NYU law professor Richard Epstein believes that the Department of Justice's antitrust suit against Apple and publishers over e-Book pricing is a mistake.
Epstein outlines some reasons why Apple is likely to emerge victorious from this battle.
In looking at this situation, DOJ sided with Amazon and held that this form of collusion raised consumer prices and therefore caused an injury under the antitrust laws. It sounds pat but here are the difficulties.
First, there is no need for any collusion on this issue. If a single publisher had dreamed up this new scheme, it could have refused unilaterally to sell any books to Amazon or anyone else unless they bought into the model. Why is it illegal for Apple to come up with a bright idea that helps its competitive position with Amazon?
Second, it is not clear that lower prices are necessarily in the long term interests of the public at large. As with all complex transactions, lower prices spell both low costs to consumers and low royalties to authors. The lower royalties translate into lower level of production of new books, so that we do not have here the usual cartel situation where higher prices reduce output. It is plausible that the higher royalties increase the number of titles available, and by increasing competition in the new book market, prices are lowered in the long run.
Third, it is not clear why this arrangement is bad if done by all major publishers simultaneously. If it has justifications for each acting alone, those justifications remain when they act together. Under pure competition we would expect gravitation to a single new model if it proves better overall than its rival. That could be just what is happening here. The cooperative efforts speed the industry toward a more sustainable business platform.
You can read his full analysis at the link below...
Read More [via BusinessInsider]
Epstein outlines some reasons why Apple is likely to emerge victorious from this battle.
In looking at this situation, DOJ sided with Amazon and held that this form of collusion raised consumer prices and therefore caused an injury under the antitrust laws. It sounds pat but here are the difficulties.
First, there is no need for any collusion on this issue. If a single publisher had dreamed up this new scheme, it could have refused unilaterally to sell any books to Amazon or anyone else unless they bought into the model. Why is it illegal for Apple to come up with a bright idea that helps its competitive position with Amazon?
Second, it is not clear that lower prices are necessarily in the long term interests of the public at large. As with all complex transactions, lower prices spell both low costs to consumers and low royalties to authors. The lower royalties translate into lower level of production of new books, so that we do not have here the usual cartel situation where higher prices reduce output. It is plausible that the higher royalties increase the number of titles available, and by increasing competition in the new book market, prices are lowered in the long run.
Third, it is not clear why this arrangement is bad if done by all major publishers simultaneously. If it has justifications for each acting alone, those justifications remain when they act together. Under pure competition we would expect gravitation to a single new model if it proves better overall than its rival. That could be just what is happening here. The cooperative efforts speed the industry toward a more sustainable business platform.
You can read his full analysis at the link below...
Read More [via BusinessInsider]