[jerf]

If Amazon can significantly hurt a publisher in this manner, it is suggestive that they may have a monopoly power that they are abusing: http://en.wikipedia.org/wiki/Monopoly#Law

(General note: Please at least somewhat carefully read over that before arguing. First, I'm only saying that it's suggestive, not proof, and secondly, there's a lot of misconceptions about what exactly is forbidden w.r.t. monopolies.)

[AnthonyMouse]

The thing is, they don't. Amazon is like Walmart or Google. The reason everyone uses them isn't that there are no other options. There are. The reason is that they're better at it. A monopoly is, for example, Comcast, because there is no reasonable alternative provider for the same service.

Talking about "hurt a publisher" is broadening the scope too far of what a monopoly is. A large retailer taking your products off of its shelves will hurt you in the sense that you'll make fewer sales, but that doesn't mean they have monopoly power. All it means is they have non-zero negotiating leverage with you. If you don't like it, go sell your books on Barnes and Noble or eBay or direct to customers on your own website.

Think for a moment about why we hear all this wailing about Amazon in the book market but not in the market for e.g. AWS, even though Amazon has a large market share there as well. It's because in the book market the publishers are also Amazon's competitors and they're the ones wailing. Because Amazon wants everybody to buy eBooks, the vibrant success of which gives authors significant leverage over publishers once it becomes viable to forgo a print edition entirely unless publishers provide sufficiently attractive terms.

That puts the squeeze on print publishers from both ends. Amazon is demanding lower prices from them and authors are given leverage to demand higher royalties. That's the natural state of the market when your product requires you to operate an industrial scale printing facility and have a significant unit reproduction cost for your product and competitors are providing similar customer value by copying bits. The print publishers are screwed and they're trying to figure out how not to be, but they're already dead and they just haven't hit the ground yet.

[DerpDerpDerp]

There are markets with no real viable alternative to Walmart, because Walmart used their scale to crush competition, and no has made it uneconomical to start a rival business, since they'll temporarily lower prices below sustainable (using their scale), then raise them again when the other store dies.

If Walmart has enough local monopolies, this is a self-reinforcing strategy, since it's unlikely all of the monopolies will be challenged at once, and Walmart can thus have a few of them with unusually low prices while the rest sustain that one during the conflict (since they're guaranteed to have business, being the only store in town).

[AnthonyMouse]

So the thing about a monopoly is it's totally squishy. There isn't a clear line you cross to become one because there is no clean way to define a market. Every customer places a different value on the product itself, the search and transportation cost of buying from alternative retailers, etc.

So take Walmart. Do they have a local monopoly? First, question, on what? If you want to buy a television then they almost certainly don't, because they have strong competition from Amazon and six dozen other Internet retailers, and on top of that customers tend to be willing to drive out of town to save real money on a big ticket item.

But what about, say, groceries? That pretty much puts the Internet out of the running, because you can't ship a single gallon of milk in a refrigerated truck for anything resembling a competitive price. So then the question is, how far away is the nearest local competitor? If it's only a five minute drive, maybe that's enough competition. If Walmart's prices get out of hand people will start to make the drive. But what if it's 15 minutes? 30 minutes? 45 minutes? What if a substantial portion of the local population doesn't own a vehicle and that "15 minute" drive is a two hour walk? So maybe some Walmart stores have a local monopoly on groceries.

But wait, there's more. If Walmart's local prices start to get out of hand, how hard is it for a competitor to open up? It turns out the answer is, not very hard. A small grocery store is a one person operation. Low barrier to entry. If new competitors spring up six hours after Walmart raises their prices, they can't actually raise their prices very much no matter how far away the nearest existing competitor is. Which is why, even in towns with only that one Walmart, it still doesn't cost $20 for a gallon of milk.

[DerpDerpDerp]

I think there's a second element to why a gallon of milk isn't $20: Walmart relies on not upsetting too many people, who collectively wield enough local political power to harm Walmart locally.

It would only take a local wage initiative, for instance, to likely bother the closest Walmart. So there's an inherent incentive not to let prices rise so much that people are angry enough to get the government involved because they can no longer buy milk (or food).

