Consumer Concerns about the Google Online Book Settlement Agreement

Considerable attention has in recent years been focused on consumer choice regarding platforms and conditions for accessing various kinds of content via the Internet. The main focus has been on the supply of Internet access networks – cable, wireline telco, satellite, wireless – from which consumers can choose as means to get to the content they desire. The implicit assumption of this focus on alternative networks has been that the provision of online content is subject to competitive market forces that empower consumers to choose from numerous options. Diversity, pluralism, multiple sources of supply, easy entry, low costs of production, competition, rivalry, and other indicia favorable to maximizing consumer choice and welfare in the domain of Internet content have in effect been assumed to exist.

That assumption may not be warranted in the future as it might apply to consumer access to copyrighted material – books online. The basis for our concern is the resolution of a class action suit that may well award – without regard for broader public interest, competition policy, privacy, consumer protection, transparency and other consumer concerns – exclusive and protected monopoly power to a single entity in the provision of copyrighted books online.

This ConsumerGram sketches out the basis for and some implications of these concerns.
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The set of available printed documents, many in library collections, has been accumulated and preserved at incalculable public expense over several centuries. Any reasonable assessment will grant that this is a valuable asset and one to which (subject to reasonable copyright protections) the public has a strong, legitimate claim to access. However, historic terms of access to copyrighted materials are being challenged in the context of new digital technology. The terms of access to large amounts of copyrighted material could be changed in ways that appear to create a private monopoly gatekeeper guarding and charging for access to an enormous body of printed works.

An Online Book Monopoly?!

First, some background. Google commenced in 2004 a highly publicized effort to digitize the base of printed knowledge. It focused on the holdings of research libraries. Building on their successful model for providing search results free to end users, while charging advertisers for access to users, they made the results available, including full text searching, at no cost to users, while generating revenues through advertising on Google Book Search. Some of the digitized books from which limited content was provided were protected by copyright. While not inconsequential, the cost of digitizing millions of volumes is miniscule relative to the incalculable public and private sunk costs previously incurred to make and keep the books available. Content costing billions and billions to produce, accumulate and store is in danger of being monopolized.

A collection of authors and publisher stakeholders claimed the Google book digitization initiative constituted wholesale copyright violations. They initiated a class action suit. After protracted negotiations, the parties late last year announced agreement and submitted the settlement for approval to the US District Court for the Southern District of New York. The settlement runs to 134 pages and 15 appendices. It is enormously complex and chock full of language intelligible only to copyright specialists, but the bottom line is clear: it effectively provides for creation of the world’s largest library, a digital library that would dwarf the Library of Congress plus all the national libraries in Europe. And, the plain meaning of its terms would effectively put that asset under exclusive control of Google.

The settlement creates an entity to represent selected copyright holders – the Books Rights Registry. The Registry is made up of rights holders, who are aware of the suit; who are a part of the class; and who decline to opt out of the settlement. All other copyright holders are excluded. The settlement enables Google to digitize material, primarily copyrighted out-of-print books in stocks from research universities; sell access to the material to institutional and public access licensees; keep 37% of the revenue; and remit the remainder to the Registry for distribution to rights holders. Individual consumers must access the material from licensed institutions or libraries, or purchase a license from Google. Copyrighted books in print will be available online only if copyright owners opt in to the settlement. Otherwise, they will continue to be sold as usual.

Some Public Interest and Policy Implications

There is widespread support for digitizing library works and making them easily assessable to the public via the Internet. However, the means for accomplishing this is debatable. On one hand, Google’s Book Search of digital works is a step forward in that would make, for the first time, centuries of published works available to the online public. As Professor James Grimmelmann notes:
“Everyone is better off than in a world where the alternative is no Google Book Search.”  (James Grimmelmann, full references below)

On the other hand, the settlement raises public policy concerns about making this library the property and vested control of a single firm, Google. Effectively, the settlement erects what appear to be insuperable barriers to entry for any future competitor who might be attracted by supernormal returns in the online book business. The settlement covers most book authors and publishers who own US copyrights. If they exercise their option to opt out, no future competitive book digitizer can enter and compete without obtaining their permission one by one – a requirement which on its face appears to be a practical impossibility. Or, a potential entrant might commence another class action suit, which if approved by the court – a process that could take as much as two years – would permit entry. The practical expectation is that entry will be effectively barricaded thereby protecting for the foreseeable future the award of Google control over the digitization of virtually every book covered by US copyright, as Robert Darnton University Professor and Director of the Harvard Library explains:

“[The settlement] takes the vast bulk of books that are in research libraries and makes them into a single database that is the property of Google … Google will be a monopoly.”  (New York Times)

