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American Booksellers Association Defended Agency Model at DOJ

Representatives from the American Booksellers Association (ABA) visited the Department of Justice (DOJ) to defend the agency model. The government agency is investigating Apple and five major publishers  for breaking antitrust laws as they set eBook prices.

At the March meeting, association CEO Oren Teicher, president Becky Anderson, vice president Steve Bercu and association general counsel Deanne Ottaviano urged the DOJ to keep the agency model in place after an investigation into the eBook pricing model.

Teicher explained what happened in the meeting in a letter to ABA members yesterday. Below, we’ve included a long excerpt from the letter.

Here’s more from Teicher’s letter:

To convey just how important the agency model is for the health of the book industry and a truly competitive marketplace, ABA met with DOJ in Washington, D.C., on Monday, March 19. At that meeting,  and I expressed to Department of Justice representatives ABA’s strong support for agency model pricing of e-books.

We made very clear to DOJ that we believe the agency model has corrected a distortion in the market fostered by major online retailers, which sought to eliminate competition both on the publishing level and at the distribution level

As we understand it, the investigation is not questioning the legality of the agency model, but, rather, whether it was arrived at in an illegal manner. The critical point we made to DOJ was that any attempts on the government’s part to remedy any alleged wrongdoing must not end the agency model, which has created a more competitive marketplace.

Since the introduction of the agency model, the market has become not less competitive, but, rather, far more competitive. There is much more competition in the retail sector, as Apple, Barnes & Noble, Google, Kobo, and indie booksellers have all entered the market, offering consumers many more choices. There is also far more competition among publishers, which are now regularly offering special promotional offers, with lower-priced titles. In our channel, we have seen that the average prices to booksellers and to consumers have dropped since the introduction of the agency model.

Before the introduction of the agency model, a single online retailer was selling e-books significantly below cost, dominating this nascent market, and rapidly growing readership in their proprietary format. It may be that their intent was to capture this market not only for book purchases, but, perhaps more importantly, to sell these consumers products from the full range of other online product offerings — everything from lawn furniture to flat-screen TVs. As many analysts have noted, the losses that online retailers have been willing to accept on book sales by selling below cost can be seen from another perspective as nothing more than shrewd ongoing customer acquisition costs.

In our meeting with DOJ, we argued strongly that if the agency model goes away, there is every reason to conclude that major online retailers will again use considerable resources to dominate — and ultimately monopolize — the market, and that, in a relatively short amount of time, consumers will have a radical reduction in choice when it comes to purchasing books in both digital and print formats. The market will be far less competitive on all levels, and this stark reality will adversely affect the health of the entire publishing ecosystem. In the end, we believe, it will mean a far less diverse range of titles being published and a much diminished range of publishers.

Publishing thrives on diversity. What’s particularly galling about some online retailers is that they are free-riding on the resources of their bricks-and-mortar competitors — indie and chain, and in many industries besides books — to gain market share.

The special promotion of Amazon.com’s price-comparison app last holiday season brought into high relief that Main Street retailers are essential showrooms marketing and promoting sales for Amazon and other online retailers, and there is data that clearly support this fact. That Amazon refuses to comply with the law and collect sales tax where it is due only increases their strategic advantage.

At this point, it’s completely unknown what the Department of Justice will do. But given the importance of this issue, I wanted you to know what steps ABA has taken to communicate directly to DOJ just how essential the agency model is to the health of our industry.

Together we will see what the upcoming weeks will bring, but, I want to assure you that ABA will continue to take whatever steps possible to help indie bookstores remain fully competitive in the sale of both print and e-books on their websites, and will continue to advocate as aggressively as possible on your behalf.

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