Amazon.com Has Become Embroiled in a Controversy

Amazon.com has become embroiled in a controversy regarding pricing on Kindle books. The issue arose when several book publishers faced a class action lawsuit from the Attorney General about price-fixing on ebooks. Price fixing is considered to be anti-competitive activity that undermines the power of free markets. Thus, it has been illegal as part of the mandate the U.S. government has to promote free competition, for nearly 100 years. The publishers, however, have essentially placed the blame on Amazon. The company is now working with the publishers to deliver refunds to consumers, who were judged to have overpaid for their Kindle books.

Lynn (2012) notes that Amazon has a dominant position in the ebook market, in part because of the success of its Kindle e-reader, but also because it has become the dominant bookseller in general in the United States. Amazon is using its bargaining power as the dominant retailer in the industry to set prices in the market, something that contravenes the spirit, if not the letter, of the antitrust legislation enforced by the Department of Justice.

The Amazon case did not emerge in isolation. In July, Apple was found to also have colluded with five major publishers with respect to e-book pricing. The two cases were tried independently, but in both instances it was found that the distributors and the publishers colluded to raise e-book prices rather than to engage in a competitive marketplace, in contravention of the Sherman Act (Albanese, 2013).