prices Amazon charged for use of its services. Amazon reportedly responded by lengthening delivery time, removing discounts, refusing pre-orders, and eliminating promotions for Hachette books.

Perhaps the most powerful argument raised concerned price discrimination. Khan explained that giant firms like Amazon are able to collect data on customer preferences and patterns, and could use that information to determine the highest price each customer is willing to pay. As a result, buyers who shop online are increasingly losing a sense of what constitutes a “fair” price. While there is debate in neoclassical economics over whether price discrimination is good or bad, it’s obviously bad PR. Stucke continued by arguing that there are antitrust implications when a company amasses a lot of data, from raised entry barriers, insurmountable network effects, and privacy and quality costs to buyers.

Up to now, Amazon has avoided antitrust cases centered on these arguments, Kanter argued, partly because antitrust law focuses on measurable effects on buyers, like price, and not hard-to-measure effects, like quality. Kanter also blamed a “lack of political will” among regulators and politicians for taking on Amazon. To be clear: The legal system remains of two minds whether such forms of price discrimination are anticompetitive or just smart business. But it is worth noting that Amazon has faced accusations of what looks a lot like price discrimination before: In September 2000 Amazon apologized for testing different prices of the same product on different customers. Other online companies have been accused of conducting price discrimination through using customer data, most notably Staples.com and Orbitz, the latter of which steered customers using Macs to more expensive hotels. So while individual anecdotes can raise false red flags, they can also point to manipulations of price.

While all the speakers were critical of Amazon, they did not come to consensus around solutions. Some asked for government litigation while others felt antitrust law as it stands is too weak. An audience member asked, “Why can’t we boycott?” to which the panelists demurred, saying, “Amazon is too powerful” and “We wouldn’t be able to organize the publishers together.” Some suggested legislation that would ban companies that are foremost platforms for sales from competing with sellers who use their site. But how far would laws like this go? There are many arenas for this kind of platform-seller relationship (online and brick-and-mortar) and many variables for such transactions (store-brand items, for example), so case law could be a deep thicket.

We don’t know, then, what the solutions would be, or what form they might take, or how far they might go, or if they’re even needed. And, to quote Khan, “In not all of these instances do we know for sure if Amazon is doing [price discrimination] ...what we do know,” she continued, “Is Amazon has the capability to do these things.” We do know that fear of Amazon’s abilities has stoked much anger towards Amazon in the American book community. If a DOJ probe is initiated, as demanded by Authors United, the public will be eager to see what those pricing algorithms suggest.

Author:

Patrick Oathout