The Policymaker's Playbook

Market Failure Analysis

The ebook licensing market exhibits classic market failure: information asymmetry (publishers set terms unilaterally), barrier to exit (vendor lock-in), and monopolistic control (OverDrive holds 95%+ of library market). In a functioning market, libraries would switch vendors, negotiate collectively, or build alternatives. Instead, they're trapped.

Why? Because copyright law gives publishers absolute control over digital distribution. The First Sale Doctrine, which creates a functioning used book market and enables library lending, doesn't apply to ebooks. This legal asymmetry (absolute control for digital, limited control for physical) was not an accident. It was explicitly designed into the Digital Millennium Copyright Act (1998) and reinforced by court rulings like Vernor v. Autodesk (2010).

The market failure manifests in public harm: readers lose access to affordable books, libraries shrink digital collections due to unsustainable costs, school systems with low budgets can't compete for ebook access, and consolidation eliminates alternatives. Yet traditional antitrust analysis misses this because the market appears competitive at the publisher level (Big Five + many indie authors). The harm is invisible in standard market metrics.

Standard economic solutions (price controls, antitrust enforcement, entry barriers reduction) don't apply in a copyright-controlled market. You need policy intervention at the copyright level itself, which means Congress must act, not regulators.

Why State Laws Failed

Maryland tried. House Bill 518 (passed 2021, effective January 2022) required publishers to offer ebook licenses to public libraries "on reasonable terms." It was a moderate approach: no price controls, no prohibition of embargoes, just a requirement to make ebooks available to libraries on reasonable terms.

Publishers sued immediately. They argued copyright law gave them exclusive distribution rights and state law couldn't override federal copyright. The federal district court agreed, striking down the law on preemption grounds. The publishers won without going to trial on the merits of their licensing practices.

Connecticut learned from Maryland's failure but took a broader approach. S.B. 1234 (May 2025) renders certain restrictive contract terms unenforceable, prohibits restrictions on interlibrary loan, bans secrecy clauses preventing libraries from sharing agreement terms, and requires publishers to offer commercially reasonable alternatives. It includes a trigger clause requiring other states with a combined population of 7 million to adopt similar measures before taking effect. Even this legislation faced fierce industry opposition.

The constitutional issue is real: federal copyright law preempts most state-level attempts to regulate digital licensing. States can regulate publishers' business practices in other domains (labor law, consumer protection) but not copyright-licensed goods. This creates a perverse incentive: copyright holders can escape state law by claiming federal copyright authority.

The lesson: state-level solutions are structurally limited. Federal action is necessary. Congress must either amend the Copyright Act to restore library rights or create new federal legislation explicitly authorizing library licensing regulations that would survive preemption challenges.

Emerging Solutions

Consumer Protection Angle: The Federal Trade Commission has authority to challenge unfair or deceptive practices. OverDrive's deletion of MP3 audiobooks without notice to libraries purchasing them arguably violates consumer protection standards. If the FTC's Section 5 authority were invoked, it could challenge platform practices that harm consumers (libraries) through obscure terms and unilateral changes. This doesn't require copyright reform; it requires aggressive consumer protection enforcement.

Antitrust Potential: OverDrive's 90%+ market dominance, combined with its deep integration with Follett's K-12 distribution through their December 2025 partnership, creates antitrust concerns under the Sherman Act. The DOJ could scrutinize the Follett partnership on antitrust grounds. However, traditional antitrust analysis focuses on price, not access. The harm here is access concentration, not price gouging. Antitrust action would need to expand its framework to address access-based monopolies.

International Models: The EU's Digital Markets Act (in force since November 2022, actively enforced since March 2024) designates large platforms as "gatekeepers" and requires interoperability, data portability, and fair access terms. While OverDrive likely wouldn't meet the DMA's revenue thresholds for gatekeeper designation, the regulatory model offers a template for library-specific platform regulation. Australia's News Media Bargaining Code (2021) forces digital platforms to negotiate with news media publishers; a similar model could require platforms to negotiate fairly with libraries. These models don't directly address copyright but create structural constraints that reduce monopoly power.

Library Technology Cooperatives: If libraries collectively built open-source ebook platforms and negotiated as a unified buyer, they could create countervailing power to OverDrive. This would require federal funding for library technology infrastructure: not copyright reform, but strategic investment in library capacity.

Actionable Recommendations

For Congress: Amend 17 U.S.C. § 108 to explicitly restore library rights to lend ebooks on the same legal footing as physical books. Specify that licensing restrictions that exceed the scope of the copyright grant (e.g., time limits, checkout limits, simultaneous user restrictions) violate the fair use rights of libraries as purchasers. This would require copyright reform but would be the most direct solution.

Alternatively, create a new federal law explicitly authorizing library licensing regulations that preempt copyright law. Model this on existing carve-outs within copyright law: the Chafee Amendment (17 U.S.C. section 121) and DMCA Section 1201 triennial exemptions allow circumvention of DRM for accessibility purposes. A "Library Access Act" could similarly create exceptions to copyright holders' claims to absolute control, requiring good-faith licensing on reasonable terms.

For the FTC: Investigate OverDrive's platform practices under Section 5 authority. Challenge the unilateral deletion of purchased content (MP3s), the exclusivity arrangements pushing publishers toward their platform, and the opaque licensing terms that effectively trap libraries. Use enforcement authority to create de facto fairness standards without waiting for copyright reform.

For the DOJ Antitrust Division: Block acquisitions that would further concentrate ebook distribution (e.g., if OverDrive were acquired by a larger tech platform). Challenge OverDrive's exclusive partnerships if they foreclose meaningful competition. The standard test should include not just price effects but access effects.

For Library Organizations: Form a collective bargaining entity to negotiate with publishers and OverDrive. Threaten to build open-source alternatives if licensing terms don't improve. Coordinate policy advocacy. Create funding mechanisms for technology commons that would outlast any single vendor.