DOJ Files Comments And Response to e-Book Consent Decree With Publishers

The United States Department of Justice received 868 comments on its proposed consent decree with the settling publishers in the Apple e-book litigation.  They are available here, with access to comments by number, name, and by through local search.  The United States has filed its own response today to the comments, many of which suggest that collusive conduct is far more favorable than handing a big chunk of the market to Amazon.  To that, the Justice Department says:

Some of the criticism directed at Amazon may be attributed to a misunderstanding of the legal standard for predatory pricing.  Low prices, of course, are one of the principal goals of the antitrust laws.  Cf. Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 340 (1990).  This is because of the unmistakable benefit to consumers when firms cut prices.  Id.  “Loss leaders,” two-for-one specials, deep discounting, and other aggressive price strategies are common in many industries, including among booksellers.  This is to be celebrated, not outlawed.  Unlawful “predatory pricing,” therefore, is something more than prices that are “too low.”  Antitrust law prohibits low prices only if the price is “below an appropriate measure of . . . cost,” and there exists “a dangerous probability” that the discounter will be able to drive out competition, raise prices, and thereby “recoup[] its investment in below-cost pricing.”  Brooke Group v. Brown and Williamson Tobacco Corp., 509 U.S. 209, 222-24 (1993).  No objector to the proposed Final Judgment has supplied evidence that, in the dynamic and evolving e-book industry, Amazon threatens to drive out competition and obtain the monopoly pricing power which is the ultimate concern of predatory pricing law.  The presence and continued investment by technology giants, multinational book publishers, and national retailers in e-books businesses renders such a prospect highly speculative.  Of course, should Amazon or any other firm commit future antitrust violations, the United States (as well as private parties) will remain free to challenge that conduct. 

Or putting it another way, Amazon’s price cutting is a feature, not a bug.  I’m sure the statement “This is to be celebrated, not outlawed” must gall some of the commenters, as much as this statement might:

Finally, even if there were evidence to substantiate claims of “monopolization” or “predatory pricing,” they would not be sufficient to justify self-help in the form of collusion.

Amazon can undersell because it diversified its revenues and profits by selling other products besides books.  I could order cat food from Amazon if I wanted to.  The booksellers generally sell books in one form or another and not much else of consequence.  As Steve Jobs might say, you’re holding your business model all wrong.  [MG]