In what must be the zenith of the pot calling the kettle black, the U.S. government announced last week that it and 15 states are suing Apple and other major book publishers for price fixing electronic books. The Justice Department is alleging that the price fixing publishers have agreed to convert the retailers who sell their e-books into agents who continue to sell their e-books but no longer have the ability to decide what retail price to charge for them. Thus, all prices are determined at the publisher level, allowing the executives in those companies to collude to ensure higher profits for all to enjoy. The DOJ estimates that by adding $2, $3 or as much as $5 to the price of many New York Times bestsellers and mass market paperback titles over the last two years, consumers have been ripped off by over $100 million.
Now, on the surface this may sound shocking. You are probably thinking here is yet another example of corporate bigwigs gouging the little guy. And that is what Attorney General Eric Holder and President Obama want you to think. See, then they can ride in on white horses, file a lawsuit that will cost the defendants so much money that they settle out of court and therefore look guilty of actually doing something wrong , and save the day for average e-book buying Americans. It fits into that government as the great protector of the masses mentality.
But, the real truth is that even without knowing that publishers may have conspired to increase book prices, no one was forced into buying them in the first place. Consumers make choices about what to buy every day and some, if not most, of the time those decisions are based on cost. If they felt the jacked-up prices of the e-books were too expensive, they could have chosen not to buy them. Enough consumers making this choice would have broken the back of the conspirators and forced them either collaboratively or individually to lower prices to market level (the equilibrium point). Consequently, the collusion would have been destroyed through natural means and consumers would have reasserted their position of dominance in the market economy.