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Getting Things Straight: eBooks May Indeed be an Influence in the Amazon-Hachette Dispute

2844902161_f66b8f9bdf_b[1]Here’s an interesting complication in the 8 month old Hachette-Amazon contract dispute that seems to have tripped up some in the press.

A few days ago Michael Cader, writing over at Publishers Lunch, set the record straight on some background details concerning Amazon, Hachette, and the latter’s antitrust settlement from 2012. Unfortunately, in trying to set the record straight Cader may have also introduced an error of his own.

To recap, in January 2010 5 US publishers conspired with Apple to bring about retail price maintenance in the ebook market and to force Amazon to submit to the pricing changes. The DOJ and state’s attorneys general started investigating in mid-2010, and in April 2012 the DOJ brought an antitrust lawsuit against the 5 publishers and Apple.

Three of the publishers (S&S, HarperCollins, and Hachette) settled the day the lawsuit was filed. Penguin and Macmillan settled later (late 2012 and early 2013), and Apple fought the lawsuit in court and lost (repeatedly).

It turns out that the day the lawsuit was filed is more important than Cader realized. In particular, this part appears to be a goof on his part:

The second misunderstanding is the idea that Hachette (and possibly others) are no longer governed by their DOJ settlements that limit how the agency model can be deployed (leading to what we dubbed Agency Lite). This is also wrong. ..

To review, the court did not approve the settlements with the first three publishers until September 6, 2012 — so those conditions apply at least until September, 2014. The exact expiration depends on contractual processes under the settlement that have not been confirmed publicly.

While Cader is correct that there is a 2 year window where the settling publishers cannot pursue the agency model again, I think he could be wrong on when that window ended.

Rebecca Allen, writing over at Walk it Out, caught his error:

In the DOJ settlement, the language is unambiguous. "For two years after the _filing_ of the Complaint, Settling Defendants shall not enter into any agreement with any E-book Retailer that restricts, limits, or impedes the E-book Retailer from setting, altering, or reducing the Retail Price of one or more E-books, or from offering price discounts or any other form of promotions to encourage consumers to Purchase one or more E-books."

The complaint was filed on 11 April 2012, so yes the 2-year window may have expired. We don’t know for sure because the settlement also allowed the publishers to choose when they would renegotiate their contracts, and that resulted in a randomness that makes it impossible to predict when the negotiations will commence.

So does this mean that Amazon and Hachette are fighting over Agency right now?

Maybe, maybe not.

While it is possible that the dispute currently includes ebook pricing, I doubt that ebooks were a concern when Amazon first started pressuring Hachette in November 2013. Remember, there is at least one report from an agent which said that Amazon was short-stocking Hachette titles 8 months ago, and that was far too early for Amazon and Hachette to be fighting over ebooks.

But now that we are into June 2014, it’s possible that the dispute also includes ebook pricing. We don’t know for sure, but there is a chance that the PW report (that this dispute also includes agency pricing for ebooks) may indeed be true.

If you ask me, ebooks probably are a topic for discussion in this dispute. If nothing else Amazon is aware of the time frame and they most certainly do not want to give up control over retail prices.

So yes, I think Amazon and Hachette are fighting over Agency pricing. It’s probably not the main reason Amazon is cutting back on the number of copies of Hachette titles in Amazon’s warehouse, cutting their sale price discounts, or taking the pre-order buttons off of new titles.

Update: On the other hand, maybe not. Cader was kind enough to clarify this point, and depending on how you read the complaint he could have been right all along. According to Cader, the point which Rebecca Allen raises above relates to new contracts with ebook retailers, while the points he raised related to existing contracts with ebook retailers.

So no, agency is probably not at risk today. But given the tone of the Bonnier contract dispute in Germany. I still think ebooks are in the Hachette fight somewhere.

But to be honest, folks, I don’t know enough about the law to be sure one way or another.

image by mararie

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