The Book Publisher Antitrust Suit Point by Point

Today Penguin filed its answer to the Department of Justice antitrust suit against Apple and the US book publishers (MacMillan and Penguin). Prior to this both Macmillan and Apple  responded to the suit. The Penguin response is 75 pages long, so I won’t be going over it point by point. But it is particularly enlightening in that it restates the government  allegations and responds to each of them. While I was reading the documents, it struck me how much it really addressed the big issues of this litigation.  Penguin did a lot more than simply make the obligatory categorical denials to each of the 103 government  allegations.

Antitrust law is exceptionally arcane and frequently difficult to understand even  by those who specialize in such matters. There are so many exceptions that have been carved out over the years that it is always difficult to determine what the outcomes are likely to be. I know. I have been a plaintiff in 3 suits and a consultant to the Federal Trade Commission in an antitrust investigation, all of them  against  – would you believe? – the book publishers.

Let’s go over some of the key allegations and the Penguin responses.

United States allegation #2.  The government asserts: that e- book sales have been increasing “ever since Amazon released its first Kindle device in November of 2007…..One of Amazon’s most successful marketing strategies was to lower substantially the price of newly released and bestselling e-books to $9.99.”

Penguin response: Penguin admits that e-book sales have been increasing and further  “admits that Amazon’s below-cost selling of certain newly released and best-selling e-books for $9.99,… was a successful strategy for locking consumers into its proprietary Kindle platform and raising a significant barrier to entry.”

[My comment. This is a very revealing response by Penguin. Framed as an admission of the government’s allegation, it includes some  twists on Penguin’s part that go to the heart of their defense. The government implies that Amazon is simply pursuing a typical market strategy to offer  lower prices and  sell more books. Penguin emphasizes that the practice is very selective and that the strategy was initiated to lock consumers into purchasing Kindles and keeping other potential competitors from entering the market. In other words, Penguin is pointing out that the real threat to competition is Amazon, not them.]

US allegation #3. “Publisher defendants feared that lower retail prices for e-books might lead eventually to lower wholesale prices for e-books, lower prices for print books, or other consequences the publishers hoped to avoid….Publisher Defendants teamed up with Defendant Apple which shared the same goal of restraining retail price competition…”

Penguin response: Penguin admits that they had concerns about Amazon’s pricing practices. They point out that Amazon was selling some of these books “well below the prices paid by Amazon to Penguin…for these titles.” They believed that Amazon’s practices were “anti-competitive and detrimental to the long term process of expanding opportunities for developing authors and creating more content.” They also point out the Government’s complaint  “is careful to avoid stating, prior to Apple’s entry, Amazon’s share of eBook sales was 80 to 90 percent.”  Penguin goes on to argue  that Amazon’s practices  were “undercutting the margins and incentives of other booksellers, fostering a perception of eBooks as lower cost commodities, and threatening the viability of book publishers and authors, as well as other bookselling outlets vital to the marketing and promotion of books.”

[My comment. Penguin pointedly mentions  that the government avoids bringing up an inconvenient fact:  that Amazon had 80-90% of e-Book sales prior to Apple’s entry. Again, they are emphasizing that the real competitive danger lies with  the “monopolist-Amazon” and that the result of the publishers – Apple relationship was to increase competition, not to restrain it.]

US allegation #5. The government alleges that Apple and the publishers “jointly agreed to alter the business model governing the relationship between publishers and retailers. Under the old “wholesale” model, “publishers sold books to retailers, and retailers, as the owners of the books, had the freedom to establish retail prices.” Under the new model, “publishers would take control of retail pricing by appointing retailers as ‘agents’ who would have no power to alter retail prices set by publishers.”

Penguin Response. Penguin denies there was any agreement  among the publishers to change the pricing model. They again reiterate their position that “the allegation that there was a ‘robust retail price competition’ before  the adoption of the agency model ignores the indisputable fact that the ‘competition’ was nothing more than the below-cost, predatory, market-domination strategy of a monopolist distributor [Amazon].”

