A group of independent college bookstores alleges in a proposed class action that a new program offered by major players in the textbook industry is part of a broader scheme to eliminate competition and “protect their historical price increases and stranglehold on the market.”
According to the 102-page lawsuit, the three leading higher-education publishers—McGraw-Hill Global Education Holdings, LLC; Pearson Education, Inc.; and Cengage Learning, Inc.—have conspired with retailers Barnes & Noble and Follett to capture the college textbook market by offering a product called “Inclusive Access.”
While the defendants purport that Inclusive Access affords students lower prices and greater access to course materials, the lawsuit claims the program has eliminated the option for many students to buy or rent used textbooks and more cost-effective course materials from other retailers, effectively putting independent bookstores like the plaintiffs out of business.
The Publishers collectively devised and agreed on a plan to force upon the market a product that must be purchased anew from the Publishers by every single student every single semester, thereby eliminating all substitute products, including the significant secondary market for Course Materials.”
All told, the suit claims Inclusive Access has allowed the defendant publishers and retailers to line their pockets “at the expense of financially-vulnerable college students and the Plaintiff Retailers.”
The Secondary Textbook Market
The lawsuit explains that, in the past, students have had many options for buying textbooks, e-textbooks, and other course materials. Retailers would purchase from publishers the course materials required or suggested by educators and then sell the products to students at competitive prices. Independent college bookstores such as the plaintiffs could offer students even lower rates by selling or renting out used textbooks and even buying back the books from students at the end of the semester for re-sale, the suit adds.
As the secondary textbook market flourished, publishers became concerned that more and more students were buying or renting used books instead of paying full price for brand new materials, the case explains. In response to declining revenue caused by this trend, the publisher defendants, the lawsuit says, began to offer “custom” textbooks or course material packages that the plaintiffs claim “hindered or made it impossible to acquire the Course Materials in a used or second-hand format.” Yet even with this workaround, independent, off-campus bookstores could still obtain access to course materials at the same price as other retailers and could continue to compete, the lawsuit explains.
Threatened by the competition, big publishers allegedly began devising a plan to eliminate the secondary textbook market by forcing students to buy new products each semester. The result, according to the case, is a program dubbed “Inclusive Access” that the plaintiffs claim does not live up to its name.
Inclusive Access Is Anything But, Suit Says
According to the complaint, the Inclusive Access program affords every student enrolled in a given course time-limited, online access to the course’s materials, which are provided by the publisher to the university. Each student, the case explains, is automatically charged for Inclusive Access materials, usually in the form of a “course fee” added to their tuition bill, and must visit the university’s exclusive on-campus retailer (either Follett or Barnes & Noble) to have their account “turned on.”
The lawsuit argues that although the content offered through Inclusive Access is “exactly the same” as what the publishers used to sell in print or digital format, the sole difference is an added limitation on access, as students have no way of retaining the materials after the course is over and can only purchase Inclusive Access from one retailer on campus.
According to the case, the publisher defendants have entered into exclusivity agreements with Barnes & Noble and Follett to only sell Inclusive Access through their on-campus stores. Similarly, the two retailers allegedly pay “millions of dollars” for exclusivity arrangements with the universities that allow the companies to operate as the only official on-campus bookstore at each school.
The result of this arrangement is that students have only one option when it comes to purchasing course materials, the case says. Although publishers claim that students can opt out of using Inclusive Access materials, the process to do so, according to the suit, is either nonexistent or “opaque, confusing, and difficult if not impossible to execute.”
Despite its name, the Inclusive Access product serves to limit students’ choices and completely shut out all other retailers besides Follett and Barnes & Noble, the plaintiffs argue.
“In reality, it should be called ‘Exclusive Access’ as there is nothing inclusive about it,” the case scathes. “Designed by collusion and agreement, the product specifically limits access to higher education course materials and is exclusive to the conspiracy’s members, resulting in the elimination of competition, the elimination of access to materials, universities, and students, and higher prices, among other anticompetitive effects.”
Case Claims Inclusive Access Yields Less Competition, Higher Prices
Although the defendants have convinced schools to adopt Inclusive Access by claiming it costs less for students, the lawsuit argues that this is a misrepresentation.
According to the case, publishers have compared the cost of Inclusive Access to their own baseline prices for textbooks instead of market pricing, which the suit says is often much cheaper. In truth, the suit argues, the defendants’ elimination of competition from independent bookstores will only give rise to increased costs for course materials.
Citing a recent study, the complaint claims the destruction of the secondary market will allow publishers to “enjoy profits 42% higher than under current conditions.” From the complaint:
The Publishers and the Defendant Retailers claim (and have in some cases convinced the Universities) that Inclusive Access will make Course Materials more affordable for all. But in fact, Inclusive Access has and will continue to raise prices and limit supply and access. The Defendants are actually implementing a collusive scheme to maintain their stranglehold on the industry while disguising it as reform. If the Defendants are not stopped soon, there will be no players left in the industry to reverse the damage they have caused.”
Who Does the Case Look to Cover?
The lawsuit looks to cover a proposed class of off-campus retailers in the U.S. who sold course materials to students at universities or online at any time since January 1, 2015.
The lawsuit can be read below.