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Why There Can Never Be a Competitor to Google Books

Publishers are about to grant Google monopolistic pricing power and permanent exclusivity over countless “orphaned” works.
October 18, 2010

Here’s one more way Google is the new Microsoft: the U.S. Department of Justice thinks Google is a monopolist, at least when it comes to Google Books. That’s why the DOJ is publicly expressing dissatisfaction with a revised settlement between Google and publishers, a settlement it says will never allow for a competitor to Google Books.

cc Jim Barter

To understand why this is so important, you have to appreciate the ambition of Google Books: not only will it eventually offer a searchable index of every book ever printed, it will also offer many of those books for sale, with the revenue split between Google and publishers. In other words, as ebooks proliferate, Google Books is a potential ebook selling behemoth.

In a recent article in the Stanford Technology Law Review, legal and economic scholar Eric M. Fraser extracts from the 140 page settlement–which is still under review by the DOJ and has yet to be approved–a number of gems. Here’s the bottom line:

- The settlement allows Google to sell copies of works that no other organization in the U.S. can sell: so-called “orphaned” works where the original copyright holder cannot be located because, for instance, they went out of business, of poor record-keeping or mergers. This could eventually constitute the bulk of Google Books. As Fraser puts it, “No other firm has ever been able to legally copy orphan works.”

cc Danny Sullivan
- The settlement allows Google to do things that no one else can reasonably expect to ever be able to do. That’s because the only way any other potential competitor for Google Books could reach the agreement it has with publishers–a class action agreement that gives Google default rights to all books ever published in the U.S. unless the holder of their copyright contacts Google to opt out–would be for that competitor to do what Google did: illegally scan the books and then hope for a good outcome when slapped with a class-action suit by all the country’s publishers.

- This means that under the current settlement, there is no reasonable expectation that a competitor to Google Books will or could ever arise. Because Google will be allowed to set prices more or less in collusion with publishers, this will give Google no effective competitors in this space. Google will be a de-facto monopoly. “The parties to the actual lawsuit–Google on the one side and authors/publishers on the other side–all benefit from the settlement agreement because it enables collusive pricing,” Fraser said via email.

- As written, the current settlement allows Google to set prices for books that will ultimately be anti-competitive. Fraser: “When Google sets prices, it will solve the profit equations for all rightsholders simultaneously, which will lead to higher prices than if the competitors solved the equations independently and could not adjust the prices of their competitors’ products. In fact, concentrating pricing power in one organization would actually lead to the same prices as a forbidden cartel.”

- Here’s something Fraser didn’t address but I find particularly disturbing: as more and more libraries disappear, and physical copies of orphaned works become harder to come by, Google’s monopolistic possession of these works will only strengthen. Twenty years from now when e-readers are dirt cheap and we all take digital books for granted, if you find a book on Google Books, who is to say you’ll even be able to find a physical copy of it?

cc Mykl Roventine

Fraser closes his piece by noting that no one has yet to come up with a good solution to the problems with the Google Books settlement. But that’s precisely the issue: the vagaries of U.S. patent and copyright law mean that there are settlements, and these are apparently common in the world of pharmaceuticals, that essentially create or support monopolies that would have been impossible without those settlements. As a result, the Google Books settlement has implications not just for the future of books, but also for the future of U.S. prosecution of monopolies.

It’s also hard to say that Google Books, even if it’s a monopoly, isn’t a public good in and of itself. The original intention of the indexing project was, after all, to bring all the knowledge hidden in books onto the internet, where it can be searched and integrated into the great hive mind outside of which information is increasingly irrelevant and inaccessible. It’s unclear whether or not that will ultimately be good for readers–and not just publishers and the Registry that Google will set up to collect revenue for them.

Follow Mims on Twitter or contact him via email.

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