Bookstore owner suing Amazon over alleged price-fixing scheme that makes it impossible for other retailers to compete

From The Chicago Sun Times:

An Evanston bookstore owner wants to take on Amazon.

Nina Barrett, owner of Bookends and Beginnings, signed on as the named plaintiff in a class-action lawsuit filed last week that accuses Amazon of orchestrating a price-fixing scheme with the nation’s leading book publishers that makes it impossible for other retailers to beat their prices.

According to the suit, contracts that Amazon has with the nation’s “Big Five” publishers — Penguin Random House, HarperCollins, Hachette, Macmillan and Simon & Schuster — block the publishers from giving other retailers better prices.

“I, along with most independent bookstore owners in America, feel incredibly frustrated because we’ve seen that the playing field is not level,” Barrett told the Sun-Times. “We have to talk to our customers all the time about why we can’t match Amazon’s pricing.”

. . . .

The suit, which was filed in New York, seeks to include all booksellers that bought books from the Big Five after March 25, 2017. It seeks damages and an injunction on the “anti-competitive” practice.

“It’s been very frustrating to watch the growth of Amazon and think, ‘Me, just little old me by myself, I can’t stop this, but I can see that it’s unfair,’” Barrett said.

. . . .

Attorney Eamon Kelly, who lives in Evanston and regularly shops for biographies at Barrett’s store, pitched Barrett to his fellow attorneys and then pitched Barrett, who said she “jumped on the idea.”

Barrett’s shop, with its alleyway entrance, is “a magical place to look at books,” Kelly said.

Barrett, 60, opened her bookstore in 2014.

The financial pain felt by her bookstore due to Amazon’s pricing is real, Barrett said, and would have been more acute during the pandemic if not for an online fundraising campaign that raised nearly $50,000, money her business received through the Paycheck Protection Program and the fact that a Barnes and Noble about a block from her store closed last year, funneling more customers her way.

She called Amazon a “juggernaut” and a “bully.”

“We think that being a place matters, that the browsing experience matters,” she said.

“We get up and battle and fight every day to make our business model work, and we do it out of passion. But no one of us would ever have the power to be able to take on Amazon,” she said.

Link to the rest at The Chicago Sun Times

The OP makes Ms. Barrett and her bookstore seem quite nice. PG is very familiar with Evanston and can report that it’s a pleasant tree-filled upscale university town on the shores of Lake Michigan filled with lots of people who have plenty of disposable income. If any location could support a traditional bookstore these days, Evanston could.

The OP didn’t mention whether Ms. Barrett buys the books she sells through a wholesaler like Ingram or not. At least some of Ms. Barrett’s cost of goods can be attributed to Ingram’s markup and shipping fees.

There are a lot of good attorneys in Chicago, although PG is not acquainted with any of the attorneys or firms named in the OP. If they’re not already familiar with the strange and expensive supply chain used by major publishers to get books to retail bookstores, they will certainly become familiar with it soon.

That said, regardless of how much some people think traditional bookstores “matter”, that doesn’t mean they will necessarily continue to be financially viable or have any sort of “right” to be viable.

All sorts of business that were common in PG’s youth are non-existent or effectively non-existent these days. More than a few businesses that have closed their doors during the Time of Covid are not going to reopen.

Perhaps the closure of the Barnes & Noble near Ms. Barrett’s bookstore was indicative that it had problems with a business model quite similar to the model Ms. Barrett is fighting to make work in her store.

17 thoughts on “Bookstore owner suing Amazon over alleged price-fixing scheme that makes it impossible for other retailers to compete”

  1. Nina Barrett, owner of Bookends and Beginnings, signed on as the named plaintiff in a class-action lawsuit filed last week that accuses Amazon of orchestrating a price-fixing scheme with the nation’s leading book publishers that makes it impossible for other retailers to beat their prices!
    According to the suit, contracts that Amazon has with the nation’s “Big Five” publishers — Penguin Random House, HarperCollins, Hachette, Macmillan and Simon & Schuster — block the publishers from giving other retailers better prices.
    ———-
    Riiight!
    Why would any business give better terms to a hole in the wall that might move one item a week than to the channel tbat moves half their product? One that returns 25-50 of the product they take *on consignment* over one that returns almost nothing?

