Original URL: http://www.theregister.co.uk/2013/06/06/publishers_gave_amazon_ultimatum/

Publishers put a gun to our heads on ebook pricing, squeals Amazon

Wanted to damp down our Kindle-ing dominance

By Brid-Aine Parnell

Posted in Media, 6th June 2013 10:24 GMT

A top Amazon executive has said that publishers gave the etailer an "ultimatum" to let them set the price customers would be charged for ebooks.

Testifying at the fruity firm's trial for price-fixing, Russell Grandinetti, veep for Kindle content, said that if Amazon had the choice it would still be on the old wholesale model of pricing under which it bought books from publishers and then sold at any price it liked - even if this was less than it had paid.

"Certainly if someone offered reseller, we would have taken them up on that offer," he said in testimony reported by Reuters, the Wall Street Journal and others.

Macmillan was the first to go to Amazon about changing to the agency model, where retailers took a cut from a price set by publishers. Graninetti said the first meeting was "tense" and Amazon ended up taking the company's books off its virtual shelves for a few days before later agreeing to a three-year deal to get 30 per cent of each sale.

"We wanted to avoid losing most or all of their titles from our store," he said.

Other publishers started following suit soon after, a situation that Amazon considered to be at least partly intended to "slow down the success of the Kindle".

The US government has accused five major publishers, also including Simon & Schuster, HarperCollins, Penguin and Hachette, and Apple of using the agency model to raise and then fix the price of ebooks - at a cost of millions to ordinary customers. The DoJ has said that it believes part of the motivation for the fix was to destroy the already substantial market domination Amazon had built up, particularly since it was selling at cost or below cost to encourage sales of its Kindle readers.

Amazon also pursued the most favoured nation clause that the Department of Justice has now forced publishers to pull from their contracts. The MFN clause stopped the book houses from offering better prices to other retailers, something Apple also insisted on, which left ebooks at a more or less uniform price for customers no matter where they were bought.

Grandinetti said that Amazon wanted the MFN clause because it didn't want to be "further discriminated against by these publishers".

The five publishers have all settled with the government, agreeing to financial penalties of $164m so far; and to tear up present contracts and restrict future contractual dealings. ®