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Hollis Salzman and Meegan F. Hollywood at Robins, Kaplan, Miller & Ciresi L.L.P. in New York have written a timely Guest Post on an important and exotic antitrust topic — monopsony.

Ms. Salzman serves as Co-Chair of Robins Kaplan's Antitrust and Trade Regulation Group and as co-lead counsel in blockbuster antitrust class actions, including In re Automotive Parts and In re Air Cargo Shipping Services. Recognition of her knowledge and skill have come from Chambers USA, Lawdragon, and Benchmark Litigation, to name a few. Check out a recent interview by Law360.

Ms. Hollywood prosecutes class actions that involve price-fixing, unlawful monopolization, and other anticompetitive practices. She heads up the associates who handle In re Air Cargo Shipping Services.

You can contact them at and, respectively.

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"The Everything Store" — Can You Buy a Monsopsony on Amazon?

There has been a lot of buzz in recent months over the highly publicized Amazon-Hachette dispute, which was first reported by The New York Times when negotiations over renewed contract terms between the online retailer and publisher broke down earlier this year.  While details regarding the exact nature of the dispute have not been divulged, the general consensus is that Hachette prefers to return to an agency pricing model, which allows publishers to set the prices of their own books.  Amazon is adamantly opposed to this switch because the agency model would prevent the kind of drastic discounting that Amazon is known for.  It’s no secret that publishers deem Amazon’s discounting practices a violation of antitrust laws.  Recent debate, however, has focused on whether US regulators tend to agree.

Of course, all of this follows from that other much-publicized dispute in which the Department of Justice successfully claimed that the six largest publishers in the US, including Hachette, unlawfully colluded with Apple to raise e-book prices when they introduced the agency pricing model in response to Amazon’s deep discounting back in 2010.  The publishers settled the case and agreed to certain restrictions, which largely enabled Amazon to continue discounting e-books.  Moreover, US District Judge Denise Cote’s final order, issued in 2013, laid out a staggered schedule for the various publishers to renegotiate their contracts with retailers.  As it turns out, Hachette was up first.

Reportedly, Amazon demanded better terms from Hachette, and negotiations rapidly deteriorated.  Amazon retaliated by declaring literary war on Hachette in an effort to force the publisher’s hand.  Specifically, Amazon delayed delivery of books published by Hachette for up to three weeks, removed the pre-order option for Hachette titles, charged more for Hachette books, and even suggested that readers might enjoy a book from another author instead.  To add to the hype, Hachette authors simultaneously took to social media to denounce the mammoth online retailer for offenses ranging from bullying to extortion to a violation of antitrust laws.

Meanwhile, across the pond, recent reports indicate that the European Commission has begun a preliminary investigation into complaints that Amazon violated European competition law by engaging in similar tactics with Bonnier AB, a German publishing trade group.  Specifically, Bonnier claims that Amazon delayed delivery of its books in order to force the publisher to accept lower prices for its e-books.  European antitrust law expressly forbids companies with a dominant market position from engaging in such abusive conduct. 

All of this has led many to ponder whether Amazon’s recent exploits might (finally) raise the eyebrows of US antitrust watchdogs.

Monopoly, Monopsony – What’s The Difference? 

While commentators often attach the word “monopoly” to Amazon, the real inquiry is whether Amazon is, instead, a “monopsony.”  An unlawful monopsony, the lesser known violation in the antitrust family, occurs when a buyer of goods has the power to unlawfully lower the prices of the products that it buys.  By contrast, an unlawful monopoly occurs when a seller of goods has the power to unlawfully raise the prices of what it sells.  Both result in a misallocation of resources, which harms consumers and distorts markets, and therefore each violates antitrust law. 

The theory of monopsony assumes that the monopsonist has the power to dictate terms to its suppliers.  However, to show monopsony, one must show that suppliers are forced to sell their products at prices so low that the loss results in a reduction of supply.  Harm to the market results when suppliers are, in turn, driven out of business, or have less money to invest in new innovation, technology, equipment, and/or expansion.  In that sense, a monopsony often does not directly affect consumers in the traditional way that unlawful monopolies do. 

