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Is Amazon Evil?

Amazon's cheap books are easy on our wallets, but publishers have been deeply undercut by the rise of large retailers and predatory pricing schemes.

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For small publishers Amazon provides unprecedented access to a larger audience of customers. The costs of reaching this audience can, however, outweigh the benefits. For Gavin Grant, keeping Small Beer Press afloat without slashing already-modest author royalties means making cuts in advertising and marketing budgets. Grant isn’t shy about Amazon’s role in keeping him in this tight spot: “If I meet a reader and they say, ‘I buy all your books through Amazon,’ I often say to them, ‘That’s great for Amazon, that’s great for the shipper. It does nothing for me, and it doesn’t do much for the author.’”

 

 


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Many in the publishing community mock Amazon as the “Wal-Mart of books,” but it’s important to remember that Wal-Mart is also the Wal-Mart of books. Last year, Target, Amazon, and Wal-Mart fought a price war over a handful of new hardcover bestsellers. Books with $25 and $35 retail prices were being offered for nine dollars or less.

In response to the price war, the ABA wrote a letter to the Department of Justice (DOJ), requesting that it investigate possible “illegal predatory pricing.” David Gernert, a literary agent who represents the novelist John Grisham and was quoted in the ABA letter, told The New York Times: “If readers come to believe that the value of a new book is $10, publishing as we know it is over. If you can buy Stephen King’s new novel or John Grisham’s Ford County, for $10, why would you buy a brilliant first novel for $25?” People who tend to read Grisham and King aren’t necessarily reaching for a brilliant first novel, but Gernert’s point still has some force: devaluing the books produced by an industry already squeezed to the brink is not likely to benefit the reader in the end.

The DOJ made no formal reply to the ABA, nor is it likely to (when contacted for this article, a DOJ representative had “no comment” on the letter). Enforcing anti-trust statutes, particularly in the publishing world, has always been a difficult endeavor. The relevant laws (part of the Robinson-Patman Act) have their roots in the 1930s, an era in which healthy competition was measured not only in low prices but also according to the diversity of retailers. A portion of the Robinson-Patman Act states, for instance, that it is illegal to charge different prices in different geographic areas simply to undersell local stores, a practice critical to the business strategies of large companies such as Wal-Mart.

But the DOJ doesn’t bring Robinson-Patman cases anymore, and the Federal Trade Commission (FTC) does so only rarely. John Kirkwood, a former FTC lawyer, explains that the Robinson-Patman Act is thought to be anti-consumer, “so courts are skeptical if not hostile.” The thinking is that, if prices are getting lower, the consumer must be benefiting.

 

 


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In July Bezos told the press: “Amazon.com customers now purchase more Kindle books than hardcover books—astonishing when you consider that we’ve been selling hardcover books for 15 years, and Kindle books for 33 months.” The company refuses to release exact figures, so there’s nothing to back this claim, but with Amazon cutting the price of the Kindle in order to remain competitive with Apple’s iPad, there can be little doubt that Kindle sales—and e-book sales—are up. Though that part about being astonished probably isn’t true. Amazon’s quest is market control, and it goes to great lengths to ensure it.

“At the end of the day,” an Amazon source explained, “the market is going to determine what the right price for this content is.” The conceit is that that $9.99 price tag is what the market demands. But in this case Amazon is the market, having—with no input from its suppliers—already dictated the price and preempted the standard fluctuations that competition and improved efficiency impose on prices. It was only through Macmillan’s negotiating that a new e-book-pricing model emerged, and then only for certain, privileged publishers.

 
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