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Barnes and Noble, Microsoft and What the Nook Does to the DOJ Case Against Apple

This article is more than 10 years old.

You'll have heard the news that Microsoft has agreed to invest in Barnes and Noble's Nook business, creating a new subsidiary and taking the fight to Amazon and Apple.

Well, excellent: but this does now throw a little light on the Department of Justice's case against Apple and the five major publishers.

They're accused of colluding in order to create a cartel which would work against consumers of e-books. The details of the case and even whether they were or not don't concern us here.

There was also the earlier concern that Amazon itself was carving out a near monopoly in the e-book space. Which is where we come to a little bit of economic theory.

It doesn't actually matter if someone does have a monopoly. No, really, it doesn't. Yes, there are very definitely downsides to it, from the consumer side, if someone exploits a monopoly that they have. But exploiting a monopoly and having or being one are not the same thing.

The crucial concept is "contestability". If that monopoly is contestable then the monopolist won't exploit it and thus it doesn't matter.

And we can clearly see that the e-book market is indeed contestable. Amazon looks like getting a lock on it and Apple steams into the market. Then we get Microsoft and Barnes and Noble entering it too. And I've no doubt that other companies, Facebook say, could create a pretty good e-book offering if the mood took them.

That the market is still, obviously contestable means that we really don't have to worry very much about anyone being able or even trying to corner it. Because even if they do they can't exploit the consumers having done so. For it's just too easy a market to contest.