An Evanston, Illinois bookstore alleges Amazon.com and the Big Five publishers in the U.S. have conspired to constrict competition in the market for print trade books.
The 48-page antitrust lawsuit alleges Amazon, Hachette Book Group, HarperCollins Publishers, Macmillan Publishing Group, Penguin Random House and Simon & Schuster have wielded highly restrictive contractual mechanisms called “most favored nation clauses” (MFNs) in their distribution agreements with booksellers to ensure that no rival is able to “differentiate itself” from the companies when it comes to the price or availability of print trade books, i.e. titles other than reference and academic books.
In general, the complaint says, MFNs entitle a buyer to the lowest price or best terms that the supplier offers to another buyer, but when coupled with Amazon’s market dominance, MFNs “serve an anticompetitive purpose” that controls the wholesale price of print trade books, destroys Amazon’s retail competition, reduces consumer choice and creates “disincentive” among booksellers to compete on prices and non-price promotions, the plaintiff alleges:
“Defendants employ a comprehensive set of unreasonably restrictive MFNs that cover virtually all aspects of competition between booksellers to ensure that no rival bookseller can differentiate itself from, or otherwise compete with, Amazon in the sale of trade print books at retail. These provisions include price and product availability. They have the intent and effect of controlling wholesale prices of print trade books and preventing competition with Amazon in the retail sale of print trade books.”
The lawsuit posits that while it would increase the Big Five’s distribution and therefore be in their best self-interest to let Amazon’s rival booksellers gain market share by offering them lower wholesale prices of exclusive early releases, Amazon’s contracts with publishers go above and beyond when it comes to covering every potential avenue a competitor might use to stand apart from Amazon, who’s responsible for the sale of about 90 percent of all books sold online. According to the suit, the Big Five, to reign in wholesale prices, have agreed with Amazon to “anticompetitive restraints” that have prevented the plaintiff and other booksellers from competing with the e-commerce behemoth.
Ultimately, the defendants’ conduct has erected a near-insurmountable barrier to market entry for new booksellers and hindered the expansion of existing competitors in the retail market for the sale of print trade books, the complaint alleges. Per the case, the plaintiff and other booksellers have, as a result of the defendants’ conduct, overpaid for books bought from the Big Five publishers at wholesale with no offsetting competitive benefit for the high price, such as exclusive sales, special editions or early releases.
In addition to the apparent harm the defendants’ MFNs have caused to the booksellers for print materials, the lawsuit alleges consumers have also come to feel the effect of the lack of competition given the degree and scope of Amazon’s dominance in deciding “what books consumers will encounter, and to pick which publishers, authors, and creators will be the winners and losers.”
“The harm [MFNs] cause to competition and consumer choices is precisely what federal antitrust laws are intended to address,” the suit says.
The lawsuit goes on to call the defendants’ alleged use of MFNs “astonishingly brazen” in light of repeated investigations into the companies’ conduct with regard to competition in the book-publishing industry. Most notably, the Big Five publishers conspired a decade ago with Apple to raise trade eBook prices by way of MFNs, the complaint says, which produced concurrent federal and state investigations in the United States and by the European Commission’s Directorate General for Competition.
Per the proposed class action, Amazon and the Big Five’s MFNs “not only mirror but expand the illegal price restraints used in the Apple conspiracy and ensure that no rival retail platform can differentiate itself from, or otherwise compete with, Amazon.”
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