    All the hole in the wall bookstores combined (~1000?) move less than 5% of the trade books.
    Amazon moves 50-60%, more for some publishers. They stock maybe 30-50,000 titles. Amazon stocks over 5Million. Yeah, they matter more.

    They don’t understand their beef isn’t with Amazon but with the publshers’ volume discounts, a policy that predates Amazon.

    https://www.baltimoresun.com/news/bs-xpm-1994-05-28-1994148091-story.html

    Note that they settled out of court after three years. And since then three quarters have gone away, including Borders and most of B&N because nothing changed.

    They’re just angling for a payout, somehow thinking the current administration will be more hostile to Amazon than the last.

  2. It doesn’t matter if the bookstore is large or small, there is no mechanism that lets a bookstore today match what Amazon can do at scale.

    – There is no chance that the case will ever go to trial.

    I have to wonder who is paying for this boondoggle, because no firm can self-finance it, and the bookstore owner doesn’t have that kind of money. I suspect that it’s some billionaire trying to manipulate the Amazon stock price so that they can short the stock.

    I was born in 1956 and watched as small bookstores were scattered here and there around town. Books were everywhere in spinner racks; grocery stores, Circle K, 7-Eleven, so actual bookstores were unique. They would exist as long as the owner was happy to run the bookstore. They were able to exist because books and magazines were distributed nationally by companies that moved vast amounts of books into a store, then ultimately out to a dumpster with the covers stripped off for recycle.

    – Books were treated like produce that spoiled.

    Think about that. At the end of each supply chain were dumpsters filled with stripped mass market books for recycled paper. The system was not designed to get books to readers, it was designed to feed that distribution system — a few books actually sold — to ultimately feed the recycled paper industry.

    – Think of a baleen whale, filtering out krill to feed itself.

    Feeding that flood of books out to the stores lead to a kind of frenzy on the publisher side where they just shoveled as much “produce” into that distribution system as they could get away with. They would have as many writers as possible pumping out books to feed that voracious system.

    When the mall stores like Borders took over, the publishers could no longer dump vast numbers of books into the system. That flood of books cut off, and instead of books being everywhere, grocery stores, Circle K, 7-Eleven, etc…, they were cut down to only big towns with malls, with not enough people to buy what was in the bookstore.

    When you get the chance wiki the stores to get an idea of what was happening.

    wiki – B. Dalton
    wiki – Waldenbooks
    wiki – Borders Group
    wiki – Barnes & Noble

    I used to buy six books every Saturday at an independent bookstore. In addition to that weekly harvest, each quarter I would fill a small hand-basket with about 30 books. That literally works out to about 400 books a year. As soon as the distribution system collapsed I went down to a couple of dozen books a year, all from Barnes & Noble. The independent store I favored suddenly had shelves mixed with new and used, with almost no new books coming in.

    Before the crash, I would see shelves filled with dozens of copies of the same new book, trying to sell as many as possible before the remainder were stripped for recycle. At one point they doubled the price of mass market books because they knew that for every copy sold, they would strip another, so they were trying to make you pay for two books, while only getting one. Then they doubled the price again. That desperate tactic lasted for just a few years, and the reduction in sales helped tip the system over.

    Before the crash, I was following huge numbers of authors. Most of them simply vanished after the crash. Most new books never made it to the local bookstores. In the 2010s I found some of the authors on Amazon that I had completely missed, and proceeded to buy everything they put out in those lost decades, but most of the writer’s I used to track simply vanished.

    I have not been able to find a real discussion or history of that system of book and magazine distribution. They were so ubiquitous until the were not. The only other example was the collapse of American News Company in 1957.

    wiki – American News Company

    Publishers either went out of business or went to the independent distributors which then collapsed in the late 1990s when the big stores like Borders bypassed the distribution system and had publishers ship direct.

    The mall stores like Borders could have kept going for decades, but the concept of a REIT has made it impossible for any low margin business to survive when they do not own their own building.

    wiki – Real estate investment trust

    A REIT makes its money from their stock price. The stock price is based on the physical rents going up and up, despite what the local area can support. Mall-stores go out of business, and are replaced with another store that is willing to pay that initial starter price, then leave when the lease price goes up on renewal.

