Barnes & Noble Weighs In With the Court on the e-Book Settlement

Barnes & Noble has filed its comments to the Court on the proposed final judgment with the settling publishers.  B&N, as Mr. Horse from the old Ren and Stimpy show would say, doesn’t like it.  No sir, I don’t like it, not one bit.  One would almost think that B&N’s was one of the defendants (which it is not) by the tone of the document.

The document raises the specter of Amazon’s pricing policies pre-agency contract model and how the adoption of the agency model has benefited other retailers in that market.  Specifically, Amazon’s market share of e-books has gone from 90% to 60% since the publishers set prices.  That’s a good thing from B&N’s perspective as it competes with Amazon.  Then there is stuff like this:

The benefits of agency to American consumers are easily identifiable.  Competition is now vigorous among e-book distributors.  Amazon’s share of e-book sales has decreased to approximately 60 percent, while Barnes & Noble, Apple, independent booksellers, and others have emerged to provide consumers more choice in where and how they shop for e-books.

I’ll just make a side note that the antitrust laws are designed to protect consumers and not to protect competitors from each other.  That usually translates into something more than the benefits described by B&N.  Pricing on e-books would be one factor that seems to escape their notice.  That does show up later in the document where a chart shows a decline in the average price of e-books over time, though it does not indicate how that price information is determined.  Popular conception is that prices paid by consumers went up and were similar to physical books after agency pricing went into affect.  I think in this case I would rather have the thousand words than the picture if the words filled in the detail.

As this is not a defendant’s filing, a major focus is that the remedies imposed on the publishers by the Justice Department in the Settlement go well beyond what is requested in the complaint.   The Department, for example, seeks to prohibit Most Favored Nation Clauses (MFNs) on every level of commerce by the publishers though the complaint concerns itself with retail MFNs.  Publishers must also file their contracts with the Department on a quarterly basis for two years.  This transforms the Department into an industry regulator for future contracts.  B&N is the one who gets punished in this scenario according to the filing.

There’s a lot at stake here, B&N says:

The proposed settlement, particularly its overreaching regulatory provisions, warrants an exacting review because of its potential impact on the national economy and culture, including the future of copyrighted expression and bookselling in general, not only electronic books (“e-books”).  Because of the far-reaching implications of the proposed settlement, many millions of Americans, as well as all levels of the distribution chain for books (from authors to publishers to distributors, and especially brick-and mortar stores), stand to be affected by this case’s resolution.

I don’t know how to respond to this except that in the parallel music industry, I remember visiting by local record store (such an archaic name).  They were first threatened by big box stores that had a comparable or better selection at lower prices.  Consumers flocked to them.  Local record stores and music labels were next pressured by digital downloads.  The stores felt the heat because they seemed no longer necessary and the labels similarly so because they saw their product, songs, devalued to $0.99 or less.  Does that sound familiar? 

Somehow music is still created, manufactured, and sold.  Maybe not the way the labels would like, but business is transacted nonetheless.  iTunes is popularly considered the largest owner of the online music market with a share of well over 60%.  That I have nostalgia for the record store experience does not mean that I miss it.  I think the same will happen for bookstores.  Many of the documents in this case stress how the agency model brings less money to the publishers.  That, to me, simply shows how desperate the publishers are to preserve the way they do business.  Somehow books will be written, manufactured, and distributed if digital distribution becomes the norm. 

As a last note, I’ll mention that the American Booksellers Association sent a letter to the Justice Department on October 22, 2009 asking the Department to investigate Amazon’s alleged predatory pricing practices.  It seems the Association was concerned that the price war that broke out between Wal-Mart, Amazon, and Target was having a bad impact on local booksellers.  I don’t remember that the Department acted in any significant way on the request, at least in regard to the Association’s concerns.  More commentary is at paidContent with links to the filing.  [MG]