Amazon Accused of E-Book Price Fixing

Amazon is accused of fixing the price of e-books through anti-competitive agreements with the nation's top five book publishers (Big 5). The lawsuit, filed by the U.S. District Court of the Southern District of New York, alleges Amazon entered into agreements with the publishers to increase e-book prices up to 30% and to protect Amazon from price competition from other e-book retailers. Interestingly, the same court filed a similar case in 2013 claiming that Apple, Inc. conspired to raise the price of e-books in violation of the Sherman Antitrust Act. After the court found Apple guilty, with appeals all the way to the U.S. Supreme Court, Apple paid $450 million in damages. In that case, the Big 5 publishing firms agreed to sell their e-books at the same prices through Apple's online store as well as through all other e-book retailers, including Amazon. E-book prices decreased from 2013-2015 while a consent decree prevented the Big 5 from interfering with retailer discounts. Even after this antitrust action, the Big 5 entered into price-fixing agreements with Amazon and have continued to maintain these prices to the present.

In 2019, the House Judiciary Committee began investigating Amazon as part of a broader investigation and concluded its agreement about pricing with book publishers harmed competitors in the retail book market, including the e-book market. Amazon's original business model was to provide discount prices for e-books, yet this promise of discount prices is being challenged by several regulatory entities. The price agreement between Amazon and the Big 5 represents 80% of all books sold in the United States. Amazon used clauses in agreements with publishers to prevent publishers from partnering with any of Amazon's competitors and to reinforce "Amazon's stronghold and control over book distribution and pricing" according to the court complaint. The agreement also required the Big 5 to offer Amazon the same terms they used in alternative business models such as subscriptions, streaming, rentals, book clubs, bundling of e-books with print books, and even reduced prices for partial downloads.

A monopoly provides exclusive possession or control over the supply of a product with the ability to set prices. It appears that Amazon is trying to obtain agreements to control or dominate the e-book market and maintain prices higher than what would occur in a free competitive market.