Book Sellers Ask Justice Department To Review Amazon (AMZN) And Wal-Mart (WMT) Pricing

magazinThe American Booksellers Association wants to know the motivation of Wal-Mart (NYSE:WMT), Target (NYSE:TGT), and Amazon (NASDAQ:AMZN) for selling popular books online for under $10. The industry group has asked The Justice Department to investigate what it believes “constitute illegal predatory pricing that is damaging to the book industry and is harmful to consumers.” The association sent a letter to the Antitrust Division of the department detailing its grievances.

At the core of the dispute between publishers and the large online retailers is that major titles are being sold below the cost that Amazon and its rivals have to pay to book companies. The American Booksellers Association says that this is the equivalent of a conspiracy “to win control of the market for hardcover bestsellers.”

The accusation may be taking things too far. The pricing practices among Amazon, Target, and Wal-Mart are probably nothing more than a good old-fashioned price war meant to gain a share of the online shopping audience as the holidays approach. Each of the three big retailers is certainly losing money on all the books that they sell for $9, but they assume that each book buyer may be a buyer of other merchandise. The sale of hardcovers is essentially just a “”loss leader” to pick up customers who may also buy consumer electronics. clothing, jewelry, cosmetics, and gardening supplies to put under the Christmas tree as gifts.

The booksellers have a case because people who buy books from the three large retailers will probably keep up that habit, if the retailers keep their prices low. If the motivation of Amazon and its rivals is to draw in customers for the holidays, the price of they charge for the bestsellers is likely to go up early next year.

The Justice Department will have to look for motives in any investigation, and it may find that the large e-commerce sites do not care if they damage the book publishing industry, but they certainly do not have that as their goal. Amazon, Wal-Mart, and Target have a more simple reason. They want to make money by gathering as many customers as they can.

Douglas A. McIntyre