A short article published by the AP today notes that Connecticut Attorney General Richard Blumenthal is investigating Amazon and Apple for possible anti-competitive measures taken to restrict the e-book market.
Blumenthal notes that Amazon and Apple have “most favored nation” (MFN) agreements with the five major publishers, which aim to deter those publishers from giving discounts to other retailers. Says Blumenthal in a letter to Apple:
“I fully understand that MFN’s are not per se illegal under our antitrust last. Yet, as I am sure you are aware, MFN’s are not per se legal either. MFN clauses — especially when they are offered to two of the largest e-book retail competitors in the United States — have the potential to impair horizontal competition by encouraging coordinated pricing and discouraging discounting. The net effect is fairly obvious, in that MFNs will reduce the publisher’s incentive to offer a discount to Apple if it would have to offer the same discount to Amazon, leading to the establishment of a price floor for e-books offered by the publisher.”
There are some serious problems with this argument. First, the publishers have had agreements like this for decades, applying to those old-timey paper books. Second, why is Blumenthal singling out Apple? Barnes & Noble is more established, almost certainly has a larger market share (reports vary, but I think that’s a safe assumption), and also has the same MFN agreements with the publishers.
It’s worth noting that Blumenthal, who has gone after tech companies in the past, is angling for Chris Dodd’s vacant Senate seat. It’s also worth noting that there’s no company in the tech world, and few in the non-tech world, that are as eye-catching in a headline as Apple. I don’t want to imply that this is kind of a silly investigation that is highly unlikely to go anywhere (even Blumenthal notes that nothing illegal is happening!), and that Blumenthal is trying to get some attention before a Senate run. I’ll let you fine people come to that conclusion by yourselves.