Salon.com’s New Revisionist History Blames Amazon for the Apple Antitrust Lawsuit

Salon.com has long been a member of the Amazon is evil camp, and they’re back again today with yet another installment.

In what is ostensibly a post on the latest Apple v DOJ tussle (the hearing scheduled for tomorrow), Kathleen Sharp has managed to drag in Amazon several times, misstate historical details, and bring up multiple irrelevant arguments. I am always a fan of short-form fiction published by Salon.com, so I am overjoyed to once again have an opportunity to discuss Salon.com’s latest flight of fancy.

It’s a good one, and starts out with a whopper:

You may remember that Amazon helped persuade the U.S. Department of Justice to sue Apple in April 2012, claiming that Apple conspired with five of the nation’s largest publishers to fix the price of e-books at a level different than what Amazon had set.

I don’t remember that Amazon persuaded the DOJ to do anything. What I remember is that at least 2 of the state’s attorney generals were investigating Apple and the 5 publishers since August 2010 (so said the WSJ).

So Amazon hoodwinked the DOJ and the attorneys general for nearly 50 states into conducting a 2 year long investigation? Really?

Amazon, the web’s biggest retailer, had been selling published books at a money-losing rate of $9.99. Why? To get us to buy its Kindle e-book reader, and to dominate the e-book market. Amazon’s strategy worked. According to court documents, the firm soon controlled 90 percent of the e-book market.

As I pointed out when I last debunked one of Salon.com’s works of fiction, the DOJ has concluded that there is no evidence that Amazon is selling ebooks at a loss (link).

And as I also pointed out in that post, not all of the ebooks sold by Amazon in the pre-agency era cost $10 or less. I know I regularly paid more, and I’m not the only one.

This meant that publishers — who had invested in the writing, production, promotion and distribution of these books — couldn’t sell their wares at the recommended retail price of $14.99.

Um, the publishers weren’t selling the ebooks, Amazon was, but is Sharp really trying to argue that publishers were unable to set the retail price they wanted and let Amazon take a loss?

That doesn’t make any sense.

Nor could brick-and-mortar stores match Amazon’s money-losing discounts. Amazon’s product-dumping and predatory pricing helped bankrupt many small-town bookstores. Yet, neither publishers nor independent booksellers sued Amazon, even though they might have had a good case (as we’ll soon see).

B&N was often matching Amazon price for price on new hardcovers. And if Amazon was killing small-town bookstores then why did the ABA have more members in 2013 than in 2012? And why did Forbes and the Washington Post report that indie bookstores are thriving?

Also, Sharp never does explain why publishers and indie booksellers would have had a good case for suing Amazon (not that I can see, anyway).

So how did this wacky e-book case get so far?

It started in the Rainier Tower in Seattle, home of Steve Berman and his law firm, Hagens Berman Sobol Shapiro LLP. …

Sharp spends the next 8 paragraphs focusing on one of the anti-trust lawyers who sued Apple and the 5 publishers on behalf of consumers. I’m not quite sure why she wrote about him at such length, but I suspect she was trying to imply that because this lawyer is based in Seattle he must be Amazon’s patsy.

But never mind her motive; let’s look at the details she got wrong:

Allegations of collusion attracted the DOJ and other government agencies charged with upholding state and federal laws. In April 2012, the DOJ picked up Berman’s argument and sued Apple.

So what does Sharp think the state’s attorneys general and the DOJ were doing in the 20 months since August 2010, twiddling their thumbs? She doesn’t offer a clear explanation, but she does go on to raise an irrelevant argument:

Every year, the “Library & Book Trade Almanac,” an authority in the field, reports annual sales by book category. It 2008, when Amazon had a lock on the market, it reported that the average price of an adult fiction e-book in the U.S. in was $8.71. In 2009, as more people self-published books, the average dropped to $8.21. In 2010, when Apple introduced its agency model for e-books, the price dropped 14 percent to $7.06. And when publishers were up and running against Amazon in 2011, the average price of an e-book sank by an astonishing 32 percent — to $4.83. “That’s a steal,” said Al Greco, a professor of marketing at Fordham University.

The average selling price of ebooks on the US market-is irrelevant to this lawsuit; it is no more or less than a red herring and has been a red herring no matter whether it is Mark Coker, Joe Wikert (or rather his guest), or Sharp who makes the argument.

Why?

For one thing, the phrase “raise ebook prices” is itself a red herring (the publishers conspired to gain control, not simply to raise prices). And then there’s the point that (as I pointed out in August 2012) the 5 publishers were only trying to control their own prices, not everyone else’s.

And the DOJ has already shown that the average price of ebooks published by the 5 publishers actually went up as a result of agency pricing. There’s even a convenient chart:

agencyprices-1024x555

I’d love to see someone refute that one.

I don’t think Sharp will be able to, but she does go on to muddy the waters even more:

Which gets to the heart of this bizarre case: The numbers show that, far from hurting the market, the publishers’ and Apple’s agency model actually helped it. They allowed Barnes & Noble to gain a foothold in the e-book market, provided relief to the independent brick-and-mortar stores, and gave consumers lower rather than higher prices.

I’m sorry, but I was under the impression that the whole price-fixing issue involved ebooks. Indie booksellers have only a negligible share of the US ebook market, so how exactly did agency pricing provide relief?

And as for the lower vs higher claim, see the above chart.

Apple and the DOJ are going back to court tomorrow to argue over the conduct of and fees charged by the court-appointed monitor, Michael Bromwich, and that’s why Sharp spent the rest of her article slanting all of the disagreements between the DOJ, Bromwich, and Apple in favor of Apple.

I won’t repeat them here, but I suspect that the judge will see things differently.

