It’s no secret that “affordable” for a college student means the cheapest thing they can find. So it’s not a surprise that, when it comes to college textbooks, students will choose buying the cheaper book on Amazon.com rather than at the campus bookstore.
This is a reasonable and rational decision when a student is already paying thousands of dollars every year to go to school. Every cent a person can save counts, so being able to save hundreds of dollars on books every year based on where you chose to buy textbooks is great.
However, my concern lies with the potentially monstrous monopoly that Amazon could create within the next few years given their history.
According to the New York Times, Amazon had been selling their new e-books at the low rate of $9.99 while still paying publishers the normal $14 for the book — essentially losing money with every book. With these low rates, they ensure that no one entering the e-book market could compete with them, creating a monopoly of sorts.
In response, Apple, as well as five major publishing companies figured out how to sell e-books for $12.99 or $14.99 in order to ensure that Amazon’s competitive predatory pricing would be stopped. However, instead of congratulating the companies for working against the monopolistic tendencies of Amazon, the United States Justice Department turned around and sued Apple and the publishing companies for price fixing.
This was the wrong decision. Instead of allowing companies to naturally stop Amazon’s predatory pricing policy — which wasn’t allowing competing e-book companies to make any money and was closing the market — the United States has decided to target the very companies that were trying to stop a monopoly.
While it is true that Amazon is saving consumers’ money in short run, what they are engaging in is not sustainable. A four-dollar discount may look great for the customer, but it was a four-dollar loss for Amazon for every book sold.
But because no one could afford to compete with them, Amazon was slowly gaining a dominant market share to the point where they could force publishers to sell at a price that would result in the publishers’ and authors’ losing money.
If anyone should have been charged with monopolistic tendencies and have an antitrust suit brought to them, it should have been Amazon. Why the U.S. Justice Department chose to sue Apple is a mystery to me, when Amazon was clearly engaging in predatory pricing that was eliminating the ability of competing companies.
It is for this reason that I think the solution to this problem should be to make it illegal for companies to sell products for a loss if they are a for-profit company.
In an era where small business is glorified, and competition is so important for a free market, the only reason a company would have an incentive to engage in predatory pricing would be if it wanted to make itself into a monopoly.
As Theodore Roosevelt once said, “The greatest evils in our industrial system today are those which rise from the abuses of aggregated wealth.” That’s exactly what predatory pricing is.