Tuesday, November 20, 2012

Amazon & Google Agree to Antitrust Consent Decrees

2018 Publishing Predictions

My 2013 predictions mainly concern the year 2018. Why?  It's easy to predict the near term (unless you are trying to accurately predict where the markets will go over the course of one year).  Also, the practical utility of a short term prediction is limited.  When the air raid siren has sounded, it's too late to build a shelter.  Predicting the mid term allows time to adjust behaviors and positions.  And, as a celebrity seer once said to me, "If you engage in fortune telling, foretell the mid-term.  That gives them time to forget your inaccurate or mistaken predictions."   His other advice was to "predict outcomes not details."  On that one, I've broken with accepted prophetic practice. 

[Suggested musical accompaniment:  Robert Plant & Alison Kraus' version of the late great Allen Toussaint's Fortune Teller.  Video embedded at end of post.]

Prediction 1

FTC Cuts Amazon & Google Down to Size

(New York) November 22, 2018.  The FTC concerned about
Depiction of FTC Attack on Google
vertical integration (control of content production and distribution) will prohibit Amazon and Google from having a monetary interest in content they distribute or display.  Amazon and Google will agree to consent decrees, whereby Amazon* is forced to spin off its Simon & Schuster, Avalon, Dorchester, Sony Records and Showtime divisions.  Likewise, in response to accusations it abused its market power, i.e. the ability to control price or reduce competition, in internet searches,   Google will agree to divest its Google Maps, JK Lasser Tax Institute, Automobile Club of America, Zagat and ESPN divisions. In a complicated formula to be worked out by FTC and European regulators, within 90 days of the decree, Google will be ordered to start sharing proceeds of revenues derived from sale of personal data of users who click a new "Monetize Me"  button.  Neither Google nor United Parcel Service (UPS)  will be willing to comment on how the  consent decrees will impact their proposed merger.  Lloyd Jassin will be quoted as saying, "Privacy is the new copyright."

"Protecting competition in the digital marketplace is a high priority for the FTC," will say Bureau of Competition Director Richard Feinstein. "This order will ensure that vigorous competition continues in the worldwide online market for entertainment and information products, and that consumers are not faced with reduced innovation as a result of digital favoritism and dwindling access to markets for independent publishers and other independent content producers." 

"The Internet is better served with less regulation," David Crane, a Google-friendly legal scholar will be quoted as saying. "This violates nearly every tenet of laissez faire capitalism.   What Google is doing is good business.  It's not exclusionary.  While Google is invaluable, it's not essential.  Stop complaining about your inability to compete. Start competing."   

*Why the FTC Took Amazon & Google Apart: An Antitrust Analysis: By 2016, the FTC determined that Amazon and Google had turned their backs on their original missions of openness and innovation. The platforms, via exclusionary tactics, have  become toxic to healthy innovation. Responding to real or perceived external threats, both companies had abused their market power by raising barriers to entry,  making it difficult for potential new entrants as well as large companies to compete.   It started in earnest in June 2012, when Amazon Publishing acquired category publishers Avalon and Dorchester. Four years later, Forrester Research reported that 70% of America's online shoppers began their search for a product at Amazon. Google which tied search to advertising, controlled 70% of America's advertising sales by 2016, and was rumored to be in talks with UPS about a possible merger. That same year, the EU fined Google $500M Euros for cooking search results, i.e., favoring its own content over the content of others. Book publishers and more so, film and television studios and the interactive gaming industry had become a threat to Amazon. They could withhold products, or, in the case of studios and the interactive gaming industry, increase license fees at the end of a license term. Google, now a mature business, simply lost its way. The FTC determined it was time to regulate the platforms. But they needed to make their case.  Amazon had shown an unsavory willingness to withhold technological innovations from suppliers and vendors for its own advantage. Using its position of dominance, it often disabled "buy now" and "buy" buttons to address threats from its publishing suppliers. But, it wasn't just about books. Similar tactics were used to punish suppliers and deny threats to entry in gaming, music, publishing, motion pictures, kitchenware, infant diapers and formula, and shoes. Hoping to mimic the trading template created by Amazon, Google eyed UPS as a way to fill in the gaps in creating a fully integrated trading company. Amazon and Google's entrepreneurial audacity were tolerated until they exhibited parallel habits of willful exclusion of others - otherwise known as conscious parallelism in the rubric of antitrust law. After being scrutinized for possible antitrust violations for several years, the FTC determined that they ceased to be the instruments  of innovation; so the FTC cut them down to size. Reflecting on the Apple "Agency Pricing" consent decrees of 2012 - 2013, a former Justice Department attorney (anonymously) observed that "Price fixing cases were easy to sell, both politically and as a coherent story. There were clear villains. Apple. Big publishing. The consumer felt it in their wallets. The price of eBooks went up. When former innovators go bad, those are the tough cases. When do you bring an enforcement action? It's a matter of timing. The FTC waited until they believed innovation and openness had taken a back seat to discriminatory practices."

Prediction 2 
Google Wins Fair Use Battle *

If you are looking for something short-term, something 2013'ish, I predict that Google wins (or The Authors Guild settles) the fair use litigation commenced in 2005; that Google does not seek attorney fees or otherwise act punitively.  Is the mass digitization of  books a good thing?  Yes, unless Google favors its own content over yours.  See, 2018 predictions above. 

*Update: Yep, it came to pass.  On October 16, 2015 the U.S Court of Appeals for the Second Circuit affirmed a 2013 lower court ruling that Google’s library book scanning project was protected by fair use and was not copyright infringement.


Looking Back on My 2008 Predictions (blog post) (Lloyd Jassin):  I urge you to to look at the end of the post, where I score my 2008 predictions.  The growth of the independent book sector, which was predicted, as well as Google's search engine preference for its own content, are just two or four major predictions that have become reality.    

Three Versions of Fortune Teller


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