    REITs are a cancer on the system. They almost got taken out during the 2008 financial crash. I remember seeing a bizarre episode on the Nightly Business Report showing the owner of the largest REIT — controlling most malls — as a little old guy just barely making a living. Watching the episode I said to myself, “Right, I believe that.” HA!

    BTW, In the stuff I write, I have independent bookstores where people go to buy POD books direct, there is no Amazon. People go there, use book kiosks to create their own books and put them into the system. Those bookstores are not in malls, not subject to the cancer of REITs, and with no stock to recycle like produce.

  3. I’m sure the legal eagles can cite plenty of law school approaches but from a common sense, business focused look, those folks have been inhaling.

    The law that gets invoked by tbe ADSers is Pattman-Robinson. Straight from tbe FTC:

    https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/price-discrimination-robinson-patman#:~:text=Price%20discriminations%20are%20generally%20lawful%2C%20particularly%20if%20they,a%20seller%27s%20attempts%20to%20meet%20a%20competitor%27s%20offering.
    ——-
    Price Discrimination: Robinson-Patman Violations

    The Supreme Court has ruled that price discrimination claims under the Robinson-Patman Act should be evaluated consistent with broader antitrust policies. In practice, Robinson-Patman claims must meet several specific legal tests:

    The Act applies to commodities, but not to services, and to purchases, but not to leases.
    The goods must be of “like grade and quality.”
    There must be likely injury to competition (that is, a private plaintiff must also show actual harm to his or her business).
    Normally, the sales must be “in” interstate commerce (that is, the sale must be across a state line).
    Competitive injury may occur in one of two ways. “Primary line” injury occurs when one manufacturer reduces its prices in a specific geographic market and causes injury to its competitors in the same market. For example, it may be illegal for a manufacturer to sell below cost in a local market over a sustained period. Businesses may also be concerned about “secondary line” violations, which occur when favored customers of a supplier are given a price advantage over competing customers. Here, the injury is at the buyer’s level.

    The necessary harm to competition at the buyer level can be inferred from the existence of significant price discrimination over time. Courts may be starting to limit this inference to situations in which either the buyer or the seller has market power, on the theory that, for example, lasting competitive harm is unlikely if alternative sources of supply are available.

    There are two legal defenses to these types of alleged Robinson-Patman violations: (1) the price difference is justified by different costs in manufacture, sale, or delivery (e.g., volume discounts), or (2) the price concession was given in good faith to meet a competitor’s price.

    The Robinson-Patman Act also forbids certain discriminatory allowances or services furnished or paid to customers. In general, it requires that a seller treat all competing customers in a proportionately equal manner.
    —-

    Three problems with crying wolf:

    – Volume discounts are expressly exempted
    – The seller is to treat all customers *proportionately*, not equally. (And thrxe guys want lower prices for them, presumably to offset their higher operating costs.
    – The act applies to *purchases*. ABA stores are effectively consignment shops; during the Borders implosion the publishers claimed they owned the books, not Borders.

    Finally, their obsession with price misses the whole point that is rendering them obsolete: catalog size. A comment I saw on another recent post about yet another bookstore lawsuit pointed out that during the Agency conspitscy, all ebookstores, big and small had the exact same pricing on the same BPH books and consumers overwhelmingly went to Amazon because of catalog size and convenience.

    These folks are barking up the wrong tree: matching Amazon pricing on everywhere books isn’t going to help them any because Amazon’s domination doesn’t come from everywhere books. It comes from their deeeep backlist, Indies, and the very APub books they refuse to carry. Plus ebooks.

    I could conceive of a case being made over KU (flimsy but not open-and-shut) but not over BPH pbooks.
    Not when the BPHs refuse to deal with a tbousand small shops and let Ingram deal with them.

    I could also see all this price-focused suits getting consolidated and Amazon throwing the BPHs under the bus by invoking volume pricing and the agency conspiracy as the justification for the MFN clause. That would be fun.

