As human beings, we’re quick to react to sudden and immediate dangers, from the mythical snapping twig that suggests an approaching predator to sirens or an ominous-looking individual. Often, we react too quickly and at times totally incorrectly. But we react… to those kinds of dangers. We also react to perceived threats on our “rights,” not so quickly, but at times even more violently.
What we don’t react well to, and slowly, and usually less than perfectly, are to those changes in our world that have turned perceived “good things” into indicators of dangers. And the recent Department of Justice “victory” over Apple and the major publishers on ebook pricing is just one recent example of this. Now… I’m not exactly an Apple fan. I own no Apple products whatsoever, and I think that the I-Phone and its clones are harbingers of disaster [although in the interest of full disclosure, I will note that my wife does own a single IPad and that I am indeed an author whose income depends very much on the health of the book market.]. As I noted much earlier, the DOJ case against Apple and the publishers was based on the case that Amazon’s dominance of the ebook market [over 90% at the time] was essentially irrelevant because Amazon was charging lower prices than those Apple and the publishers were charging under the “agency model.” And the letter of the anti-trust laws supported DOJ, as did the courts.
The problem/danger here is the failure of Congress, the Judiciary, and the American people to recognize that “lower prices” aren’t always better, and in fact, they can be a symptom of great danger. Lower prices are great, assuming that your income is stable or increasing. But are lower prices so good if they cause the actual standard of living of the majority of Americans to decline? Certainly, homebuilders and construction workers might well argue that the oversupply and cheap prices of existing housing was anything but good for them or the economy. What is important is the relationship between wages and prices, not just how low prices are. If prices are down twenty percent, but your income is cut in half, you lose… maybe everything. This tends to be overlooked in today’s economy and consumer culture.
And what is the relevance to law and the Apple decision? Simply this – old style monopoly was the restriction of trade to raise prices and increase corporate profits. Under the old-style [and current definition] of monopoly, lower prices are not a danger but a good thing. The problem is that today we have a new kind of monopolist, as embodied in Amazon and Walmart. These “new” monopolists use low prices to gain a dominant market share, and once they have that share, they use their power to force their suppliers to provide goods and services at lower prices, outsourcing overseas, doing whatever it takes. This means those suppliers must cut their costs to stay in business, and that means lower wages. It also means that manufacturing here in the United States either automates or outsources to lower wage areas. In the end, the new monopolist still has large-scale profits which are not so high in percentage terms, but so much larger in scale that the percentage decline is acceptable. This kind of “new” monopoly has taken over especially in consumer goods and retail industries, but it’s also appearing, if more slowly, in everything from finance to automaking…and, at the same time, Americans keep scrambling for bargains… without realizing exactly what the long-term cost of those “low prices” happens to be.
Happy shopping!