Amazon clearly don't care about their profit margin at this point in history; they care about their market share. The more books they sell, the more their corner of the garden grows. It's enclosure, with the hedges being their DRM ecosystem. So yes: they'll sell ebooks at a loss in order to force the value of ebooks down and make Kindle the only game in town. At a certain point, they'll have run out of publisher margin to squeeze and start squeezing author margin so that they can actually start making money, and they'll do this in relative peace and quiet because the DoJ isn't looking out for anyone but consumers, who want to pay basically nothing.
This is the argument we've been making forever, and hey, check out Amazon subsidiary Audible lowering royalties for publishers of audiobooks recently...
Assuming Hachette gets what they want, presumably the agency model, what's to stop Amazon from cutting the percentage the publisher receives? What's to stop the publisher from setting their books at $14.99 at Amazon, and $4.99 at BN? When exactly has the producer/publisher/creator been able to set the retail price as they see fit? As a retailer, cutting prices is perfectly within Amazon's rights.
The big five charge too much for an ebook, pricing them within cents of print editions. That's bullshit, plain and simple. They don't have shipping costs, warehousing costs or printing costs. So when you're talking about pushing prices down, that isn't a bad thing when consumers are being ripped off.
Publishers can't survive on .99 titles, I get that. Anything under $4.99 probably isn't profitable enough for the big dogs, especially for newer titles. It's a problem when you start asking $14.59 for an ebook when the print version goes for $14.99.
EDIT: As a future self publisher, I'm not raving about Amazon. Quite the opposite. I think the select program has the potential to be damaging, given the terms that require exclusive rights. I think it's important to expand the distribution of your titles into Itunes, Kobo, and Nook. I understand that so much power in the hands of one entity isn't ideal, but Amazon isn't doing anything wrong in my eyes. They're just the best at the game, and I think the problems the Big Five are facing with Amazon is a battle they've created by deeply over-valuing their electronic products in an attempt to slap a bandaid on their print sales bleeding.