[ My comment. This gets to the heart of the government’s case that the publishers jointly conspired to establish a system that fixed prices at a higher level than would otherwise be the case. Certainly if  the government can establish the factual basis for such a joint agreement, then they will be in a very strong position. Penguin claims here and repeatedly in their answer that there was no joint agreement and that they were simply responding individually  to the anti-competitive practices of  the “monopolist”, Amazon.]

US allegation #8.  The government alleges that after executing the new trade model with Apple, “the Publisher  Defendants all then quickly acted to …[impose the new model] on their other retailers. As a direct result, those retailers lost their ability to compete on price, including their ability to sell the most popular e-Books for $9.99…”

Penguin Response.  Under the new model, “price competition has moved from the retail level to the publisher level. Price and non-price competition both among publisher and among eBook retailers has exponentially increased as a result of the move to the agency model.

[My comment.  Penguin’s apparent argument that price competition continues to be robust because it is practiced at the publisher level, as distinguished from the retail level seems to be a bit of a strain, even if true.  But they do point out that outside of the very limited class of best sellers that Amazon had been selling for $9.99, there is increased price competition. And furthermore the government has not considered the competitive benefits of more players in the market selling more types of electronic readers and even more types of book formats, like enhanced e-Books that did not exist until the iPad.]

Ok. That’s enough for this blog. The complaint goes on with numerous allegations of specific facts that the government hopes  will prove  their case. Probably the most conspicuous allegations (at least from the point of view of publisher tittle-tattle are #39-45, where the government describes repeated meetings  attended by publisher CEO’s at fancy New York restaurants. The government complaint fails to show exactly what was discussed over Chardonnay but insinuates that this was the venue where the agreements were made.

I hope this gives you a little flavor of what the issues are in this case and how the two parties frame those issues.

 

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Daniel Boyarin on Why the Gospels Are Jewish

Today we are interviewing Daniel Boyarin, whose new book, The Jewish Gospels: The Story of the Jewish Christ, was published by New Press this April.  In The Jewish Gospels, Daniel  presents an astonishing argument that the concept  of the Trinity was not  original  to Christianity   at all but came out ideas that were commonplace in the Jewish tradition long before the birth of Jesus.  Daniel is one of the world’s most renowned, original, and admired scholars of ancient Judaism.  He is the Taubman Professor of Talmudic Culture in the departments of Rhetoric and of Near Eastern Studies at UC Berkeley. Daniel is not shy of taking provocative and controversial positions. His work was recently alluded to in the Oscar-nominated Israeli film, Footnote, where it was the subject of an argument. He has described himself as a  Trotskyist, anti-Zionist Orthodox Jew, a set of positions and commitments that has excited both exaggerated interest in his work as well as scurrilous public attacks (mostly by pro-Zionist Jewish professors). Let’s hope today’s interview will engender both.

Andy: Daniel, everybody knows that Jesus was a Jew. But in The Jewish Gospels you are saying something quite different and original, even revolutionary. Can you explain your argument?

Boyarin: When people say that Jesus was a Jew, they usually mean that he came out of a Jewish milieu. Some think he completely revolutionized that environment, while others think it was the Gospels that produced that overturn,  making a Jewish teacher into a god. I am arguing that the portrait of Jesus we find in the Gospels (especially in Mark) is one that could completely fit into the context of Second-Temple Judaism in which a Messiah who would be divine and human at the same time is not a foreign notion. I argue, moreover, that there is nothing in Mark or Matthew (or probably in Luke as well –  but this is a harder argument to make) that suggests that Jesus was setting aside or abrogating the law of the Torah. So it’s not only Jesus who was a Jew but the Christ (and Christ is not Jesus’s last name but his title!)

Andy: So let me get this straight. In the early years of Christianity there was no real distinction between Jews and Christians.  There just happened to be some Jews who thought that a particular guy, Jesus, was the messiah.  And these Jesus Jews weren’t really all that distinctive within the world of Jews at the time. Is that correct?