At this point little is known about the likely Google pricing model for awarding viewing rights to different entities. The settlement language permits “…realization of revenue at market rates for each book and license on behalf of the rightsholders.” (Emphasis addeded)

Critics call attention to the provisions allowing Google to keep 37% of the revenue generated and permitting the company unfettered discretion to set market rates and fashion other terms of access. If the business model and pricing practices for Google Book Search resemble those for Google Earth, Google Maps, Google Images, Google Labs, Google Finance, Google Arts, Google Food, Google Sports, Google Health, Google Checkout, Google Alerts, and other Google enterprises, the price structure provide access on a tiered basis and will discriminate among advertisers based on ability and willingness to pay. One expert reflected on the proposed settlement as follows:

“Those restrictive terms foreshadow potential future restrictions on and tiering of their book search services. Well-funded libraries may pay a premium to gain access to all sources; lesser institutions may be left to scrounge among digital scraps. If permitted to become prevalent, such tiered access to information would threaten to rigidify and reinforce existing inequalities in access to knowledge and life chances. Such tiering divides society into two groups–those who can afford to access the information, and those who cannot. (Frank Pasquale)

In the context of a generally approving assessment of the agreement, a widely respected New York Law School professor and technologist warned:

“…in some areas, such as price discrimination and privacy, the settlement leaves the door open for Google to behave oppressively.” (Professor James Grimmelmann)

Consumers Value Access to Information

The value of consumer access to the Internet is derived from the value of the information they can obtain from such access. Competition in provision of access to information networks is important, but is trivialized to the extent that the information to be accessed itself is effectively monopolized. Indeed, the case for competitive network access is largely based on the assumption that information thereon is competitively available. The value to consumers of “neutrality,” “openness,” “fairness,” “freedom,” and “absence of discrimination” in the context of Information Pipes is of debatable consequence, if the Information Content to which access is assured is itself subject to monopoly whim unchecked by markets.

The public policy focus on Internet matters has concentrated on Information Pipes and market power in traditional forms of electronic media – radio and television. But, unless we are missing something, the threats of consolidation of market power, of exclusivity, of lack of competition, of lack of consumer choice, and related monopoly concerns in markets for information in copyrighted books is more troublesome and deserving of comprehensive scrutiny in a broad public policy context.

The settlement is typical of those in class action suits which, unlike the present one, do not for the most part raise serious questions of public policy. The Google settlement with copyright holders is an important exception inasmuch as the settlement does not address centuries of public interest related concerns about access to copyrighted materials; it does not reflect legitimate and serious antitrust questions; it does not address fundamental consumer protections; it does not address legitimate privacy concerns; it does not address transparency regarding editorial practices (when and why certain works are excluded); nor, does it address the propriety of “privatizing” assets accumulated at public expense. Finally, consumers are left to wonder, and fear, what precedents are being set here regarding rights to video, photos, art sketches, and other kinds and sources of content not covered in the settlement.

The critical question is: Are we prepared to permit the Internet to be used as an instrument for privatizing knowledge that now exists, and arguably belongs, in the public sphere? And, moreover, are we prepared to do so under conditions that practically award a monopoly franchise to a single company and thereby exclude the benefits of competitive market rivalry? And, are we content to allow this to occur in the context of a legal proceeding in which a variety of critical public interest concerns may not even be raised and need not in any event be considered by the Court? We believe most consumers would be concerned and disagree.

The public needs to speak up and oppose this deal. The interests of this and future generations of readers require a broad public debate, and not a judge’s approval of a settlement that appears to be a bad deal for the public. We hope the judge rejects the deal and policymakers move ahead with a solution that provides the massive benefits of a comprehensive digital library without the barriers and costs of monopolization.

Sources:
(1) Andrew Albanese, “Talking about Google Settlement, Publisher Cites Monopoly, Duopoly, and New Library Sales,” www.libraryjournal.com/article/CA6640464.html;
(2) Frank Pasquale, “Conditions for the Digital Library of Alexandria,” November 24th, 2007, http://madisonian.net/archives/2007/11/24/conditions-for-the-digital-library-of-alexandria/;
(3) Anon., “Google Book Search: The Good, the Bad and the Really Bad,” http://singularitylaw.com/copyright-law/google-book-search-the-good-the-bad-and-the-really-bad;
(4) Miguel Helft, “Google’s Plan for Out-of-Print Books is Challenged, New York Times, April 3, 2009, www.nytimes.com/2009/04/04/technology/internet/04books.html?_r=3&adxnnl=1&pagewanted=1&adxnnlx=1239987759-wqgWkt+lEBay6YUfijDHIw; and
(5) J. Grimmelmann, “Principles and Recommendations for the Google Book Search Settlement,” Nov. 2008, www.laboratorium.net/archive/2008/11/08/principles_and_recommendations_for_the_google_book.

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