Antitrust Practices and Market Power

Anti-Trust and EBooks

Within the contemporary economic environment, there are a number of systems and agreements between parties in the purchase/consume transaction. In any given marketplace, there are ways that businesses approach competition. If one business dominates the market and does not allow for equal or fair competition, a monopoly exists (geography, scale, technological coercive, etc.). Monopolies define and regulate the competition in markets; oligopoly changes this rubric to a small number of sellers controlling the market. Price and access are some of the ways in which market share and market competition continue to evolve. Price, of course, is the amount of payment required for a good or service. Price-fixing, though, is an agreement reached between businesses to buy or sell at fixed (manipulated) prices in order to control the market. The major difference between a monopoly and an oligopoly is the number of players that are manipulating the market -- monopoly means only one provides the product of service, but in an oligopoly, the product or service is available from a given number, yet still a few large businesses dominate this market and make it very difficult for new businesses to enter (Friedman, 1990; Schenk, 2010).

One current example of a potential company, in this case Amazon and Apple, Inc., colluding to change the business model of electronic books so that consumers would need to pay more for the service has been noted by the European Anti-Trust Commission as well as the United States Justice Department. Essentially, the Amazon Kindle and the Barnes and Noble Nook readers, as well as other tablet and SmartPhones, have changed the manner in which many individuals read books, magazines, even text (journals or other academic material). Instead of purchasing hard copies of paper books, books are available through libraries as rentals, or through purchase at a discounted price, through vendors; with Amazon and Barnes and Noble being the largest. For example, number three on the New York Times Best Seller list for Hardcover Fiction is George Saunders' Tenth of December. The price from Amazon, including shipping for Prime Members, is $14.21, and the e-book for Kindle is $12.99; Barnes and Noble at $14.77 and $12.99 respectively; and most independent bookshops would be in the $22-24.00 price range. E-book publishers seem to be forced into situations in which their format must match the Kindle, Nook, or I-Pad/Apple format. Publishers complain that the case centers on the way publishers are charged for e-books when Amazon, in particular, offers many titles, including many Best Sellers, at $9.99 or below. In the case of Amazon, estimates indicate that 90% of the e-book market, which, combined with Apple's specific protocol, increases the price point for publishers and makes the sale of actual paper copies more difficult (amazon.com; barnesandnoble.com; nytimes.com; Catan and Trachetenberg, 2012).

Amazon would, for instance, sell more Kindles by deeply discounting e-books, taking a loss on that segment while making it up on the hard goods side; using price to increase its market share and monopolization of the e-book market. The European commission maintains that even association pricing is unfair, because it limits the ability for non-mega giants to compete fairly in the market because their wholesale costs are often considerably higher than Amazon's retail price (Barker, 2011). Publishers, at least in the current business model, must continue to provide multiple means of delivery. They cannot pay authors or afford to market books if each time Amazon sells a book it is under the price of any other competitor and does not reflect true costs.