Here Come the Ambulance Entitlement Chasers

The Ambulance Chaser
By KeithBishop, iStockPhoto

I didn’t hear, initially, about this suit filed against Apple and New York Publishers in early August of this year (bold-facing emphasis is mine):

This evening, Seattle-based law firm Hagens Berman filed a class action lawsuit against Apple and five of the “big 6” publishers claiming that they illegally fixed e-book prices (through the agency model, in which book publishers set their own e-book prices) in order to “boost profits and force e-book rival Amazon to abandon its pro-consumer discount pricing.”

The defendants named in the case are Apple, Hachette, Simon & Schuster, Macmillan, HarperCollins and Penguin. The sixth “big six” publisher, Random House, which also uses the agency model but was the last to adopt it, is not included.

What I did notice was the big pile-on, what often happens when sharks—er—lawyers start circling an embattled industry (emphasis is mine):

…The very next day after the original suit was filed in California, a New York firm pounced on the publishers with a second lawsuit—and 15 others soon followed, according to plaintiffs’ attorney, Douglas Thompson. A lawyer for the publishing industry who did not want to be identified says Amazon has been named as a defendant in at least two of the lawsuits and Barnes & Noble in one of them.

…Random House…was not included in the original class-action suit, although it is listed in the New York suit filed the next day.

Interesting. My first take had been that suit-happy was originally behind this, but now both they, B&N, and Random House are in the mix. On the same side, even. It’s a shark-feeding-frenzy around blood in the water. As usual, I want to see who started this—who’s really in that ambulance the lawyers are chasing? Here’s more interesting points from both articles (emphasis is mine):

The [original] plaintiffs are Anthony Petru of Oakland, California and Marcus Mathis of Natchez, Mississippi. Anthony Petru appears to be a personal injury lawyer at Oakland firm Hildebrand McLeod & Nelson. Mathis appears to be the former owner of the now-closed Mighty Martini Bistro in Natchez. “Plaintiff Petru purchased at least one eBook at a price above $9.99 from a Publisher Defendant for use on his Amazon Kindle,” the complaint says. “Since May 2010, Plaintiff Mathis has purchased several eBooks from Publisher Defendants at a price above $9.99 for use on his Sony Reader.”

…The description of the plaintiffs appears to assume that $9.99—the price at which Amazon used to price the Kindle editions of most New York Times bestselling titles—or less is the “correct” price for an e-book. The complaint also suggests that e-books are too expensive.

…Agency pricing requires e-books to be priced the same across all e-bookstores, meaning an e-tailer like Amazon can’t put a book from a participating publisher on sale to gain an edge over a competing seller—only the publisher can do that..

Many readers believe that e-books should be cheap because they involve none of the printing costs that paper books do. Publishers argue that most of the costs of publishing a book are fixed (acquisition, cover design, editing, marketing, etc), and don’t go away in a digital world. Currently, customers generally pay a couple dollars more for an e-book than they would have when Amazon controlled pricing.

The publishers and their tech giants allies are heading into new legal territory with agency pricing. That is because owners’ power to set prices changed considerably following a 2007 Supreme Court case called Leegin. Prior to Leegin, which involved a handbag maker, it had been an automatic violation of antitrust law for manufacturers to impose prices on retailers. But the Supreme Court decided to reject this rule… in favor of a more flexible case-by-case approach that is based on whether or not it is reasonable for a manufacturer to impose a fixed price. The fight over e-books will likely be decided on this basis.

So who’s in the ambulance? The book publishing industry, to include both “manufacturers” and “retailers.”

Is This About Price-Fixing? AntiTrust Issues?

In a “free market” (which our economy no longer resembles), retailers should have the option to set their own prices, even take losses. We all knew this was happening—up until the agency model was put into effect, Amazon was taking losses on most of their commercially-published e-books. However, no one knew how long Amazon could sustain that practice.

We can’t forget that handy anti-trust legislation, used to prevent a company who’s dominating a market (a monopoly) from forcing consumers into a single-provider straitjacket. This was the basis of the complaints against Microsoft, when they were forcing computer retailers to only provide their browser on computers. Whether Amazon has risen to monopoly status in the e-book area yet, I don’t know (from the first article: “Amazon is believed to have about 60 percent of market share for e-books, with Apple at about 10 percent”).

And let’s mention what’s probably behind the 2007 Supreme Court ruling about price-fixing being okay when, otherwise, the industry might crumble. Remember when the government had to step into the airline industry due to the throat-cutting price wars? Yes, those price wars did more than take out a few competitors—it hurt the entire industry. Do you remember all the shelves of software we used to have, until Microsoft started providing free applications with their operating system? Yeah, free was better, and all those independent software companies went under (strangely, the DOJ decided to pick Netscape as their poster child, when they had so many other/better choices).

I’m not advocating price-fixing, but I’m leading up to an important point. Most of the above examples wouldn’t have happened without a consumer population that set price above anything else. The trash-barrel is full of bankruptcy filings of companies who thought they could distinguish themselves with consumers based upon good customer service, good quality control, zero-defect manufacturing, etc…. Unfortunately, price is king. (Note that “price” has no relationship to “cost,” which should be obvious to anyone who’s worked in retail or even dished up fries.)

Regardless, the publishing industry (this includes e-retailers) have a mess on their hands, but they need to work out the snarls by themselves. Imposing external price controls will only drive the industry to disaster.

Or Is This About Entitlement To Free/Cheap Content?

To me, this seems less about the horrible price-fixing of e-books (which is affecting ~15% of those ~5% of Americans who actually buy books) than about our attitude of entitlement these days. We now deserve to get our content free (content being news, journalistic photographs, commentary, music, books, television news/dramas/etc., or movies).

What a difference a decade has made: we used to accept the standard release progression for an anticipated book. First, the expensive hardcover would hit the stores. At this point, the consumer had to decide how important ownership was and whether they wanted something that could eventually be a collectable. If we just wanted to read the darn thing, we’d check it out from the library or borrow a friend’s copy. If we wanted to own it but the hardcover was too expensive, we’d wait for the mass market paperback. But now there’s lot’s of screaming on We deserve to get an e-book version immediately upon the release of the hardcover and that e-book version better be priced less than a mass-market paperback—or we’ll rate the book badly, try to boycott the author/publisher/editor–heck, everybody in the evil marketplace who demands payment for their time and effort!

In two decades, we’ve also lost the moral sense that we should pay for someone else’s time, service, or intangible products (i.e., digital). It started with stealing cable; cable companies used to prosecute these people, but I think they’ve just given up (it’s just easier to have the paying customers subsidize the others). Utility companies used to feel safe from theft because of the dangers involved, but that’s ended. And it’s not about shafting the big guy: your neighbor seems quite willing to steal electricity from you.

You might think these perpetrators are those who have been pushed into making dire choices (although I’ve never heard of anyone freezing to death due to lack of cable T.V.). But you’ll find that’s not usually the case. A twenty-something software engineer, a co-worker of mine who was making a pretty nice salary for his age, told me he was piggy-backing off his neighbor’s broadband. Of course, he was saving money by not paying for an ISP. I asked, “Don’t you think that’s stealing?” He just shrugged and said, “Well, he deserves it because he didn’t set his security correctly on his router.”

Really? It sounded just like the excuses piracy sites use when they provide copyrighted music and works for free. Those artists/authors/publishers deserve it for trying to protect their copyright and having the audacity to charge money for their work.

Any opinions?

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