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NEWS | Ebook Price Fixing and Bad Journalism

by Geoffrey Allan Plauché on April 15, 2012

in IP, News, Prose

Sharis Pozen

DoJ Assistant AG Sharis Pozen

Sharis Pozen

DoJ Assistant AG Sharis Pozen

Jeffrey Tucker recently discussed the Department of Justice's decided to launch antitrust litigation against Apple and five of the Big Six publishers — Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster, but not Random House — for alleged price fixing. Three of them — Hachette, HarperCollins, and Simon & Schuster — decided on the same day to settle straight away. The alleged sin was that Apple and the publishers decided to go with the agency pricing model in which the publishers get to set the prices for their books in the iBooks Store, while Apple takes a 30% cut.

As you'd expect, I'm with Jeffrey Tucker in believing that price fixing, collusion, cartels should not be illegal. In a free market, these practices are not stable and will end up harming the companies in the long run if they dissatisfy customers. What I want to highlight in this news post is not what so much what libertarian justice has to say about the matter but some bad economic-tech journalism about the business side.

I recently read this article on Mashable by Lance Ulanoff, the site's Editor-in-Chief:

“How Steve Jobs Got Apple Into Trouble Over Ebooks.”

Wow, is this guy clueless.

And if Steve Jobs really thought Amazon screwed up in alienating major publishers by not adopting the agency model, he was clueless as well. Amazon is WINNING.

Jobs pushed the agency model on the publishers? I don't think so. They preferred that model but couldn't get Amazon to go along with it without Apple's help. It's the screw-your-customers model and it wouldn't have been good for the publishers over the long haul. They want high ebook prices so that they can hang onto their outdated IP-dependent business model of selling paperbacks and hardcovers in big-box brick-and-mortar stores for as long as possible.

That antiquated business model is particularly insane in the United States. The origin of the current wasteful publisher/brick-and-mortar bookstore relationship is fascinating. The strip-and-return system has its origin in the Great Depression (thanks Fed!).

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NEWS | Regulators Take on the Ebook

by Jeffrey Tucker on April 14, 2012

in News, Prose, Statism, Technology

Sharis Pozen

DoJ Assistant AG Sharis Pozen

Sharis Pozen

DoJ Assistant AG Sharis Pozen

Get this: The federal bureaucrat who last month started the litigation against Apple and book publishers for ebook pricing is the same person who, back in the stone age, represented Netscape in its lawsuit against Microsoft.

Recall that Microsoft was trying to give away its Internet Explorer to computer users for free. Netscape went nuts and got the government to clobber Microsoft for being so nice to consumers. It put the company through litigation hell and even demanded that Microsoft change its operating system code to untie it from IE.

The person's name is Sharis Pozen, and she is acting head of the Justice Department's antitrust division and a political appointee of the Obama administration. She claims that she is threatening state violence against Apple and publishers for pricing collusion — and that it's her job to protect consumers.

Interesting. She began her career trying to protect the rights of an old-line company to rip off consumers. To her, a price of zero was unfair competition. She was sure that a browser should be a paid product. The progress of history flattens that argument. Today, dozens of companies beg you to download their browser for free. Browser use is all over the place, sort of like a free market. There is no Microsoft monopoly, contrary to the overheated predictions.

Given that history, one might suppose she would retire from public life and maybe go into flower arranging or something. Instead, she is still at it. Last year, she denied a proposed merger between T-Mobile and AT&T that would have improved your cell service. This year, she says that a deal between publishers and Apple is harming consumers, so she has to act.

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