[AnthonyMouse]

That's true to an extent but I don't really buy it as the primary reason. Look at Comcast. Customers angry because your service is expensive and terrible? Hire an army of lobbyists, problem solved.

[jerf]

See, this is why I really strongly suggested that you read the link I provided. Monopolies are not, strictly speaking, about "not having any other options". I phrased my point carefully... the fact that Amazon can incur great pain on someone like this, combined with the fact that they have, strongly suggests something that may be actionable under monopoly law, regardless of what other definitions may or may not also be something you could choose to apply, but I did not.

If customers in practice had easy and significant choices, they'd just go elsewhere easily and the publisher would feel no pain.

[AnthonyMouse]

> Monopolies are not, strictly speaking, about "not having any other options".

They kind of are. You can get into the whole bit where it's an antitrust violation for a group of companies that should be competing to instead get together and collude with each other, but that doesn't have any relevance to Amazon. Nobody is accusing them of colluding with anybody.

I'm not sure what you're getting at with the Wikipedia article. Are you reading the list of conduct which is prohibited for monopolies (and cartels) as something you expect to be prohibited in general?

> If customers in practice had easy and significant choices, they'd just go elsewhere easily and the publisher would feel no pain.

That's not how it works. If Macy's stops carrying your clothing line, you're going to lose a nontrivial amount of sales even though they have a hundred other competitors. All profitable companies have a little bit of market power or customers and suppliers would squeeze their margins to zero and put them out of business.

[dragonwriter]

> > Monopolies are not, strictly speaking, about "not having any other options".

> They kind of are.

Not in US antitrust law, where market power and monopoly power are mostly defined in relation to empirically demonstrated effective power to raise prices or exclude competitors. [1] The existence of effective competition would deny these abilities (by definition), but actually having other competitors exist in the market at issue doesn't. So, the statement that they are not strictly about "not having any other options" is precisely correct.

[1] See, e.g., http://www.ftc.gov/tips-advice/competition-guidance/guide-an...

[AnthonyMouse]

> Not in US antitrust law, where market power and monopoly power are mostly defined in relation to empirically demonstrated effective power to raise prices or exclude competitors.

There is a difference between what something is and what you can use as evidence of it. There is this whole issue in antitrust law about how you define the market. For example, is MacOS in the same "market" as Windows? The accused monopolist always wants to paint the market as broad. Microsoft says it doesn't have a monopoly because Apple is competing with it. If Microsoft claims the market is that broad, but they can still do all the things you would expect a monopolist to be able to do and customers don't abandon them, it's evidence that the supposedly competing company isn't actually providing competition and they do actually have a monopoly.

> The existence of effective competition would deny these abilities (by definition), but actually having other competitors exist in the market at issue doesn't.

That's just a language trick. Effective competition comes from having competitors. If you don't have effective competition it's because your "competitors" aren't actually competing with you, either because they're cooperating or because they're not actually offering the same product in the same market (i.e. in either case they aren't actually competitors).

[smackfu]

Antitrust law is not well equipped to deal with actors who use their power to drive down prices and reduce profits.

[dragonwriter]

Perhaps, but the particular tactic Amazon is employing here relies on their ability to raise price in a market in which they are dominant (physical book retailing) to acheive an advantage in negotiations related to another market (e-book retailing). It may be that their goal is to drive down prices in the e-book market, but that's orthogonal to whether the action relies on monopoly power in the physical book retail market.

[btrombley]

I think this is backwards: it was the book publishers (and Apple) that were sued for colluding to raise e-Book prices and had to settle -- which is what anti-trust laws are meant to protect consumers against. Amazon using its size and some questionable tactics just doesn't fall into that category.

The book publishers have done a great job painting this as a David vs. Goliath story, but it's really two Goliaths battling over a shift in publishing and distribution.

[dragonwriter]

Just because it was illegal for book publishers to collude with Apple to fix prices in the ebook market to their advantage doesn't make it any less illegal than it otherwise would be for Amazon to leverage any monopoly power it may have -- as that is legally defined, which doesn't require a complete absence of competition -- in the online physical book retail market to acheive market power in the ebook market.

[cafard]

Amazon doesn't just beat up on the big boys.