Fight Amazon by recognizing its teeth

So far, the fact that Amazon engages in some bad business practices hasn’t stopped most of us from logging on and buying things from the online emporium, from spandex pants and kitty litter to hardback copies of J.K. Rowling’s latest novel.

Scratch that: Right now, you can’t purchase Rowling’s book. Or J.D. Salinger’s. Or Malcolm Gladwell’s.

Jeff Bezos’ behemoth is making headlines again, but this time it’s not because it wants drones to deliver your toothpaste. Amazon is making it exceptionally difficult to buy a number of titles from the Hachette Book Group in an attempt to leverage better e-book terms from the publisher. This isn’t the first fight between the two companies; in 2008, Amazon pulled the “buy” buttons from Hachette and Bloomsbury books.

You’d be forgiven for not caring at first blush. Most of the coverage frames the standoff as a behind-the-scenes spat between publishers and Amazon. But if you think about it, it’s almost like a scene from a gangster movie: Amazon is essentially holding books and authors hostage, and publishers are asking, How is this not extortion? Bezos’ only response thus far has been, “We talk when we have something to say.”

The backstory is this: When the Kindle e-reader was introduced in 2007, Amazon tried to increase demand by pricing all e-books at $9.99 — without consulting publishers. Worried about this pricing model’s effect on their bottom lines, five of the top six publishers — Hachette, HarperCollins, MacMillan, Penguin and Simon & Schuster — instead did business with Apple, using an alternative model that allowed for more variable pricing. That’s when the Department of Justice brought an antitrust case against Apple and the publishers (for conspiring to raise the price of e-books), allowing Amazon to revert to its monopolistic control over the e-book market.

Thanks to this outcome, we’re guaranteed rock-bottom prices on books today, but we may be trading the ability of publishers to produce quality books in the future.

Fights between Amazon and the big publishers are just the tip of the iceberg. In 2009 and 2010, while investigating Amazon’s cost-cutting tactics, I discovered that small- and medium-size publishers were being especially bullied into giving cripplingly high Amazon discounts — a strategy the company called the Gazelle Project because Bezos thought it should go after publishers “the way a cheetah would pursue a sickly gazelle.”

Now they just call it the Small Publisher Negotiation Project, which effectively means that a publisher’s books disappear from the Amazon website until Amazon gets its way.

Amazon has a majority of the physical and e-book markets — estimates put it at somewhere from 60 to 75 percent — so when it pressures publishers, it’s hard to refuse. Yet media outlets and financial analysts alike express a baffling measure of surprise every time Amazon proves it’s a jerk. “This could seem like they’re being spiteful and petty,” an analyst recently told a New York Times reporter. “That’s typically not Amazon’s playbook.” But if you go to Relentless.com, you’ll be redirected to Amazon’s home page because Relentless was what Bezos originally considered calling his company.

It’s not that Amazon hasn’t done incredible things for customers, publishers and authors. While working on that investigative article on Amazon, I was at a writer’s residency that I later discovered received funding from Amazon. That’s the point: It has a hand in everything. But as its latest negotiation tactics show, Amazon is less interested in maintaining its position at the top of the food chain than it is in becoming the food chain.

For months now, Amazon has been raising the price of Hachette’s physical books to try to get the company to give in on new e-book terms. When that didn’t work, it staged weeks-long shipping delays and said Hachette books were unavailable when they were available. It even suggested customers might prefer to buy a different book entirely, which makes some kind of sense; to Amazon, books are interchangeable, just another widget.

But books are unique intellectual goods whose value depends first and foremost on the writer, and in the race to rock-bottom prices, authors are suffering. One Hachette author whose book had been among the top 300 titles on Amazon saw it fall to the top 3,000 after the company raised the price.

Consumers, to be sure, are part of the problem. No matter the evidence, we can’t seem to shake our blind faith in Amazon as a new kind of entity. We want to believe that it is a virtual, neutral warehouse of inventory for us to access, not another old-fashioned, cutthroat business. We rely on Amazon too much to want to know that its algorithms for book recommendations (often based on how much publishers have paid Amazon) are anything but open, democratic and user-generated. (This, of course, is an issue not just with Amazon’s practices but with the invisible undergirding of our larger online world. Recall that companies can pay Google to push their links to the top of search results.)

Amazon cultivates its image as a force driven solely by customer demand rather than by a relentless cost-cutting and price-control strategy. In 2010 when I queried the motivation behind the $9.99 e-book price, an Amazon source told me, “At the end of the day, the market is going to determine what the right price for this content is.” But that was precisely what they weren’t allowing by dictating the price. Yet the source’s sentiment is echoed by Bezos, who has said, “Amazon isn’t happening to the book business. The future is happening to the book business.”

But what kind of future is this? Amazon has become a mashup of the best and worst a business has to offer. It can ship us anything at cheap prices, on the double. With its amassed customer data, it can predict what we want to buy next. But employees at its factories work in abysmal conditions and aren’t allowed to unionize. The business of the future also looks suspiciously like the business of the past.

What’s a book lover to do? Hachette authors have taken the fight online, calling their readers to boycott Amazon. In spirit, I’m all for a boycott, but given Amazon’s size and ubiquity, we’re not going to buy our way out of this, and we shouldn’t. The idea that we can spend our way to a more just world reduces us in value to the money we’ve got in our wallets. Nor should the responsibility lie solely with us as consumers. And that’s where regulation comes in.

The Federal Trade Commission and the Department of Justice used to measure competition in diversity of retailers as well as low prices. The Robinson-Patman Act — on the books since the 1930s — made it illegal for a company to charge different prices in different towns in order to undersell local stores. With good reason: It’s a strategy that breeds monopolies, allowing a big company to come in, eliminate competitors by underselling them and then charge whatever it wants to a newly captive consumer audience. While the Robinson-Patman Act still exists, as evidenced by the metastasizing of Wal-Mart stores over the years, the FTC and DOJ don’t enforce it. “They’ve almost completely backed away,” former FTC lawyer John Kirkwood told me, pointing out that courts now view such cases as anti-consumer. In other words, opinion has shifted to a near fundamentalist faith in the idea that low prices are all that matter.

“It’s unfortunate that lower prices for consumers is the only criterion that’s applied,” publishing consultant Mike Shatzkin, told me, pointing out that a race to the bottom doesn’t bode well for the future of books. There will always be a lot of books — especially with the rise of self-publishing — but there will be a difference in the kinds of books available, with publishers less likely to take financial risks on new writers or projects that require more resources. Simply put, said Shatzkin, “There will be less money to invest.”

During the government’s case against Apple, the company defended itself in part by arguing that it was Amazon that grabbed control of the book market by pricing e-books below cost, to which the judge replied, “Another company’s alleged violation of antitrust laws is not an excuse for engaging in your own violations of law.” Fair enough. But maybe there’s enough regulation to go around?