Publishing Leaders Issuing Warning over Amazon’s Market Power

By Jim Milliot | Aug 18, 2020

Courtesy Amazon

Amazon Books in Pacific Palisades, Calif.

Three of publishing’s most important organizations have teamed up to write a letter to the chairman of the House Antitrust Subcommittee investigating the market power of Big Tech to press their case that, over the last several years, Amazon’s growing dominance over book publishing and bookselling has fundamentally altered the competitive framework of the industry. If Amazon’s power is left unchecked, the letter continues, competition within publishing could diminish even more.

In a joint letter to Rep. David Cicilline (D-R.I.), Maria Pallante, president and CEO of the Association of American Publishers, Mary Rasenberger, executive director of the Authors Guild, and Allison Hill, CEO of the American Booksellers Association, wrote that their members have long relied on a level playing field to publish and sell their works. But today, the letter continued, “Amazon no longer competes on a level playing field when it comes to book distribution, but, rather, owns and manipulates the playing field, leveraging practices from across its platform that appear to be well outside of fair and transparent competition.”

Amazon’s power is far reaching, the letter states, including using predatory pricing and its market dominance “to engage in systematic below-cost pricing of books to squash competition in the book selling industry as a whole.” As for the entire publishing industry, the letter states, “we believe that Amazon acts anti-competitively in multiple ways, dictating the economic terms of its relationships with suppliers so that publishers, their authors, and the booksellers who sell on Amazon pay more each year for Amazon’s distribution and advertising services but receive less each year in return.”

The authors asked Cicilline to consider four recommendations:

Prohibit Amazon from Leveraging Data from the Operation of its Online Platform to Compete with and Disadvantage the Suppliers Doing Business There: The organizations contend that “the data that Amazon collects from across its platform not only gives Amazon leverage over its book suppliers, it also gives Amazon an insurmountable lead over any would-be distribution rivals—a lead so daunting that, at this point, absent government intervention, there is no possibility of meaningful competition from anyone, whether they be publishers, booksellers, or emerging platforms.“

Prohibit Amazon from Tying Distribution Services to the Purchase of Advertising Services: “Amazon offers two distinct services to the authors, publishers and booksellers that supply and sell books through its online bookstore, but brazenly ties them together so that suppliers must spend advertising dollars in order to make distribution services viable,” the letter argues.

Prohibit Amazon from Imposing MFNs and Other Parity Provisions: While acknowledging that Most Favored Nations (MFNs) and parity provisions are not inherently anti-competitive, the letter notes that “lawmakers should be concerned that Amazon imposes MFNs and other parity provisions to eliminate the ability of rivals or new entrants to gain any meaningful competitive advantage relative to Amazon.” Amazon, the letter continues, require “publishers to a) offer Amazon similar or better economic terms and conditions as those offered to any competing distributors; b) inform Amazon about more favorable or alternative terms given to competitors; and c) restrict pricing discounts to consumers.”

Prohibit Amazon from Using Loss-Leader Pricing to Harm Competition: “For over two decades, Amazon has used books as loss leaders in the book industry to lure consumers to its website, gather data, make profits on bigger ticket items, and capture an increasing market share,” the letter states. “Despite innovation in the independent bookselling world, independent bookstores find themselves struggling to compete with a company that historically sells books at a loss to that end. Amazon has garnered the bulk of the online book market through loss leader pricing, including by offering books below cost in order to promote and sell its proprietary Kindle device.”

The letter concludes by pointing to the subcommittee’s own work, which the authors say shows that Amazon holds an outsized position of power in the U.S., “giving it the ability to interfere with the free flow of information, ideas and literature on a large scale,” adding: “The American book publishing industry is and always has been uniquely intertwined with our democracy. Many authors, publishers, and booksellers along the way have contributed to the marketplace of ideas, and we hope that many more will emerge and thrive to the benefit of the public. This will not happen, however, unless government officials step in decisively to exercise appropriate governance of Amazon.”

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