Friday, August 21, 2009

Why is the Antitrust Division Investigating the Google Book Search Settlement?; Huffington Post, 8/19/09

Pamela Samuelson via Huffington Post; Why is the Antitrust Division Investigating the Google Book Search Settlement?:

"As I explained last Monday, the settlement is audacious because it uses the legal jujitsu of the class action procedure to give Google a breathtaking license to all in-copyright books. The agreement authorizes Google to create a digital library of these books and to commercialize most of them. Google will compensate rights holders for commercialization of these books either directly if they signed up with the Google partner program or indirectly through a newly created Book Rights Registry (BRR) whose job is to distribute money to rights holders signed up with BRR.

The U.S. Department of Justice (DOJ) Antitrust Division announced in late April 2009 that it was investigating whether the settlement agreement is, as some critics charge, an agreement that will unreasonably restrain trade or create a monopoly that would enable Google to extract monopoly rents from the books and further entrench Google's dominance in the search market.

Antitrust analysis generally starts with a definition of the affected market. The market for digital books is currently rather small, but it is growing. Many predict that it will become a major market in the future. Clearly, Amazon and Barnes & Noble, as well as Google, can negotiate with rights holders of in-print books to make these books available in digital form (although the settlement would give Google the right to scan the books first and negotiate later). Google argues that Amazon and other digital booksellers can also license rights to sell digital books from the BRR. And of course, anyone can sell or give away public domain books...

My concerns about the competition-policy consequences of the settlement center on the market for institutional subscriptions. The settlement gives Google the right to have and make available the contents of a universal library of books. Anyone else could build a digital library with public domain books and whatever other books it could license from publishers or BRR. But no one else can offer a comparably comprehensive institutional subscription service because only Google has a license to all out-of-print books. Google's optimistic estimate is that only 10 percent of the books in the corpus will really be "orphans," but 10 percent is still roughly two million books. Suppose the real percentage of orphans is closer to 30 percent and another 20 percent of those whom BRR tries to sign up tell the BRR reps to get lost...

Under the Bush Administration, the DOJ would likely have done nothing about the GBS settlement. But the Obama Administration takes antitrust seriously. We will know very soon what DOJ plans to do, for the judge presiding over the settlement agreement has asked DOJ to report on its antitrust analysis by September 18."

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