John Paczkowski

Recent Posts by John Paczkowski

Connecticut AG’s Tech Probe o’ the Week: E-Book Prices

Connecticut Attorney General Richard Blumenthal is like the Stephen King of investigations: terrifying and terrifyingly prolific. This year alone he’s gone after Craigslist, Google (GOOG) and Topix — and now he’s drawn a bead on Amazon and Apple as well. Blumenthal said Monday that his office is investigating whether the agreements the two companies have with e-book publishers are anticompetitive.

At issue here are the “most favored nation” (MFN) contracts that guarantee Apple (AAPL) and Amazon (AMZN) will receive the best e-book prices available.

“I fully understand that MFN’s are not per se illegal under our antitrust last,” Blumenthal wrote in a letter to Apple. “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.”

According to Blumenthal, that’s already happening. His office surveyed e-book prices for a number of bestsellers sold by Amazon, Apple, Borders and Barnes & Noble (BKS) and found them to be identical at all four companies. “These agreements among publishers, Amazon and Apple appear to have already resulted in uniform prices for many of the most popular e-books — potentially depriving consumers of competitive prices,” he concluded.

And they’re potentially doing it in an election year, which has got to make it even more troubling for an AG with senatorial ambitions and a clear proclivity for grandstanding …