As an added wrinkle, buyer power without true monopsony power can actually benefit consumers.  Indeed, when buyer power pushes prices down without resulting supply reduction, consumers enjoy lower downstream prices.  Consumers are harmed, however, when output reduction is coupled with a misallocation of resources.  While consumers may not immediately feel the effects of the monopsony, harm resonates nonetheless as wealth is transferred to the monopsonist, and consumers are faced with higher prices and fewer options.

For its part, Amazon has a strong reputation for consumer-friendly discounting.  Thus, as consumers enjoy discounted e-book prices, it is difficult to imagine how they are being harmed by Amazon’s practices.  The relevant question is whether Amazon’s bullying tactics with publishers could effectively result in a reduction of books being published.       

Could Amazon Be The First Illegal Monopsony?

Significantly, no US court has yet to find a single company guilty of an unlawful monopsony.  The case that came the closest was Weyerhaeuser Co. v. Ross-Simmons Hardware Lumber Co., 549 U.S. 312 (2007).  In Weyerhaeuser, a dominant purchaser of logs was accused of overbidding, and driving its smaller rival out of business.  While the trial court and Ninth Circuit found for the plaintiffs, agreeing that the defendant paid “more than it needed to pay” for logs, the Supreme Court reversed 9-0.  

The Weyerhaeuser Court concluded that predatory buying must be evaluated under a much stricter analysis than that contemplated by the Ninth Circuit.  Specifically, the Court held that a buyer is liable only if (1) buy-side bidding caused costs to rise higher than revenues, and (2) the defendant has a “dangerous probability of recouping the losses” through an “exercise of monopsony power.”  It is important to note that under the Weyerhaeuser standard, recoupment via higher prices in the downstream market does not satisfy the test.  Rather, the Supreme Court required recoupment “through the exercise of monopsony power,” that is – by forcing lower prices on the buy-side.  

Since Amazon first introduced its Kindle product, it has priced e-books below what it was buying them for.  For example, if Amazon bought an e-book from Hachette for $15, it resold it to a consumer for $9.99, losing $5.01 per e-book.  Not surprisingly, e-book consumers flocked to Amazon helping the online retailer to grow exponentially over the years, and causing publishers and authors to rely on Amazon’s sales.  In fact, some have even suggested that consumers use Amazon as a modern-day card catalog.  According to that theory, if a book or author is not sold on Amazon, that book or author must not exist. 

With its low prices and established reputation as a consumer-friendly reading room of sorts, there is little debate that Amazon is a dominating force in the e-book market, both on the buy-side and sell-side.  Varied reports have placed Amazon’s share of the e-books market from anywhere between 60 to 90 percent.  Moreover, Amazon accounts for nearly 65 percent of Hachette’s e-book sales.  Thus, Amazon certainly has market power in the antitrust sense, and its buyer power alone cannot be said to be merely circumstantial. 

Now it seems that Amazon is attempting to enhance its bottom line by wielding its power in the market to achieve more favorable pricing from publishers, rather than by increasing its own prices downstream, i.e. recoupment through the exercise of monopsony power.  It remains to be seen, however, whether Amazon’s tactics will result in a reduction of output.  Publishers will certainly be put out by larger discounts to Amazon and expensive services.  Authors will likewise suffer if publishers are, in turn, unable to pay large advances, or are paid less per book due to higher discounts paid to Amazon.  Stifling authors could certainly lead to fewer publications for consumers to choose from, and a reallocation of wealth flowing directly to Amazon. 

Interestingly, in an effort to break its standoff with Hachette, Amazon executive David Naggar, wrote an open letter to Hachette authors proposing to take them out of the middle of the dispute by promising them a “big windfall.”  Specifically, Amazon dangled 100% of the sales price of every Hachette e-book sold on Amazon to Hachette authors.  However, Hachette quickly rejected the proposal, calling it “suicidal.”  Whether Amazon is trying to avoid being labeled an unlawful monopsonist by this recent proposal, or whether it is just trying to win back the hearts of frustrated authors and consumers alike remains to be seen.


The general consensus among antitrust analysts is that US regulators are not likely to intervene in what has been labeled by some as a simple business dispute.  Indeed, many view this dispute as normal business dealings between a retailer and supplier, and maintain that the enormous attention merely stems from the visibility and notoriety of the parties involved.  However, as Amazon continues its fight with Hachette, and its contracts with the remaining publishers start to expire, perhaps US regulators will be inclined to take a closer look.