Amazon Is Wrong to Sanction Antitrust Action against Hachette

In an August 9 email to participants of Kindle Direct Publishing, Amazon argued that publishers should price their ebooks at $9.99 or less and that the publisher Hachette is wrong to try to price them higher. Amazon sanctioned the antitrust action against Hachette and other publishers regarding ebook pricing, claiming:

Hachette has already been caught illegally colluding with its competitors to raise e-book prices. . . . Colluding with its competitors to raise prices wasn’t only illegal, it was also highly disrespectful to Hachette’s readers.

Amazon may be right or wrong about the economics of ebook pricing, but it’s definitely wrong about the moral propriety of antitrust action. Book publishers and all other businesses have a moral right to contract and otherwise associate voluntarily with suppliers, other businesses, and customers. Anyone who feels “disrespected” by a business’s actions is properly free to stop associating with that business and seek to do business elsewhere. When, under antitrust laws, government sues, fines, or otherwise punishes companies for doing what those companies have a moral right to do, government becomes the violator of rights. (See also my article for the Objective Standard, “The Government’s Obscene Assault on Apple.”

Amazon’s sanction of antitrust action is immoral and especially self-destructive given Amazon’s own susceptibility to antitrust actions. In 2008, Amazon was itself hit with an antitrust suit: BookLocker.com “filed a class action lawsuit against Amazon.com in response to Amazon’s . . . attempts to force [sic] all publishers using Print on Demand (POD) technology to pay Amazon to print their books.” (Amazon settled the suit in 2010.) And recently “German book publishers . . . filed a complaint with the country’s antitrust authority against Amazon, accusing it of violating competition laws and asking the government to investigate,” the New York Times reports.

What of Amazon’s economic case for lower-priced ebooks? The company states:

[E]-books are highly price elastic. This means that when the price goes down, customers buy much more. We’ve quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99.

No doubt this is true for many ebooks, but it is not necessarily true of all ebooks. Some books are highly specialized, and its readers tend to buy them regardless of the asking price (within a wide range). In those cases, a publishing company might do better by charging more per copy. In other cases, a publisher might do better to charge far less than $9.99 per copy.

If Amazon does not wish to carry ebooks priced higher than $9.99, then Amazon has a moral right not to do so—but not to initiate physical force (or sanction government force) against publishers to make them lower their prices. And if publishers wish to price their ebooks at a higher price, they have a moral right to do so—but not to force Amazon to carry them. And the sole proper role of government in this area is protect people’s rights to do business, when they choose to do so, by mutual consent.