Schumer challenges DOJ on e-book lawsuit

Sen. Charles Schumer wrote in an op-ed that the Department of Justice's lawsuit could 'wipe out the publishing industry as we know it.'

It’s not often someone challenges the Department of Justice. Especially a senator. And especially regarding a price-fixing suit.

But that’s exactly what Sen. Charles Schumer did when he reprimanded the DOJ for filing its e-book antitrust lawsuit against Apple in a bold Wall Street Journal op-ed published Tuesday.

“While this claim sounds plausible on its face, the suit could wipe out the publishing industry as we know it,” Schumer writes.

Schumer’s op-ed caught everyone by surprise, as has the high level of attention and advocacy this case has attracted. At a time when the industry is in flux, the emergence of champions like Schumer – seemingly from the woodwork – is heartening to many in the publishing industry.

According to the government’s account, Apple and five publishers were upset that Amazon had set the price of all of its e-books at $9.99, thereby driving down the price of e-books. In response, Apple and the publishers allegedly conspired to establish a new business model, called the agency model, which put pricing in the hands of publishers (instead of distributers, as in Amazon’s wholesale model) and raised the price of many e-books by about $2 to $3.

In April, the Justice Department filed the lawsuit against Apple and two publishers, Macmillan and Penguin Group, for price-fixing e-books. (Three other publishers, Hachette, HarperCollins, and Simon & Schuster, agreed to a government settlement to avoid litigation.) The government filed suit to break up what it perceived as price-fixing.

Schumer, however, doesn’t see it that way. Agency pricing, Schumer argues, helped free the e-book market from Amazon’s dominance and generally increases competition. It also gives consumers more platforms to buy e-books. As he noted in his op-ed, Amazon controlled 90 percent of the market under the old model, but after publishers instituted the agency model pricing, Amazon’s share fell to 60 percent.

What’s more, he notes, the new model actually helped bring down prices on may older e-book titles.

“The Justice Department has ignored this overall trend and instead focused on the fact that the prices for some new releases have gone up. This misses the forest for the trees,” Schumer writes. “While consumers may have a short-term interest in today's new release e-book prices, they have a more pressing long-term interest in the survival of the publishing industry.”

“If publishers, authors and consumers are at the mercy of a single retailer that controls 90% of the market and can set rock-bottom prices, we will all suffer. Choice is critical in any market, but that is particularly true in cultural markets like books. The prospect that a single firm would control access to books should give any reader pause.”

In his signature brazenness, Schumer concluded by urging the Justice Department to drop the suit, which, he asserted, had already hurt the industry.

“I am concerned that the mere filing of this lawsuit has empowered monopolists and hurt innovators.”

It’s a bold move for the senator from New York and we’re eager to see how the Justice Department responds. With the trial set for 2013, there could be months of posturing – or settlement talks – ahead.

Husna Haq is a Monitor correspondent.