Boyarin: Yes. Fairly frequently I’m asked by Christian folk why the Jews “rejected” Jesus. I answer this (as Jews stereotypically are wont to) with another question: Who do you think accepted Jesus, the Zulus; the Goths? Jews were expecting a Messiah—this is one of the central arguments of the book—and many of them, moreover, had come to expect him to be a divine being in human form or even embodied in a human. Some Jews who came to know Jesus were so impressed with him that they accepted the claim (if he made it) or made the claim themselves that this Jew from Nazareth was the one that they and all of the Jews were expecting. Not altogether surprisingly a fair number, probably most, of the Jews around at the time were more skeptical. Today we call the first group of Jews Christians, the second Jews, but then and for a long time, they were all Jews.

Andy: When I studied The New Testament, I was always taught that St. Paul was the person who really made Christianity distinct from Judaism.  And that happened early on. Apparently you see it differently. When did Christianity have its irrevocable break with Judaism? And why?

Boyarin: In some ways it was Paul who effected the revolution with respect to the Torah that we don’t find in the Gospels. But it needs to be remembered that Paul was an embattled figure, marginalized and considered a heretic by most followers of Jesus for decades if not  longer. I would tentatively suggest that it was the entry of myriads of Gentiles into the Jesus movement, folks who had no interest in or attraction toward the traditional  ways of the Jews that ultimately precipitated a gradual and finally total separation of the communities. One of the important arguments of the book is that the Gospels are misread as portraying Jesus as rejecting the Torah and Jewish religious practice; it was Paul who did that, and even with Paul, a plausible argument could be made that he intended this rejection only for the “believers” from the Nations (the so-called Gentiles) and not the Jewish followers of Christ. Jesus, I argue, defended the Torah against the reforms and traditions of the Pharisees whom he saw as substituting their own traditions for what was clearly written by Moses!

Andy: A lot of your book is a close look at the language of the Gospels, particularly The Gospel of Mark. I always thought that the Gospels tried to distinguish Jesus’ ideas from the Jewish thinkers of his time, particularly the Pharisees.

Boyarin: Yes,  but precisely the argument is that the Pharisees were not “the Jewish thinkers of the time;” they were some Jewish thinkers of the time. Jesus, I argue, was much more conservative in his approach to Torah than the Pharisees who were descended from Jews who had returned from the Babylonian Exile with some quite new ideas about the way the Torah ought to be practiced, especially their notion of a “Tradition of the Fathers”—later on called Oral Torah—that dictated some practices that certainly seemed different from the literal meaning of the Torah itself. So Jesus was portrayed as being in conflict with those Pharisees but that hardly marked him off as in any way not Jewish in his religious thought, any more than the attacks on the Pharisees in the Dead Sea Scrolls make those texts not Jewish or less Jewish than the Talmud!

Andy: When you think about this, it seems pretty provocative. How do you think Jewish and Christian theologians are going to respond to it?

Boyarin: Don’t have a clue. I mean that literally. One never knows the effect of one’s work in advance. I’m not even sure what effect I’d like it to have on theologians. I hope to have helped promote for folks a livelier sense of the ways that Jewish history took place in the first century and how contingent historically the invention of Christianity was, how unpredictable from the Gospels and the evidence that they provide. I sometimes like to relate the following counter-historical parable. Constantine, instead of adopting Christianity as the religion of the Empire, chose Mithraism which became in its further evolved form the religion of most of the world. The last persecuted followers of Jesus, sometime in the fifth century, running for their lives, carefully packed their holy books, the Four Gospels and the Letters of Paul into clay jars and buried them in the desert of Judea where they and the very existence of the sect were forgotten by time. Some time around 1948, a Bedouin shepherd discovered these clay tables by accident and an unknown Jewish sect was revealed to history. In Jerusalem there was built a Shrine of the Book and the manuscript, the only one, of the Gospel called Mark is displayed proudly there while hundreds of Jewish and Mithraist scholars all over the world devote themselves to the study of these ancient, exciting, wonderful documents of Jewish religious imagination and spiritually that had been lost and were now found.

Andy: I remember reading in The New York Times last year of a discovery of a tablet predating the birth of Christ which said that a Messiah would rise from the grave after 3 days. You were quoted in that article. Do you see this as an archeological confirmation of your ideas?

