retail news in context, analysis with attitude

Interesting piece in the Wall Street Journal that looks at the current Amazon-Hachette pricing dispute through the prism of a successful antitrust suit brought by the US Department of Justice several years ago that ended with Apple and several publishers being found guilty of colluding to keep e-book prices high.

The Journal writes that "Justice's antitrust shop alleged that Apple colluded with the publishers in 2009 and 2010 ahead of the introduction of the iPad in a conspiracy against Amazon and buyers of electronic books. But there was nothing in those cases remotely approaching the exertions of market power that Amazon is now leveraging in its pricing feud with the publisher Hachette. Could it be that the feds targeted the wrong monopolist?"

The story goes on: "Amazon (has) conceded that it has throttled back print inventory from Hachette, leading to delays of two weeks to a month on many titles. Other tactics over the last several months include selectively raising prices, disappearing 'pre-order' buttons that drive the best-seller lists, and encouraging consumers to buy books from houses other than Hachette."

The dispute, according to the Journal, "centers on the structure for selling e-books. Under the so-called agency model, Amazon takes a 30% commission of a listed price, but any consumer discounts come out of Amazon's cut. Amazon prefers a formula to share the cost of markdowns, and publishers are balking. The last rough fight over pricing led to the DoJ charges, and the negotiations with Hachette are Amazon's first with a major publisher since that settlement dictated terms for two years.

"The book industry is enraged by the e-tailer's squeeze play, but Amazon is not a public utility and under no obligation to sell products or at a certain price. Retailers promote or disadvantage products all the time with advertising, prices or store placement, and people can still buy hardbacks and e-books elsewhere."
KC's View:
This story creates additional context for this contretemps, and it makes me think that Hachette could be just the first target for Amazon … which may be thinking about putting similar pressures on as many of its suppliers as possible. (See an email in "Your Views" for one example.)

The question is where the tipping point is - when does Amazon shift from being an advocate for the consumer to being an unacceptable barrier between shoppers and the products they want to buy.