Judge Cote denies Bob Kohn’s request to investigate Amazon’s pricing…again

I wondered what had ever become of Bob Kohn, the plucky founder of RoyaltyShare who has been complaining all through the Agency Five/Apple antitrust hearings that nobody was paying enough attention to Amazon’s practice of deep discounting bestselling e-books.

Kohn has consistently demanded (in comic book form at one point) the government be forced to turn over evidence relating to its probe into Amazon’s pricing, and that Amazon be required to open its books and show exactly what kind of profits or losses it was taking on e-books—and Judge Cote has consistently turned him down.

Now Andrew Albanese reports at Publishers Weekly that the judge has turned him down again. Nonetheless, he is looking forward to having his day in court, because at this point federal law requires her to hold a hearing.

Judge Cote and the government attorneys have repeatedly pointed out that Amazon is not a defendant in the trial, and the proper avenue for Kohn to have his concerns addressed is to file an antitrust action against Amazon himself.

Amazon has always held (and testified under oath) that, even though it priced some e-books near or below cost as loss leaders, the majority of its catalog has always been profitably priced. It has always been reticent to provide information that could be of benefit to its competitors. It has also long been a favorite target of the publishing industry, due to its shrewd business practices that make it hard for competitors to keep up—which is why the publishers colluded illegally to begin with. So there is certainly plenty of incentive for Kohn to try to make the case about Amazon, even when the judge says it isn’t.

I can’t see Kohn having any more success with Judge Cote than he has been. Perhaps he will have better luck on appeal. It will be interesting to see if he ever does try to file an anti-trust action against Amazon. Regardless, Kohn’s antics have been quite entertaining over the course of the trial, and I’m glad to see he’s still out there regardless of how it turns out for him.

5 Comments on Judge Cote denies Bob Kohn’s request to investigate Amazon’s pricing…again

  1. Whether Amazon engaged in “predatory pricing” or not was (maybe still is) a critical matter of fact in the case against these five publishers and the case against Apple. As I understand it, the alleged collusion would have been a far lesser infraction had it been in self-defense against predatory pricing. The US DOJ accepted Amazon’s clam that this was not the case. We don’t know what evidence, if any, convinced them that Amazon’s claim was essentially true. The defendants were not allowed to examine that assertion or see any evidence of it.

    We should not be surprised that the US DOJ accepted Amazon’s assertions in this area. To do otherwise would have undermined their case against the publishers and Apple. It may also be that the DOJ surrendered the opportunity to pursue Amazon with an anti-trust action at some future time by accepting Amazon’s characterization of its pricing scheme. Predatory pricing is clearly in violation of both the spirit and the letter of anti-trust law.

    Bob Kohn probably could file an anti-trust action against Amazon as Judge Cote suggests but without the support of the US DOJ where would such a case go? Perhaps Mr. Kohn seeks to show that the US DOJ is somehow derelict in its duties and shame them into investigating Amazon. It does seem Quixotic but perhaps it is more complex than that.

    Reference (predatory pricing): http://en.wikipedia.org/wiki/Predatory_pricing

  2. As I understand it, the alleged collusion would have been a far lesser infraction had it been in self-defense against predatory pricing.

    That’s not what Judge Cote said. In her decision, she wrote:

    Third, even if Amazon was engaged in predatory pricing, this is no excuse for unlawful price-fixing. Congress “has not permitted the age-old cry of ruinous competition and competitive evils to be a defense to price-fixing conspiracies.” Socony-Vacuum Oil Co., 310 U.S. at 221. The familiar mantra regarding “two wrongs” would seem to offer guidance in these circumstances.

    If Amazon had been engaging in predatory pricing, as the Judge wrote, the appropriate thing would have been for the publishers to file antitrust complaints against Amazon…the way Amazon did against them.

    If they, or Kohn, want a case against Amazon, then they should file a case against Amazon. That being said, I certainly wouldn’t complain if Amazon eventually did have to pony up figures to support its contentions. But Amazon’s not the one who tried to overcharge consumers.

  3. @ Chris Meadows,
    Agreed that predatory pricing is not a defense for collusion. Two wrongs don’t make a right.
    However, it could have been a mitigating circumstance and, thus, lessen the severity of the allegation, especially when you consider that predatory pricing is extremely difficult to prove in the modern context (Brooke Group v. Brown & Williamson Tobacco, 1993).
    The counter-claim both for Kohn and the defendants in these suits is that they should have filed suit asserting that Amazon was engaged in that practice despite the unlikely chance of success. Perhaps they should have if only to show that to be an ineffective defense. However, that would have taken several years. Amazon might well have concluded that this was fair rent on the window of opportunity.
    As you look at the case law on predatory pricing, the examples really don’t conform to Amazon’s presumed end game strategy. The factor that separates them is the “stickiness” of the ecosystem. One might argue, then, that Amazon’s predation is very different from and more effective than the examples (e.g. Bromkonvention). If you accept that as the case, you are compelled to see the defendants behavior in a very different light.

  4. Frank: The judge didn’t say that if Amazon had been engaged in predatory pricing it would have been an extenuating circumstance; she specifically said it was no excuse.

    It should be interesting to see what this case does on appeal, regardless.

  5. Chris, I think that we’re conflating the case against the publishers with the case against Apple when they are very different from one another. Since the publishers settled (agreed to terminate contracts with Apple) without admitting wrongdoing (collusion), we don’t know what defenses they intended to use.
    Apple, on the other hand, has not admitted collusion, tacitly or otherwise, so also hasn’t offered predatory pricing as an excuse for collusion. The judge was dismissing an argument that had not been made – a straw man of sorts. What Apple does admit to is using their pre-existing eMarketing platform, the one that had long been used to sell music, movies and apps to also sell eBooks supplied by these publishers. Agency pricing was nothing new. Moreover, the Most Favored Nation (MFN) clause had never been found to be anti-competitive until the Apple case. It remains to be seen whether this will “stick” and become precedent.
    That Apple pitched its platform as a solution to what publishers perceived as the problem of predatory pricing, has been taken by Judge Cote as an invitation to mischief rather than a straightforward and honest business proposition.
    So, was Apple’s proposition an invitation to mischief or was it an offer to solve a real problem by legitimate means? Was Amazon really engaged in predatory pricing? Since agency pricing and MFN clauses had never before been found to be anti-competitive per se, the reality of the threat seen by publishers is an important material fact. If it was not real, then one might lean toward the conclusion that mischief was intended. If it was real, one might lean toward the conclusion that no mischief was intended.
    Yes, it will be interesting to see what approaches Apple tales on appeal.

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