Boyarin:  I would if I were more convinced of the accuracy of that reconstruction of the tablet. The tablet is, indeed, no forgery, but it is broken and hard to read and other reconstructions of its text are at least as plausible as that one, so I can’t rely on it much as I would love to.

The Day I was bullied by Romney.

Mitt Romney circa 1962

Several weeks ago I did a blog post entitled: “I was  Mitt Romney’s Boss“.  If you recall, in 1962 when I was 16 years old, I was a volunteer for the Republican   gubernatorial candidate in Michigan, George W. Romney.  They put me in charge of the mimeograph room where I worked for the summer. Shortly after I began, the candidate’s son, Mitt, joined me and we spent  the next few months  together cranking out campaign flyers and strategy notebooks.

The recent news about Romney’s “hi-jinks” as a teenager has brought up a pretty ugly memory of that summer, one that I have repressed for the last 50 years, but about which I can  be silent no longer. I’m ready to talk about the day I was bullied by Romney.

It was mid-August. Always a hot and gritty time in Detroit.  The campaign was moving into high gear. We were all excited about the new poll results that had just been released showing that George Romney was soaring ahead of the colorless Democratic candidate, John Swainson. To celebrate I asked my mother to take me shopping at Hudson’s to buy a festive outfit that I would wear to the headquarters the following day.

The next morning I put on my new lavender velveteen “smoking” jacket, attached the accompanying pink ascot to the collar of my shirt, and headed down to the Romney for Governor  offices.

When I opened the door, I saw Mitt at the mimeograph. He didn’t look up. He was trying to take out some paper that had gotten jammed in the drum. Mitt was dressed in his usual clothes. Old jeans and a torn t-shirt with mimeograph ink smudges almost covering up the silk screened message: “Real Men Do It in a Rambler.”

Then, pulling out the jammed paper, he said, “Andy, dang it,  I think we got it now.” He  turned toward  me. I was still standing in the doorway,  trying to look nonchalant, just  kind of waiting for him to tell me what a cool outfit I had on.

But that isn’t what happened. Instead  Mitt did a double take. His mouth dropped just about down to his pupik. Then as if experiencing a gradual realization of something hideous, his visage turned ugly, even sinister; his expression changed into a crooked sneer.

“Well,” he snarled, “If it isn’t Liberace.”

I didn’t really understand the sub-text of his comment, so I said in all innocence, “Not really. I’ve never learned to play the piano. My mom took me shopping yesterday for this new outfit. I thought it would bring a little color to the mimeograph room.”

For the rest of the morning, Romney was silent. It wasn’t that he behaved with any kind of hostility. He just ignored me. Wouldn’t look me in the eye.  When I tried to help him crank the machine, he pulled his hand away and gave me  a dark look.

Finally, in order to break the ice a little, I told him that maybe we could take a break. I offered to buy him some brunch. At that point, Mitt completely lost it.  He started screaming at me. I don’t remember the exact words. Something like: “You can take your domestic partnerships and shove them up your ass.”

Then Mitt grabbed me by my hair. It was long then, a  shock of it came down over one of my eyes. With his other hand he pushed my head into the hollow drum of the mimeograph machine and started cranking it around.

Finally he stopped and yanked my head out. I backed away and looked in the mirror. What I saw left me grief stricken. Needless to say my ascot was unrecognizable, turned black by mimeograph ink,  the lapels of my smoking jacket in tatters.  We had been copying flyers that his dad was going to hand out at the Cadillac Plant in Hamtramck the following day. On my forehead there was a smudged but readable print of the  headline in 48 point Times New Roman font saying: “Romney for Jobs.”

That was all. He told me to get out and if I ever showed my face again at the headquarters, he would tie me to the top of the  family station wagon, drive to the south of town and dump me into the Detroit River.

