E-book Cartel Exemplifies What America’s Economy Has Become

Eric Blair
Activist Post

First there were oil cartels, then banking cartels, and food and drug cartels. Now there are E-book cartels?

Most Americans are still not aware of what type of economic structure they have. However, a recent story about electronic book (E-book) distributors, of all things, may hold a more succinct definition: Cartelism.

A cartel is a “group of companies or countries which collectively attempt to affect market prices by controlling production and marketing.”  They are effectively a monopoly made up of several organizations that still give the appearance of random competition.

The story that broke yesterday about five large publishers colluding to form an “agency model” for E-book pricing exposes an unmistakable example of what has happened to American capitalism.

The publishers named by the Justice Department are HarperCollins Publishers Inc, a unit of News Corp; Pearson Plc’s Penguin Group; Simon & Schuster Inc, a unit of CBS Corp; Lagardere SCA’s Hachette Book Group; and Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck.

Reuters reports that the U.S. Justice Department threatened this group of publishers and their Apple iTunes ringleader with an antitrust lawsuit over price fixing of E-books.

This publishing cartel is accused of fixing industry prices to “block rivals and hurt customers” with Apple being guaranteed 30% profit margins across the board.  But the cartel made one fatal mistake when they inked this deal in 2010.  They forgot to pay off the mafia government in the process.

Contrary to popular belief about capitalism, these types of colluded monopolies cannot exist without the blessing of the government.  It’s against the law for corporations to engage in this type of monopolistic behavior.  However, the law is only used to extract hush money from cartels through a “settlement” so business can continue as usual.

Indeed, the Wall Street Journal reports that several parties are in negotiations to settle the potential antitrust case.  An anonymous publishing executive was quoted that “a settlement is being considered for pragmatic reasons but by no means are we close,” citing significant legal costs associated with the probe. “You have to consider a settlement, whether you think it’s fair or not,” the person added.

Clearly this executive knows how the game is played.  It’s all about cost-benefit analysis and little fear of actual prosecution or jail time.  So, the mafia will get their payoff and the cartel will be allowed to continue their plunder while still blocking any attempt of new competitors from entering the market.

Of course, E-book publishers are hardly a significant industry in terms of human necessity.  Yet, this case is a perfect microcosm of how the entire economy of the Western world now works.  It displays all the collusion to fix prices, squash competition, and bribe government officials that is now commonplace for what passes as “free market” capitalism.

It’s time we stop blaming capitalism for the lack of competition in all facets of the economy and start demanding that our government uphold the laws — starting with dismantling the mega-cartels that run the world.

Read other articles by Eric Blair here.