Are The Mega-Chain Bestseller Price Wars Illegal?

The ABA seems to think so:

The Board of Directors of the American Booksellers Association today sent the following letter to the U.S. Department of Justice requesting that it investigate practices by Amazon.com, Wal-Mart, and Target that it believes constitute illegal predatory pricing that is damaging to the book industry and harmful to consumers.

On the other hand, isn’t paying more than $8.99 for Sarah Palin’s “Going Rogue” a crime of another kind?

Read the ABA’s angry letter after the jump-


October 22, 2009

The Honorable Christine Varney
Assistant Attorney General
Antitrust Division
U.S. Department of Justice
950 Pennsylvania Avenue, NW, Suite 3109
Washington, DC 20530

Molly Boast, Esquire
Deputy Assistant Attorney General for Civil Matters
Antitrust Division
U.S. Department of Justice
950 Pennsylvania Avenue, NW, Room 3210
Washington, DC 20530

Dear Ms. Varney and Ms. Boast,

We are writing on behalf of the American Booksellers Association, a 109-year-old trade organization representing the nation’s locally owned, independent booksellers. A core part of our mission is devoted to making books as widely available to American consumers as possible. We ask that the Department of Justice investigate practices by Amazon.com, Wal-Mart, and Target that we believe constitute illegal predatory pricing that is damaging to the book industry and harmful to consumers. We are requesting a meeting with you to discuss this urgent issue at your earliest possible opportunity.

As reported in the consumer and trade press this past week, Amazon.com, WalMart.com, and Target.com have engaged in a price war in the pre-sale of new hardcover bestsellers, including books from John Grisham, Stephen King, Barbara Kingsolver, Sarah Palin, and James Patterson. These books typically retail for between $25 and $35. As of writing of this letter, all three competitors are selling these and other titles for between $8.98 and $9.00.

Publishers sell these books to retailers at 45% – 50% off the suggested list price. For example, a $35 book, such as Mr. King’s Under the Dome, costs a retailer $17.50 or more. News reports suggest that publishers are not offering special terms to these big box retailers, and that the retailers are, in fact, taking orders for these books at prices far below cost. (In the case of Mr. King’s book, these retailers are losing as much as $8.50 on each unit sold.) We believe that Amazon.com, Wal-Mart, and Target are using these predatory pricing practices to attempt to win control of the market for hardcover bestsellers.

It’s important to note that the book industry is unlike other retail sectors. Clothing, jewelry, appliances, and other commercial goods are typically sold at a net price, leaving the seller free to determine the retail price and the margin these products will earn. Because publishers print list prices indelibly on jacket covers, and because books are sold at a discount off that retail price, there is a ceiling on the amount of margin a book retailer can earn.

The suggested list price set by the publisher reflects manufacturing costs — acquisition, editing, marketing, printing, binding, shipping, etc. — which vary significantly from book to book. By selling each of these titles below the cost these retailers pay to the publishers, and at the same price as each other, and at the same price as all other titles in these pricing schemes, Amazon.com, Wal-Mart, and Target are devaluing the very concept of the book. Authors and publishers, and ultimately consumers, stand to lose a great deal if this practice continues and/or grows.

What’s so troubling in the current situation is that none of the companies involved are engaged primarily in the sale of books. They’re using our most important products — mega bestsellers, which, ironically, are the most expensive books for publishers to bring to market — as a loss leader to attract customers to buy other, more profitable merchandise. The entire book industry is in danger of becoming collateral damage in this war.



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