How Amazon is keeping regulators at bay in publisher spat

Amazon.com founder and CEO Jeff Bezos is playing hardball with book publishers and movie studios over how income is shared. Photo / Getty

Amazon.com's treatment of customers means more to US antitrust authorities than how the largest Web retailer pressures publishers and movie studios.

Typically it's seen as a good thing for a retailer to pressure suppliers to trim prices as that can lead to better deals for shoppers, David Balto, a former policy director at the Federal Trade Commission, said in an interview.

"The antitrust cops clearly would be on Amazon's doorstep" if it was also pushing those suppliers to charge competing retailers more, he said. Successfully going after Amazon at this stage "would be breaking new territory under the antitrust laws."

That hasn't dampened debate about the tactics Chief Executive Officer Jeff Bezos is using against Hachette Book Group, Walt Disney and film studio Warner Bros.

The question is whether he's pushing Amazon toward the same monopolistic territory that tripped up Microsoft, Standard Oil and AT&T.

"They are getting very close to the line," said Joseph Tabacco, a former senior trial lawyer at the Justice Department who has worked on federal monopoly and price-fixing cases against mining, electronics and pharmaceutical companies.

A telephone call left at Seattle-based Amazon's press office wasn't immediately returned.

Amazon, the world's largest Web retailer, commands 60 per cent of the US e-book sales, a market that is projected to jump almost sevenfold to $8.6 billion as demand for paper books falls, according to Forrester Research.

Different industries

Just controlling most of the market doesn't make you a monopolist in need of being restrained, Seth Bloom, a former general counsel of the Senate's antitrust subcommittee, said in an interview. Problems arise if a company uses improper means to stay dominant, he said.

"Amazon is free to decide which product to carry or not to carry," Bloom said. "You can't compel Amazon to carry any one particular product whether it's a book or movie."

Amazon has blocked pre-orders of some Hachette books and Disney movies, including Captain America: The Winter Soldier amid disputes over how the income is shared.

The fights with Disney, Hachette and earlier with Time Warner show Amazon is increasingly willing to keep certain items from consumers to put pressure on its vendors. They also spotlight the extent of Amazon's clout in home entertainment.

Microsoft case

It's uncommon for antitrust authorities to bring cases against monopolies for unfairly exploiting a dominant position and stifling competition.

The Justice Department and states sued Microsoft in 1998, claiming the software maker unlawfully protected its Windows monopoly by keeping computer companies from promoting Web browsers that competed with Microsoft's Internet Explorer. Microsoft submitted to court oversight of its practices under an agreement that expired in 2011.

The FTC last year closed an antitrust investigation into Google's practices without an enforcement action against the company. The agency conducted a 20-month investigation into whether the company unfairly disadvantaged competing websites by favouring its own services in search results. Google agreed in a consent decree to limitations on when it can seek to bar sales of competitors' products that rely on industry-standard technology.

While Amazon's dispute with Hachette has raised concerns about the online retailer's market power, the company's actions don't make it a target for an antitrust lawsuit, said John Kirkwood, a law professor at Seattle University who has been tapped by the American Antitrust Institute to monitor the battle between Amazon and Hachette.

Author revolt

Because Hachette is a book supplier rather than a competing Internet retailer, Amazon blocking pre-orders doesn't qualify as a monopolistic practice that would be subject to legal attack, Kirkwood said in a telephone interview.

"Merely demanding better prices on books from a vendor is not illegal anti-competitive behaviour," he said.

US officials nevertheless are likely to be watching, according to antitrust lawyers.

The Authors Guild, representing writers, has met with officials at the Justice Department and other regulatory agencies to discuss Amazon's practices, Roxana Robinson, president of the New York-based group, said in an email.

Amazon "uses authors for their own business purposes to the authors' disadvantage," Robinson said.

In a letter that appeared in the August 10 New York Times, more than 900 authors said Amazon refused to discount the prices of authors published by Hachette.

Amazon "has directly targeted Hachette's authors in an effort to force their publisher to agree to its terms," the authors wrote.

Peter Kaplan, a spokesman for the Federal Trade Commission, and Emily Pierce, a spokeswoman for the Justice Department, declined to comment.

- Bloomberg