There’s a simple reason why I haven’t commented on the Department of Justice’s warning to Apple and publishers over the agency model for e-book pricing: I don’t understand the issues yet. Unless and until I do, I know better than to hold forth on them.
Antitrust economics is specialized, technical, and unintuitive. Everyone can understand the basic idea that a cartel to hold up prices will hurt consumers more than it benefits the cartel. But beyond that point, things get hairy quickly. A great many plausible-sounding arguments are either internally inconsistent or unmoored from marketplace realities. Other claims are true about some industries at some times, and false in other industries at other times. Sorting good from bad takes not just care but a willingness to grapple both with formal models and empirical data. I’m not an expert in this; my progress here is slow and halting.
Antitrust law is even harder. Its division of conduct into various silos (“horizontal agreements,” “resale price maintenance,” etc.) creates a layer of serious technical complexity. And not only is it caught caught up in the raging theoretical debates about what economic principles are actually true in the real world, but it’s also thoroughly concerned with error and administrative costs. Antitrust doctrine is incomprehensible unless you recognize that it is driven by the expectation that courts will regularly get things wrong: either condemning pro-consumer practices or blessing anti-competitive ones. Again, I’m not an expert, just plausibly informed on a few narrow slices of antitrust law.
I’ve been reading all of the commentary I can find about the agency-pricing investigation, and I have one thing to say to 95% of the commentators. Please stop. If you haven’t done an antitrust analysis from the top, or read one carefully, or been doing this for so many years that you don’t need to, you literally don’t know what you’re talking about. This is not an area in which knowledge of the industry and layman’s intuition about economics will guide you to approximately the right answer. Believe me when I say that I do not know what the best outcome is here.