26 thoughts on “Salon.com’s New Revisionist History Blames Amazon for the Apple Antitrust Lawsuit

  1. “B&N was often matching Amazon price for price on new hardcovers.”

    In what universe? The biggest discount BN offers in-store on new hardcovers if the 20 weekly bestsellers, which are discounted at 30%. Amazon routinely offers far more than that (Sycamore Row, for example, is 49% off on Amazon right now).

    Incidentally, if you want a fun fact: publishers sell their books at a 46% discount from the list price to the major chains. Amazon is loss-leading with Sycamore Row right now. Ha.

    1. Maybe not. Amazon is not a “chain” and the usual discount schedule may not apply. If AZ is selling at a 49 percent discount, they may be getting a 50 percent discount from the publisher. Considering the volume of AZ sales, anything greater than a 49 percent discount is profit–even 49.1 percent. So we don’t know unless we have the actual discount to AZ.

      1. “Chain” in this context simply means “bulk purchaser”. Don’t be pedantic, I know exactly what I’m talking about in this particular area.

        1. Please, never mind pedantic. Do you know that AZ receives only a 46 percent discount in “this particulare area”–or is it a guess? Since you post under a screen name, how is one to know what you know?

  2. You’re missing sales tax. Barnes and Noble pays it, Amazon still generally doesn’t. That gives Amazon a 5-10% price advantage over B&N for print books.

  3. Actually, when the first price fix investigations and lawsuits launched, Amazon and B&N were targeted along with Apple and all six BPHs. Random House and Amazon were dropped early on and by the time the DOJ filed, even B&N was off the list.
    Revisionist “history” indeed.

  4. Ah, the famous “Amazon controlled 90% of the ebook market”.

    Of course Amazon had 90% of the market at that point. While they didn’t create it from scratch they were the only major player who saw a potential market and worked to grow it, which they did by an order of magnitude. Sony could have done it, but they were too busy making sure nobody knew the Reader existed. B&N hadn’t even gotten around to buying Fictionwise so they could mismanage it into the ground yet, much less launching the Nook, Apple was still writing off the ereader market as irrelevant “because nobody reads anymore”, Microsoft was letting MS Reader die on the vine, Palm was busy going bankrupt…

  5. What we’re really seeing here is what social psychologists call “motivated thinking.” Sharp is probably in with the literary publishing crowd for whom Amazon’s evil is a matter of Holy Writ, beyond all doubt. It’s like the Republicans and government.

    1. Yes. When new technology creates a wave that rocks their boat, there are people who spit and fume at the wave without considering where it comes from. What is Amazon but an application of the computer revolution to customer service and the marketing of everything? To imagine that the old publishing business model could remain intact after such a technological revolution is akin to imagining the Overland Stage to remain intact after the spread of railroads. Or the horse and buggy after the advent of the motorcar.

  6. I actually enjoy reading the historical fiction genre. I just don’t want it in my news and current affairs. There has been a lot of these types articles and too many to write off as just shoddy journalism. In my view it can only be attributed to a concerted effort to try to sway public opinion away from the fact that US anti-trust laws were violated by the major publishers and Apple. I guess it’s not surprising when so many of the nation’s news outlets are owned by the same parent companies that own the major publishers.

    1. 1. Salon isn’t owned by any major publisher.
      2. Could it be that maybe people see in Amazon the same thing that Wal Mart did 20 years ago and don’t want the entire US economy wrecked again by a vendor that uses predatory pricing to drive everyone else out of business? Does it have to be a conspiracy?

      1. “Salon isn’t owned by any major publisher”

        It’s not a sister of one of the big 5, but according to Wikipedia–and with a quick Google search to corroborate–since 2007 its operations have been dependent on ongoing cash injections from Chairman John Warnock, co-founder of Adobe.

        No real point. Just thought that was interesting.

      2. I wasn’t trying to imply that Salon was owned by a major publisher, I was referring to the larger media coverage of the trial.

        No everything isn’t a conspiracy but when the big publishers are part of large media conglomerates it’s natural to have suspicions of bias. Decades ago the news organizations would have been extra cautious in fact checking and demonstrating independence. I haven’t seen evidence of basic fact checking or editorial oversight in much of the coverage of this trial so that is where my comment came from.

        1. Well, in fairness trivial concerns like “basic fact checking” and “editorial oversight” have gone out the window globally, not just in the case of this specific story.

  7. I think the problem with Amazon is the completely irrational way the company is priced in the stock market. If it was priced like any other normal company (even Apple has a P/E ratio closer to 11 compared to 3200 like Amazon) then a lot of these conspiracy theories would disappear.

    1. Uh, what kind of linkage might there be between the irrational expectations of investors and the DOJ enforcing hundred year old antitrust laws?
      Inquiring minds would like to see some detailed explanation.
      Preferably one that doesn’t involve black helicopters or secret drinking societies. ;)

      1. Easy. If the share price wasn’t so high and the P/E ratio wasn’t so unrealistic, investors would demand that the company made a decent profit. Which in turn would increase the ability for some competition to heat up. If you’ve read the new book about Bezos you’ll see that he’s not fond of that, as diapers.com found out when they tried to get bought by Walmart (they settled for being bought by Amazon for less money).

        1. And that has what to do with the DOJ?
          Are they Amazon investors?

          It’s still a non-sequitor; neither Amazon nor its investors have anything to do with the DOJ deciding to do its job and uphold the law.

          No matter how many idiot Salon writers try to drag them into it, Amazon had nothing to do with the conspiracy or its prosecution. If anything, they benefited from the conspiracy without being part of it, much as Random House did.

          1. That CNN article is irrelevant. The company reported sales for the Kindle devices, not revenue. They could still have easily been losing money on the division, but without knowing their gross margins or revenue for that particular division it is impossible to say whether or not it was profitable.

            Try again, bucko.

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