Fred von Lohmann’s series on the amended settlement continues with a post on competition issues. On the unclaimed-works issue, he reaches a pragmatic conclusion—or as pragmatic a conclusion as one can reach “without a crystal ball”:
This raises a worthy question: if legislation is necessary to fix the competition problem posed by the settlement, then why do we need a class action settlement in the first place? Why not solve what seems like a quintessentially legislative problem with legislation, instead? (As Amazon points out, that’s exactly what was done when music publishers brought a class action against the first digital audio tape (DAT) recorders).
Here’s where realpolitik enters the equation. Google correctly points out that Congress has been working on orphan works legislation for years, to no avail. And none of the legislative proposals came close to the comprehensive solution embodied in the proposed settlement. So the question boils down to a political one: do you believe that approval of Settlement 2.0 will make orphan works legislation more likely, or less likely? Without a crystal ball, it’s hard to know.
On the pricing of the institutional subscription, he finds irony:
Of course, the chances of [monopolistic price gouging] coming to pass are hard to know in advance. As we have pointed out, if many large publishers pull their books out of the ISD database, then perhaps the ISD service won’t become indispensable to universities after all. So, ironically, the more successful the ISD proves to be, the more of a danger its pricing mechanism might prove to be for higher education.
I’m not sure I fully agree with Fred’s claim that these were the “two principal dangers” with the original settlement from a competition point of view. The orphan/unclaimed works issue was and is definitely #1, and the pricing of the institutional subscription is probably #2, but plenty of objectors also raised the coordinated pricing of individual books (call that a strong #3), along with a whole host of smaller issues like the MFN clause and the fixed 63/37 split. Leaving all of these issues out of the picture downplays the progress that the amended settlement makes in dealing with them. Perhaps, as Einer Elhauge argued, we shouldn’t have been worried about them at all before, but if you disagreed with him, then the (such as dropping the MFN and clarifying the language on algorithmic pricing) are a genuine improvement in the settlement.