I try to practice forgiveness in my life. To be able to do so has always been a grace. But I realize now that, in spite of the fact that this horrific memory has been repressed for 50 years, it has had a profound impact on me that continues to this day. In a sense, the entire arc of my life has been an attempt to overcome the humiliation I felt from that encounter with Romney. How else would you explain the fact that every morning when I get out of bed,  I put on a safari suit and pith helmet and insist that Leslie and Hayley refer to me as: “Sahib”? Or what happened on Leslie’s last birthday, when I surprised her by waking her up and taking her out to the driveway where I presented her with  a brand new Humvee painted in desert camouflage.

I feel better now having written this down, gentle reader. And, Mitt, if you are  taking a breather from the campaign and trying to relax by reading this blog,  I want you to know that you are forgiven.

My Letter to the Department of Justice

Everyone in book publishing has been talking about the anti-trust litigation and proposed settlements initiated by the United States against Apple and 5 major book publishers. The government’s case alleges that the defendants agreed to fix prices on e-books and  that these agreements  had the effect of raising prices to consumers. Most people in our business believe   that the United States’ position is misdirected, that the lawsuit will enhance the market power of Amazon.com and that this is the real anti-trust threat to the industry. The Authors Guild representing authors, the American Booksellers Association representing independent booksellers and now the Association of Author Representatives representing literary agents are on record as opposing the position of the Department of Justice. I decided to weigh in, myself, with the letter below. The DOJ is required to consider these letters, so any of you who wish to express your opinions should write to  John Read at the address below.

John R. Read
Chief, Litigation III Section
United States Department of Justice
450 5th St NW
Suite 4000
Washington DC 20530

Dear Mr. Read:

I am writing regarding the proposed settlement between the three book publishers ( Simon and Schuster, HarperCollins, and Hachette Book Group)  and the United States regarding e-book pricing.

I feel that it is wrong for the Department of Justice to focus its anti-trust efforts against Apple and the major book publishers for their implementation of the so-called “agency model” for pricing. There are restraint of trade issues in our industry, but this litigation is misdirected and likely to exacerbate those issues.

The decision by each book publisher to implement agency pricing was in response to Amazon.com’s policy and practice  of setting prices on e-books below cost in order to drive other potential sellers of these products out of the market, thus giving Amazon a virtual monopoly on the sale of e-books. This strategy was  enhanced by the manner in which Amazon designed and marketed it’s Kindle format editions of e-books,  so that those books could only be read on Amazon’s proprietary Kindle book readers, and only purchased on the Amazon web site.  Amazon  refused to allow other potential competitors in the e-book business to sell Kindle edition titles. At the time that publishers began contemplating implementation of the agency model, Kindle Editions accounted for 90% of  book sales on e-book readers.

Amazon was able to  sustain this otherwise ruinous pricing policy, because it could  offset its losses by driving people to its website where they would also purchase more profitable items.

The dangers implicit in this strategy  can be demonstrated. Amazon has shown its willingness to stop selling titles by publishers who will not agree to Amazon’s trade terms. This happened recently with 5000 Independent Publisher Group titles.  As a result, these e-books  are simply not available to the 60% of  all e-book readers who read e-books on their  Kindles.

Amazon’s policies have already had a devastating effect on community based bookstores including the recently bankrupt Border’s, Barnes and Noble, and the thousands of independent booksellers across the country.

The United States should be pursuing policies that discourage excessive concentration in industries, particularly when that concentration will reduce  the free dissemination of ideas in the country. The current litigation and settlement agreements against the major book publishers is doing quite the opposite.

Andy Ross

Andy Ross Agency

Paulo Coelho and Book Piracy

Publishers Weekly had a story today about Paulo Coelho reaching an agreement with his publisher, HarperCollins, to reduce the price of the e-book edition of his titles to  99 cents for an unspecified length of time. Coelho has been a very vocal advocate of  book piracy for many years now. It’s a position I have trouble understanding, particularly when it is  being espoused by a writer and an intellectual.

PW allows for comments on its articles. So I got involved in a rather long and colorful thread about the virtues and  vices of intellectual property theft.  When you think about it, the issues in this conversation are fundamental, touching on the ontological nature of work and its value to the worker and to society. In the case of intellectual property, it goes to the heart of the question of whether intellectual activity and creativity is “work” and whether it is worthy of being compensated.

