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Internet & eBook Price Fixing

Last week, Barnes & Noble (BKS), Apple (AAPL), and a few publishers got smacked down when the federal government arrived at a settlement that there was collusion to raise the prices of eBooks.

I won’t be naive, I’m sure price fixing and collusion happens all the time. I know it isn’t supposed to legally, but let’s face it, if it’s good for business, someone somewhere is trying it.

Aside: Apple denies price fixing accusations

It comes as no surprise that digital products find themselves at the center of a price collusion debate, and had it not been for a company like Amazon, it might have gone unchecked.

Let’s face it, aside from fulfilling intelligent property royalties, and keeping servers that would already exist, functioning, there really isn’t much cost to digital products when compared to their physical counterparts.

There are no crazy printing costs, there’s little in the way of logistics, and distribution channels are cheap with unlimited shelf-space.

They could probably sell these books at $5.00 each and still walk away with profit (pure speculation, but that makes sense to me).

Internet & eBook Price Fixing

Price fixing and collusion is a natural occurrence online, but it happens more naturally than a bunch of people agreeing to meet somewhere. The reason for this is people trying to be competitive, and websites using advanced technology. Do you remember Amazon.com’s 23.6 MILLION dollar Biology book? This was a result of pricing algorithms (or pricing algos).

Amazon would check their competitor for a price, and raise their price slightly, then the competitors website saw Amazon raise their price, and increased their price. Ultimately, they got trapped into a loop until it became blogger fodder. While this may have been an accident, this should undoubtedly be considered price collusion, yet nothing really came of it.

Pricing Algorithms & Price Fixing

Looking at the Amazon example, it is pretty clear to see how collusion can happen even by software. While a lot less ominous than the major eBook readers colluding to raise prices, we shouldn’t be naive to all of the other price fixing that occurs on a daily basis.

Unfortunately, as technology becomes more advanced, and communication gains speed, price fixing of this sort will become more prominent. Of course, consumers are also equipped with price checking and coupon applications to help them out too, but I would be skeptical to call this a wash.

eBook Price Fixing: Your Thoughts

What do you think of all of this? Did you know about Amazon.com’s 23.6 million dollar biology book? Did you know about the eBook price fixing? Did you notice, or were you impacted at all by the eBook price fixing, or any other price fixing for that matter? How do you feel about it? Let us know in the comments!

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