A few days ago, Simon Lipskar wrote a letter to the Department of Justice, detailing his issues with the pending antitrust lawsuit. One of his issues with the settlement appears to be that he has no clue what the law of antitrust is, and didn’t bother to talk with even a marginally competent lawyer about the legal requirements. Charles Petit over at Scrivener’s Error does a lovely takedown; and Jane Litte over at Dear Author has gone through the amended complaint in the multistate class action suit. I hope Lipskar reads that complaint carefully and reconsiders his position, because the allegations that are made in that complaint are that this was a conscious, criminal conspiracy to fix higher prices and cost consumers hundreds of thousands, if not millions of dollars. Criminal conspiracies, no matter their intent, are never in the best interest of the publishing community.
Nevertheless, in Lipskar’s open statement to the community, he asked members of the publishing community to weigh in on the issue and make our voices heard, and to post our letters publicly. So I did. I’ll be sending the following letter to the Department of Justice:
John R. Read
Chief, Litigation III Section
United States Department of Justice
450 5th St NW
Suite 4000
Washington DC 20530Dear John Read:
This letter is written as a response to literary agent Simon Lipskar’s defense of the agency-pricing scheme, sent to you and posted openly on the internet.
I’m aware that the Department of Justice’s attorneys hardly need me to explain how deeply flawed Lipskar’s understanding of antitrust law and competition really is. As the ongoing settlement is, however, a public process, I wanted to provide the DOJ with enough paper to demonstrate that not all members of the publishing community walk in lockstep with Simon Lipskar.
Specifically, Lipskar cites Amazon sales ranks demonstrating that many titles in Amazon’s top 100 are low-priced.
Of course, this doesn’t demonstrate that consumers weren’t harmed (even if such an inquiry were relevant; colluding to fix prices is a per se violation of Section One of the Sherman Act and so consumer harm is presumed). Instead, it demonstrates that because prices of New York Times bestsellers increased, consumers who would otherwise have preferred to purchase those books instead chose to purchase other books.
That agency pricing changed consumer buying habits is a demonstration of harm, rather than the reverse: Rather than buying the books they preferred at a reasonable price point, consumers instead bought books they might not otherwise have considered.
The second reason that Lipskar’s data is unconvincing is that it demonstrates a deep-seated misunderstanding of how cartels work. Game theory tells us that cartels never last. New entrants come into the market and undercut the pricing schemes; plus, there’s always an incentive for cartel members to cheat and grab market share. That low-priced books from non-agency publishers have taken over the market proves only that the cartel here did what cartels are wont to do, given enough time: It failed.
As defenses go, “this cartel was so ineffective that it scarcely had any effect on competition†wins points for chutzpah.
But given the allegations in the multistate class action complaint–that David Shanks asked for assurance that he would not be the only publisher signing the agency agreement, that Carolyn Reidy wrote “3 agree = OK” on a print-out of an e-mail detailing the agreement, that the publishers who had entered the agreement collectively put pressure on Amazon when it refused to accept the retail price maintenance agreement from Macmillan and sent each other encouraging notes, and that those publishers then used their relationship with Barnes and Noble to force Random House to join their cartel–this cartel has already maxed out on chutzpah.
Sincerely,
Courtney Milan
Have been pondering this since yesterday. You think that there is a RICO claim that could be brought against the publishers and BN?
@Jane: Oh God, when isn’t there a RICO claim?
The answer is…yes. I’m not sure where that conduct falls between extortion and bribery, and without knowing more details, of course it’s hard to say. But surely a claim could be brought.
@Courtney Milan: I was thinking more fraud. This is just an intellectual exercise here. I don’t foresee another lawsuit being brought here.
>>>You think that there is a RICO claim that could be brought against the publishers and BN?
I’m surprised RICO wasn’t used against Apple and the Big 6. But given how monstrously large Apple’s bank account is, and the subject being books (pfft!), I didn’t realistically think they’d use that nuke. At least to start.
It’s the chutzpah that bothers me most on this. I get angry when executives of big corporations act like the law somehow doesn’t apply to them. I agree that there probably won’t be another lawsuit brought, under RICO or anything else, but I hope they lose this one BIG TIME.
Yeah, Lipskar needs to go back to college and take a research methods course to learn how you compare apples to apples (no pun intended) instead of apples to coconuts. That’s got to be the most careless, unscientific analysis of data I’ve ever seen. Meanwhile, the collusion is rather frightening, and I’m afraid makes the “justifications” and “explanations” of a lot of agents and publishing execs even harder to believe.
@SonomaLass: I completely agree with this. In light of the allegations, Sargent’s claim that nobody did anything wrong really rankles.
My guess is that they really, really do think they are doing the “right thing.” And in this case, the right thing just happens to be the option that will make them richer! What a coincidence.
@Selena Paulsen: True! The data collection/rehearsing was totally crazy. But the worst part is…it’s irrelevant, because you don’t have to prove (and you can’t argue) that creating a price-fixing cartel was good for consumers. Harm is presumed under the Sherman Act.
So it was an exercise in crazy that bore no relation to the claim that was filed.
The problem is publishing was never run as a true business. It’s a good ole boy and gal club where they all think they’re literary geniuses.
What I wonder about is if they are so willing to collude in this, what else have they done? Where else have they screwed over readers and authors?
The good news is that business is going rule and a lot of these people are going to get run over.
Courtney, salute for the post and for sending the letter to Read. For anyone who wants to be part of a letter like Courtney’s, David Gaughran has written one, too, and is adding the names of authors with similar views.
http://davidgaughran.wordpress.com/2012/05/15/an-open-letter-to-the-doj-from-someone-who-actually-cares-about-writers-and-readers/
Bob, that is a great question, and Charles asks it too in the post Courtney links to — and also points out that if Simon has his way, authors (and agents) will be denied the opportunity to learn more about such potential collusion through the discovery process.
@Barry Eisler: Don’t think we’ll find out much more until the SummJ stage because there is 30+ page confidentiality agreement filed in each of the suits a few days ago. Signed and approved by the court.
@Bob Mayer: Bob, sadly, my experience has been that when companies go down, it’s rarely the executives who suffer the consequences.
@Barry Eisler: Thanks for the link and the reminder. I read Gaughran’s letter the other day, and think that he provides an important perspective from the point of view of one of those who are undercutting the cartel (and profiting thereby).
What your blog lacks in frequency of posts, it more than makes up for clarity and impact.
Thank you!
Now I wish I’d kept a copy of my letter to Read. I can assure you all it was brilliant. Not as brilliant as Courtney’s but almost.
What angers me the most, because it’s personal to me, of course, is the fact that their price-fixing has materially and negatively affected my traditional publishing career.
As a reader, I’ve done precisely what you say; stopped buying Big 6 books in favor of books priced at a level that doesn’t feel like a rip-off.
I haven’t bought a Big-6 published romance in the last six months. (Excepting RITA books I had to read but didn’t want to read in print.)
“…the allegations that are made in that complaint are that this was a conscious, criminal conspiracy to fix higher prices and cost consumers hundreds of thousands, if not millions of dollars. Criminal conspiracies, no matter their intent, are never in the best interest of the publishing community.”
Hear, hear! And I continue to be mystified that the -Authors- Guild thinks criminal conspiracy is good for the publishing community, is a reasonable response to being faced with game-changing competition and technology, and deserves to be given a free pass by the DoJ.
I am much LESS mystified that the AAR supports criminal conspiracy. This pretty well fits in with all my impressions of the AAR, where ethics seem to be virtually unknown.