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    Don’t Be Too Happy With Your Amazon eBook Credit

    Don’t you just love it when you get good news?

    Amazon sent us an email Saturday which opened, “We have good news.” After reading it, I wasn’t convinced.

    Addressed to “Dear Kindle Customer” the email informed us that as part of the anti-trust settlement between three of the big five publishing houses and the Justice Department last April we would be eligible for a credit for some of our past ebook purchases. You probably got one too.

    Courtesy of Mr. Jason Weaver under Creative Commons

    So, should we all say, “Hurray! Justice was done,” and rush to select some new Kindle books to buy with the negligible amount of our credit. Or should we give some serious thought to what it all means?

    The anti-trust suit was filed against the publishers, who were anxious to stave off Amazon’s efforts to drive down the price of ebooks to the price Amazon wanted to charge for them. They  had agreed with Apple which was about to introduce ebooks for the iPad on setting higher prices. The government filed suit claiming this was price-fixing. Three of the publishers, Harper Collins, Hachette Book Group and Simon & Schuster folded and settled.

    Pulitzer Prize winning LA Times reporter Michael Hiltzik in a recent piece on the settlement wrote, “To hear the government talk, this is all about breaking up a conspiracy to drive up the price of e-books on your Kindle, iPad or other device. "Ensuring that e-books are as affordable as possible," as Atty. Gen. Eric Holder declared in announcing the original settlement in April.”

    But there is more to it than that. The NY Times Media Decoder explained. “Under the terms of the settlement, the three publishers may not agree to contracts with e-book retailers that restrict the retailers’ “discretion over e-book pricing,” the court said in a 45-page opinion last week. Under previous agreements between major publishers and retailers that began in 2010, publishers set prices for e-books.”

    The NY Times reporting on the settlement with Harper Collins said, “Sarah Gelman, a spokeswoman for Amazon, said in an e-mail, “We are happy to again be lowering prices on a broad assortment of HarperCollins titles.”

    But wait, why is Amazon so happy to be lowering prices? If you’ll recall the days when Amazon entered the ebook business it had a very specific goal driving its pricing. Onnesha Roychoudhuri explained it in an article in the Boston Review, “To create a new market and generate demand for the Kindle, Amazon set the e-book’s price at $9.99. Publishers were not consulted.”

    That strategy hasn’t changed. The settlement, in effect, endorsed that strategy.

    The question the Justice Department needs to answer, and soon, is why that strategy has not been investigated as anti-competitive.

    Michael Hiltzik explains, “What's wrong with nipping a nefarious scheme in the bud, especially if the result is that, which was the supposed target of the alleged conspiracy, is liberated to resume selling e-books to you at the rock-bottom price of $9.99?

    “Plenty, if that price is designed to drive off all of Amazon's e-book competition — and kill off the last remaining brick-and-mortar bookstores too — so it can set its own prices as it wishes down the line.”

    If the Justice Department’s antitrust division is interested in protecting consumers from anti-competitive practices Amazon seems to be engaging in one. Let’s take a look at it before the damage is irreversible.

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