A few days ago, Simon Lipskar wrote a letter to the Department of Justice, detailing his issues with the pending antitrust lawsuit. One of his issues with the settlement appears to be that he has no clue what the law of antitrust is, and didn’t bother to talk with even a marginally competent lawyer about the legal requirements. Charles Petit over at Scrivener’s Error does a lovely takedown; and Jane Litte over at Dear Author has gone through the amended complaint in the multistate class action suit. I hope Lipskar reads that complaint carefully and reconsiders his position, because the allegations that are made in that complaint are that this was a conscious, criminal conspiracy to fix higher prices and cost consumers hundreds of thousands, if not millions of dollars. Criminal conspiracies, no matter their intent, are never in the best interest of the publishing community.
Nevertheless, in Lipskar’s open statement to the community, he asked members of the publishing community to weigh in on the issue and make our voices heard, and to post our letters publicly. So I did. I’ll be sending the following letter to the Department of Justice:
John R. Read
Chief, Litigation III Section
United States Department of Justice
450 5th St NW
Washington DC 20530
Dear John Read:
This letter is written as a response to literary agent Simon Lipskarâ€™s defense of the agency-pricing scheme, sent to you and posted openly on the internet.
Iâ€™m aware that the Department of Justiceâ€™s attorneys hardly need me to explain how deeply flawed Lipskarâ€™s understanding of antitrust law and competition really is. As the ongoing settlement is, however, a public process, I wanted to provide the DOJ with enough paper to demonstrate that not all members of the publishing community walk in lockstep with Simon Lipskar.
Specifically, Lipskar cites Amazon sales ranks demonstrating that many titles in Amazonâ€™s top 100 are low-priced.
Of course, this doesnâ€™t demonstrate that consumers werenâ€™t harmed (even if such an inquiry were relevant; colluding to fix prices is a per se violation of Section One of the Sherman Act and so consumer harm is presumed). Instead, it demonstrates that because prices of New York Times bestsellers increased, consumers who would otherwise have preferred to purchase those books instead chose to purchase other books.
That agency pricing changed consumer buying habits is a demonstration of harm, rather than the reverse: Rather than buying the books they preferred at a reasonable price point, consumers instead bought books they might not otherwise have considered.
The second reason that Lipskarâ€™s data is unconvincing is that it demonstrates a deep-seated misunderstanding of how cartels work. Game theory tells us that cartels never last. New entrants come into the market and undercut the pricing schemes; plus, thereâ€™s always an incentive for cartel members to cheat and grab market share. That low-priced books from non-agency publishers have taken over the market proves only that the cartel here did what cartels are wont to do, given enough time: It failed.
As defenses go, â€œthis cartel was so ineffective that it scarcely had any effect on competitionâ€ wins points for chutzpah.
But given the allegations in the multistate class action complaint–that David Shanks asked for assurance that he would not be the only publisher signing the agency agreement, that Carolyn Reidy wrote “3 agree = OK” on a print-out of an e-mail detailing the agreement, that the publishers who had entered the agreement collectively put pressure on Amazon when it refused to accept the retail price maintenance agreement from Macmillan and sent each other encouraging notes, and that those publishers then used their relationship with Barnes and Noble to force Random House to join their cartel–this cartel has already maxed out on chutzpah.