According to a February, 2012 article in The Guardian, Coelho has long been a supporter of the illegal downloading of his own writing.  Of course, if an author chooses to allow his books to be downloaded for free (assuming he controls the copyright to those books free and clear), this isn’t piracy. It’s a gift. But that isn’t really the situation with Coelho. His books are published in the United States by HarperCollins and they have been translated, published, and sold in almost every country in the world.  (The Alchemist has sold over 35,000,000 copies worldwide, probably the best selling title in the world by a living author).  Coelho has a contractual relationship with his publishers. Most book contracts give the publisher the exclusive right to sell the book for a given period of time, in exchange for which the author is compensated.  Coelho is enabling the free and unauthorized downloading of his books when he has already licensed those rights to another party.  This is very clearly piracy.

What is more troubling is that Coelho goes beyond advocating that people should steal his  books. He has joined up with the notorious file sharing site, Pirate Bay, to facilitate downloading his own books and by implication supporting the illegal free downloading of millions of  books, movies, music, and software that is being done daily on Pirate Bay.

He seems to raise piracy to a kind of moral imperative. Here is what he says:

“The good old days, when each idea had an owner, are gone forever. First, because all anyone ever does is recycle the same four themes: a love story between two people, a love triangle, the struggle for power, and the story of a journey. Second, because all writers want what they write to be read, whether in a newspaper, blog, pamphlet, or on a wall….The more often we hear a song on the radio, the keener we are to buy the CD. It’s the same with literature. The more people ‘pirate’ a book, the better. If they like the beginning, they’ll buy the whole book the next day, because there’s nothing more tiring than reading long screeds of text on a computer screen.”

Coelho’s assertions are wrong and pernicious. He begins by positing that there is a kind of paradigm shift going on, and that the old models are dead. I see this a lot, usually coming from technology gurus  or Amazon.com fan boys. When I hear the term “old business model”, I can usually predict where the discussion is headed. Coelho is saying  that under the new business model ideas belong to us all. What that means  to me is that the writer ought not to be compensated for his writing, which is to say that the work that goes into artistic creation has no value. A curious insight from a writer who has made tens of millions of dollars from his own creative work.

He elaborates on this idea  by saying that all creative writing is simply the recycling of 4 themes. I suppose what he means to say is that creative writing isn’t really all that creative.  Let’s see now….how shall I respond?…….Shakespeare, Tolstoy, Joyce, Melville, Flaubert, Cervantes, Dante. A veritable Salvation Army of recycled ideas.

Coelho then argues that piracy is good because it is good for business. Kind of like radio. It exposes people to creative work that they might not otherwise know about, and this will induce the reader to go out and buy more of the artist’s stuff.  Well, this might be true. Or maybe  not. But it certainly is an article of faith amongst the “new paradigm” types.  This is quite beside the point. The copyright holder may  decide, out of ignorance or folly, that he simply doesn’t want to give away his product. Apparently Coelho feels that he is in a better position than the artist to dictate the conditions under which the artist’s or anyone else’s  book will be disseminated.

Moving along to the thread of conversation in the PW article, we see more of the “new business model” argument.  It usually revolves around the idea that traditional  commercial (often referred condescendingly as “legacy”) publishers are simply ripping off the consumer and making millions of dollars by charging unjustified and inflated prices. The idea is that if we get rid of these greedy middle men, we will arrive at a fair price for a book, which is usually about 99 cents. The Internet gurus  call it “disintermediation”. It’s a fancy term for a business model that cuts out the middle men. A lot of people seem to believe that because there are no manufacturing and delivery costs to an e-book, 99 cents is a fair price. But in the eyes of Pirate Bay and its apologists even charging 99 cents for a book is highway robbery. The  concept de jour coming from the “new business model” gurus is: “information wants to be free”.

I believe that intellectual work has value and deserves compensation. I believe that the work that goes into writing a book is at least as important and as valuable as the work that goes into flipping burgers at McDonalds.

It’s astounding to me that this conversation about piracy gets serious discussion at all. Piracy is theft. Theft is not a “new business model”. It’s the oldest one in the book.