Is this an illegal tie?

Amazon has told publishers that they have to use its in-house POD [Print On Demand] services. Publishers dont like it:

As you probably know, Amazon.com purchased POD publisher/printer Booksurge a few years ago. Since then, they have contacted us from time to time about listing some titles through Booksurge. We had used Booksurge a few times in the past and were not happy with the print quality of the books. So we always politely passed on the various offers and went about our way using Lightning Source (LSI) as our printer (and having the books distributed through Ingram, owner of LSI).

Despite ownership of Booksurge, Amazon continued to order print-on-demand titles through Ingram/LSI (LSI even drop-shipped the books for Amazon). So everything worked smoothly until last week, [when they told us that] only print-on-demand softcovers and color books that were printed by Booksurge would be available directly through Amazon in the future.

Is this tie illegal? Here is the answer from a colleague at ERSGroup.com:

In most circuits, a rule of reason finding against the defendant requires 4 elements:

1. Market power in the tying good. (Plaintiffs can meet this by showing that the defendant has more than a 30 percent share of the tying market.)

2. Purchase of the tying product is conditioned on purchase of the tied product.

3. The tying and tied products must constitute separate products (no left shoe/right shoe).

4. A not insubstantial volume of commerce. (Courts have used a very low threshold for this.)

In most circuits a 5th factor is required to make a per se case:

5. The tie has (or will likely) adversely affect competition in the tied product market.

Here the tying good would be on-line sales of books and the tied product would be BookSurge. If the plaintiff could show that Amazon has market power in the sale of on-line books, the plaintiff would have a pretty good chance. (This requires a market definition that excludes brick and mortar stores.) Also, if there is a dangerous probability that competion [is lessened] in the tied product market ("POD books"), the plaintiff could very well make a case that this is a per se violation.

Humor: job market in 2010

No kidney shortage in Iran

Iranian kidney vendors are paid in two ways.

1. the Iranian government provides a fixed compensation to the vendor of approximately $1,200 plus limited health insurance coverage, which currently extends to one year after the exchange and covers only conditions deemed related to the surgery
   
2. the vendor receives separate remuneration either from the recipient or, if the recipient is impoverished, from one of a series of designated charitable organizations; this amount is usually between $2,300 and $4,500

Casinos paying rivals to keep out

A recurring topic on this blog is companies' trying to make the rules to control competition. If you can't beat the competition, a good strategy is to try to keep them from competing at all.

Here's a short story from Business Week about Atlantic City casinos. Their business has been dropping off thanks to new slot machines at horse racing tracks in Pennsylvania and New York. So, what are the Atlantic City casinos doing to try to stop slots at New Jersey tracks?

A group of operators, among them MGM Mirage and Harrah’s, recently agreed to pay the state’s big horse tracks a total of $90 million over three years to keep slot machines out of the venues.

What would Obama and Clinton do?

Two video interviews from Bloomberg. My synopsis:

• Obama wants to prevent house prices from falling further and give bankruptcy judges discretion to rewrite mortgages which he thinks should restore "confidence" to credit markets. Wants to extend build "new regulatory systems" for investment banks
  
• Clinton is much more concrete, promising to "freeze" foreclosures and bail out homeowners directly. Admits she doesn't understand the new securities, but nonethless thinks we need "greater" regulation.
  

Neither of them thought that house prices have to fall in order to make the housing markets clear so the credit markets clear.

DISCLAIMER: I am supporting McCain.

Test for Dem's

Even the NY Times wants a trade deal with Columbia:

Delaying the approval of the trade agreement would be convenient for Democrats in Washington. American labor unions and human-rights groups have made common cause to oppose it this election year. The unions oppose the trade agreement for traditional protectionist reasons. Less understandable are the rights groups.

...Perversely, they are harming Colombian workers in the process. The trade agreement would stimulate economic growth and help all Colombians.

Opportunity cost "predicts" housing market has not yet hit bottom

In equilibrium, consumers should be indifferent between renting and owning. Using this idea, John Mauldin thinks we are still 16% above the bottom.

Unions are bad for your health

Striking unions in Naples recently brought trash collection to a halt, prompting people to burn their trash, which in turn released dioxins into the air, a class of chemicals that cause cancer. Now we learn that samples of mozzarella cheese were found to be tainted with dioxins. Japan and South Korea have already banned the cheese, and the EU could follow. Domestic sales have already fallen by 30-35% in the days since the story broke, Dow Jones Newswires reports.

Are banks over reacting to risk?

Spreads between mortgage rates (prices) and risk-free treasury bills (costs) is getting really big:


It doesn't seem that this spread between prices and costs could be explained by increased risk. The Volatility Index (invented by colleague Bob Whaley) which measures the implicit risk in options prices (the higher the options price, the bigger implied risk) hasn't risen nearly as much. The expected annual change in stock prices is now 26%.

Good news for fraudulent lenders

Your victims may not even know they have been defrauded:

The large majority of respondents did not understand interest compounding and other debt calculations and did poorly on the questions. For instance, more than half of respondents did not understand how minimum payments are calculated and applied to a principal balance, and almost none understood the financial difference between paying in installments or paying in one lump sum at the end of a time period.