It’s a common trope in movies: A mob enforcer walks into a shop, looks around, and then says to the owner, “Nice place you got here. It’d be a shame if something happened to it.” Every viewer understands that a shakedown is in the works. The shop owner can either pay up immediately, or else his livelihood will burn to the ground.
But what do we call it when a large firm makes a similar, although not quite so blatant, threat to a smaller firm that is reliant on its business? What’s the laissez-faire euphemism for an arrangement that coerces the smaller firm into acquiescing to the larger firm’s unreasonable demands because if it refuses, it will lose substantial business and face financial ruin?
In the book market, this is Amazon’s position in relation to publishing houses. The antitrust lawsuit brought by the Federal Trade Commission (FTC) and 17 states last fall hardly addresses the book industry—the first market that Jeff Bezos and his now trillion-dollar corporation targeted and took over. But that doesn’t mean Amazon is, or should be, off the hook.
Amazon is the largest bookseller in the world. Consequently, the publishing industry relies on it to get its product to market. Amazon earns an estimated $28 billion a year from selling books. In 2020, the House Judiciary Committee found that Amazon controlled more than 50 percent of the overall (online and offline) print book market and more than 80 percent of the e-book market. In other words, if a publisher’s titles aren’t available on Amazon, it might as well close shop and find a new line of business. Even the biggest publishers are no match for Amazon’s death grip on the book market.
That’s why all publishers, including those in the “Big Five” such as Hachette and Penguin Random House, are afraid of doing anything that might upset the company. Amazon has proven time and again that it won’t hesitate to retaliate against publishers that step out of line. These retaliatory games include removing the “buy” button beneath a title’s listing on the site, delaying shipping books to customers, claiming that titles are out of stock when Amazon is actually just refusing to restock the titles, and rejecting pre-sales for new books. In 2014, when Amazon and Hachette were embroiled in a distribution dispute, Amazon marginalized the publisher on the site for eight months. This had a major impact on the publisher’s sales. According to Hachette, it suffered an 18 percent drop in US sales during the third quarter of 2014, mostly due to “the difficult situation with Amazon.” Hachette authors likewise lost income and perceived influence in the publishing world when Amazon suppressed their titles.
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Amazon’s power over books not only dampens revenue and reputation for publishers and authors; the online behemoth also exerts its market-shaping clout to create a profit-fixated monoculture in a publishing industry pushed to maximize short-term returns under successive waves of consolidation. This kind of pressure represents a little-noted civic injury to us all, since a vibrant publishing market is critical for the free exchange of ideas, vigorous public debate, and cultural diversity.
Amazon will surely insist that it has achieved its dominance over the book market by competing in entirely legitimate ways. But that argument represents a drastically foreshortened and distorted account of recent publishing history. In its early years, Amazon enjoyed a critical competitive advantage over brick-and-mortar bookstores by exploiting court-created loopholes to avoid collecting sales taxes in many states. By evading these taxes, Amazon deprived state and local governments of revenue and gave itself an important competitive edge over rivals. Readers quickly realized that they could avoid paying a 5 percent sales tax on a title they might purchase at a local independent bookstore by buying it on Amazon.
What’s more, Amazon frequently used its size and broad scope of business to sell certain titles for less than what it paid. More than a decade ago, it was accused of selling some e-books at a loss—for instance, buying titles at $14.99 wholesale and reselling them at $9.99 retail. Because of its enormous scale of operation, Amazon could bear these losses, while most rivals couldn’t. The clear aim of such tactics was to lure long-term customers away from competitors in the market, in order to secure their eventual demise. The vast influence Amazon enjoys today in the publishing supply chain shows just how effective that strategy has been.
As Amazon consolidated its hold over book publishing, it pivoted to new measures aimed at permanently securing its market dominance. Amazon now commonly leans on publishers to demand deep discounts. As business journalist Brad Stone has explained, Jeff Bezos dubbed this campaign of coercion “gazelle.” In this market parable, Amazon is a cheetah who started by targeting the most vulnerable publishers—the gazelles—for special discounts and moved on to the stronger ones from there. Wielding its enormous power to squeeze suppliers, Amazon undercut the competition on price while still making profits.
Consider what would happen if regulators permitted a similar strategy in the labor market. Unscrupulous businesses would be empowered to squeeze the livelihoods of workers to obtain a significant cost advantage and competitive edge over rivals. Indeed, when Congress passed the Fair Labor Standards of Act in 1938, it labeled the paying of sub-living wages an “unfair method of competition.” Amazon is pursuing the same brutal tactic to harm its suppliers—publishers, in this case.
According to Census data, between 1998 and 2019, more than 50 percent of the bookstores in the United States closed. Amazon’s assorted unfair practices contributed to the mass extinction of many cherished local booksellers.
Federal and state antitrust enforcers have ample legal authority to challenge Amazon’s unfair competitive practices and its targeted throttling of supply chains in the book market. More robust antitrust enforcement won’t magically recreate the book landscape of 1999 or 1979—but it can promote a more decentralized and diverse publishing and bookselling environment. For instance, trustbusters can use the Robinson-Patman Act, an anti–buyer power law Congress enacted in 1936, to target Amazon’s extraction of discriminatory discounts from publishers. The Biden administration has repeatedly signaled an interest in reviving this law after decades of effective non-enforcement by the government. The Federal Trade Commission can also use its broad “unfair methods of competition” authority to rein in Amazon’s abuses in the book market.
The FTC/state antitrust suit against Amazon in 2023 is a welcome and necessary first step. It targets some of the coercive practices Amazon has used for years to stifle the growth of rivals and to tie up the market for digital commerce. But it must be part of a more comprehensive array of federal and state antitrust actions against the Seattle-based giant. There’s a useful model to follow here in the federal antitrust campaign against Google. In 2020, the government filed suit against Google over its practices in the search market—and then, last January, federal regulators, in partnership with eight state attorneys general, launched an allied complaint against Google’s monopolization of digital advertising. In much the same fashion, the antitrust action brought against Amazon in September should help clear the way for a new case that focuses on the corporation’s domination of the book market. Trustbusters can and should set their sights on protecting book publishers and authors as essential curators and producers of ideas and expression, rather than letting them become the next generation of gazelles in the maw of a market predator.