    • With all due respect to the thoroughly undermined FTC staff who wrote that “summary,” Felix, their hands are partly tied by a relatively recent Supreme Court decision that reversed a century of well-settled antitrust law under the influence of voodoo economics. Leegin Creative Leather Products (a 2007 decision) held that a resale price maintenance agreement — where a vendor requires distributors and retailers that want to carry those products to maintain a minimum resale price — is not a per se violation of antitrust law. Despite a century of antitrust law and experience holding that it is.

      And with that bit of mushroom growing in the cracks in the pavement… price maintenance and price discrimination since then has been Interesting, as Judge Côte’s decision in US v. Apple makes plain.

      Even that FTC summary, though, implies things about antitrust law that are correct only insofar as they relate to government action; private parties have slightly different parameters. In particular, private parties don’t need to worry about partisan opposition…

      None of which is to say that the law doesn’t require an attitude adjustment with the business end of a 2×4.

      • Wouldn’t a private antitrust case have to prove Amazon is targeting them specifically? Or that they are both competing in the same market?
        Both would seem to require a really big leap of faith.

        As pointed out by Allynh this specific suit isn’t likely to get far but what if it does and Amazon’s answer includes a breakdown of sales highlighting their volume of APub and Indie sales? Books the B&M stores *refuse* to carry. Plus deep/broad backlist. Plus used. Plus POD. Plus digital.

        We don’t really know how much of Amazon’s market power actually overlaps with the B&M stores and the everywhere books. I’ll take a guess and suggest the paintiff stores aren’t actually competing for those sales. 😉

        Relevant market matters to private antitrust, too, one presumes?
        On the macro scale we know MS moves a dominant share of all trade books but we don’t know the composition of their sales. The suits are over BPH titles and 10 years ago the BPHs were a major part of Amazon’s business but Amazon has spent a decade diversifying their book sales.

        Too bad they can’t trot out Judge Penfield Jackson again.

        • A large part of the problem is defining the relevant market; it always is. For example, the FTC has no jurisdiction over business-to-business transactions, so if the market is defined as “publisher to distributor” the FTC can’t get involved… which, if you look at the disintegration of the book-distribution system in the late 1980s and early 1990s, begins to become extremely predictable if you knew anything about the FTC staff’s more-successful decade-long war against political appointees, compared to the DoJ Antitrust Division.

          The real danger here is either too broad a market (“volumes of text”) or too narrow a market (“translated literary fiction authored by dead white guys,” a/k/a/ the “Classic Literature” section of a certain B&M chain). I don’t claim to have answers here; I can predict, however, that the lawyers are gonna get it wrong. They’ll get it wrong if only because there isn’t a publishing industry on which to base their market definition; there’s the bastard offspring of a three-centuries-long orgy among thirteen distinct “industries” that all call themselves “publishing.” At best.

          • You’ve said this before (your last sentance) but for the ignorant like me can you explain these 13 distinct industries, or at least point to some on line document that does so?

            • No references not on paper or behind paywalls, I’m afraid. Unfortunately, that’s the nature of a lot of historical research and criticism; the eighteenth century is very much an underdigitized era…

              An analogy might help: Is Harley-Davidson a competitor in the same market as Chevrolet? Well, they both produce gasoline-powered wheeled vehicles, right? That’s about as close as things get for publishing; now throw in that the analogy to “publishing” also includes wheeled agricultural combines…

              The real distractor is conglomerated ownership. Consider, for example, a mid-sized publisher that is serving four distinct markets: Educational, Postsecondary educational, Periodical, and Trade Specialty Nonfiction. Those are not comparable markets; they’re not the same industry; I used to work there.

              • Okay, here’s a few off the top of my head, based on customer type and fungibility. 😉

                1- Catalogs
                2- Newspapers and advertising
                3- Comics
                4- Manga
                5- Chapter books
                6- K-12 textbooks
                7- Higher education textbooks
                7- Academic journals
                8- Professional references (Westlaw, etc) and post-Encarta encyclopedias
                9- Repair manuals
                10- Consumer non-fiction
                11- Genre fiction
                12- Religious books
                13- Vanity presses 😉

                There’s also this:

                https://www.printmag.com/post/duolingo-brings-back-bathroom-reading-with-new-toilet-paper

                😀

                I’m sure the official listings are different but I think the point stands that putting ink on paper for information transfer has many ways of making money, with different leaders in the various categories and different balances of power in each segment. Some are fading, some are evolving, many are way more profitable than trade publishing. Similar breakdowns exist all over the world.

