Senator Charles Schumer (D-NY) has penned an editorial for The Wall Street Journal criticizing the U.S. Department of Justice’s antitrust suit against Apple and five of the six major publishers in the U.S. Senator Schumer argued that the DOJ will be handling monopoly power to Amazon, and that the end result of a successful prosecution will be the death of the publishing industry.
Senator Charles Schumer and the Publishing Industry
As the senior senator of New York, Senator Schumer can count amongst his constituents most of the U.S. publishing industry, which is based in New York City. While three of the five publishing houses have settled the case, the industry as a whole has been highly critical of the DOJ’s antitrust case.
The case began with Apple’s deal with five of the big six publishers in the U.S. to launch iBooks on the iPad. With that deal, Apple moved the entire ebook publishing industry to an agency model where publishers set the price and the retailer, including Apple, took 30 percent off the top.
Apple included a clause that said publishers weren’t allowed to sell their books for less elsewhere, and those publishers used that clause to force Amazon to renegotiate existing agreements. The publishers were keen to do this because Amazon was dumping Kindle versions of best sellers in order to gain share for its Kindle platform.
The publishing industry was worried about the effect this was having on pricing in general and the perceived value of books, especially hard backs, which retail at a far higher price than ebook versions. They had been unable to stop Amazon’s practices, however, until Apple armed them with the tools to do so.
The DOJ took exception to this, accusing Apple and the publishers of colluding to raise prices. Many executives, publishers, and authors have openly worried that the DOJ’s case will restore Amazon’s monopoly in the name of competition.
This is the argument that Senator Schumer made in his editorial, titled, “Memo to DOJ: Drop the Apple E-Books Suit.”
In that piece, he wrote, “The suit will restore Amazon to the dominant position atop the e-books market it occupied for years before competition arrived in the form of Apple. If that happens, consumers will be forced to accept whatever prices Amazon sets.”
Looking to the days before Apple’s iBooks, he explained that, “Without viable retail competitors, publishers were forced to make a Hobson’s choice. They 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.”
He added, “If publishers, authors and consumers are at the mercy of a single retailer that controls 90% of the market and can set rock-bottom prices, we will all suffer. Choice is critical in any market, but that is particularly true in cultural markets like books. The prospect that a single firm would control access to books should give any reader pause.”
In short, Senator Schumer agrees with me.