                Finally, there is one last publisher that doesn’t fit any of those categories but is by far the single largest publisher in tbe US, possibly the world: The USGPO.

                Even if we only focus on the B2C side the BPHs are only a ffaction of the segment which is why, up to now, the authorities just shrug off trade publishing consolidation. It matters little if the randy Penguin moves 25% or 30% of trade books and even less that Amazon might sell half of that one category. There’s plenty of fish in that ocean and many are sharks and orcas.

          • Not only are there many different markets bundled into the media’s catch-all “publishing” many of those have multiple supply chains. Which might explain why it’s off limits to the FTC.

            One of tbe bigger issues with the OP’s subject is that it’s stated concern (MFN) has no bearing on the fate of the plaintiff. It might if it were Nook, BAM, Half-Price or some other retailer that gets their books direct from the BPHs, like Amazon, but the plaintiff’s book costs are set by INGRAM. Whatever Amazon pays has no bearing on that, does it?

            The lawsuit strikes me as akin to a pushcart hotdog vendor complaining that Pepsico charges less to Yum brands for syrup than their distributor charges them for canned soda. (And no, the products aren’t same. Neither is the “product” Amazon buys–books at the publisher’s dock– vs returnable books delivered to a storefront.) Its mangos to Oranges. No Apples involved. 😉

            Strange things happen in courthouses but I don’t expect a good outcome for a lawsuit filed in NYC vs NYC Publishing. But maybe it’s just me.

            It’ll be amusing to see how long it lasts.

  4. Specialty stores have been in decline for many years. Bookstores are simply specialty stores that feel they are more special than all the others.

    Cities used to be filled with independent butcher shops, mens stores, shoe stores, small hardware stores, pharmacies, hobby shops, and bookstores. They all still exist, but in far smaller numbers.

    Bricks and mortar retail was consolidating before anyone heard of the internet. When the internet arrived, consolidated bricks and mortar had to try even harder, putting even more pressure on the independent specialty stores. Some trends cannot be stopped by anything. This is one of them.

    The OP says, “We think that being a place matters, that the browsing experience matters.” It does, but not for enough consumers.

    • Part of the reason that independent bookstores are under that impression is that they sell “literature” and “ideas” and do not merely engage in commerce, but help support the cultural life of the nation.

      YMMV on the degree to which this self-image bears any resemblance whatsoever to reality, but the fact is that any independent bookstore owner is going to have to rely on their ability to read the local market and offer better book recommendations than Amazon or Abebooks, not getting in on pricing deals.

      • And how many book buyers actually walk up to the cash register asking for literary recommendations?

        Knowing the local market is a real thing…
        …for niche bookstores. Easy to accept genre specific specialists or for ethnics studies, christian, etc, stores living off big universities but those are few and far between and don’t depend on the BPHs and everywhere books like the ones whining about pricing.

        What they talk isn’t what they live, much less what they’re suing over.
        Pure delusion.

        • I don’t go up to the register and ask, but I will look at what the store is putting on display and what’s on the shelves. If they have stuff I want to buy, I’ll be a repeat customer. If they don’t, then I won’t be.

  5. The primary firm filing suit is the exact same law firm that won the mega-settlements against Apple and the Big 5 back in 2013. Whether they prevail this time remains to be seen but I’m pretty certain they have an in-depth grip on how the business works.

    • Uh, no.
      The settlements were won by the DOJ and the State AGs, based on the smoking gun evidence they uncovered. The ambulance chaser lawsuits had no effect.

      And any lawsuit that seeks to equate the Amazon book supply chain to the independent store’s supply chain shows a serious lack of understanding of the retail business. Or, an agenda that has nothing to do with bookselling. I’m betting on the latter: it is far from unheard for lawyers to take on loser cases looking for standing to appeal all the way to SCOTUS, hoping to overturn precedent.

      We’ll know soon enough.

      • The supply chain is only a part of the picture. Even if the independents had the exact same price per unit at their loading docks as Amazon does at their loading docks, the unit cost of sales for the independent is massively higher.

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