Federal Judge Jed Rakoff has dismissed a lawsuit filed by independent booksellers against Amazon and the big six publishers that alleged a murky conspiracy to restrain trade via Amazon’s use of proprietary DRM in its Kindle e-reading platform. In his 18-page decision tossing the suit, Rakoff found that the booksellers’ core claim—that the publishers had engaged in a conspiracy with Amazon to keep rivals from selling e-books on the Kindle—had no supporting evidence, and no plausible motive.
“The evasiveness of this allegation is remarkable,” Rakoff wrote in dismissing the booksellers’ claim. “Plaintiffs do not allege an unlawful agreement, only vague ‘oral discussions or agreements regarding the use of restrictive DRM.’ Plaintiffs do not even allege that any such discussions or agreements actually occurred, only that they may have occurred. And plaintiffs do not specify who participated in these hypothetical discussions or agreements, only that they may have involved ‘one or more’ of the Publishers and Amazon.”
First filed in February by three named plaintiffs (The Book House of Stuyvesant Plaza of Albany, N.Y.; Fiction Addiction of Greenville, S.C.; and Posman Books of New York City), the suit also alleged a separate count of “monopolization and attempted monopolization” by Amazon, in violation of Section 2 of the Sherman Act.
Rakoff’s dismissal puts an end to one of the most puzzling lawsuits in recent memory. Indeed, while two of the then “big six” publisher defendants were still settling charges that they had conspired against Amazon in the e-book market, the booksellers’ suit alleged that the publishers were at the same time co-conspirators with Amazon against indie booksellers.
Book House's Susan Novotny said the plaintiffs are studying the opinion "to determine the merits of an appeal."
Rakoff's dismissal came on December 6, the same day Judge Denise Cote finalized the Macmillan and Penguin consumer settlements.
The dismissal was not unexpected. At a hearing in April, PW reported that Rakoff was deeply skeptical of the bookseller suit, troubled by the lack of any supporting evidence, and appeared uneasy at the prospect of sending the plaintiffs off on a fishing expedition for proof of a far-fetched conspiracy. And in his dismissal, Rakoff struggled to make sense of the suit.
Calling the booksellers’ allegations “threadbare,” the judge cited not only the lack of evidence but also the absence of any plausible motive for the publishers to conspire with Amazon to limit their retail e-book options. While the publisher contracts with Amazon do call for DRM to be used to “prevent copyright violations,” that is altogether different from working with Amazon to use DRM to limit competition on the Kindle, Rakoff observed, noting that creating such restrictions on consumers would run counter to the publishers’ interests to sell e-books as widely as possible.
In addition, Rakoff held that not being allowed to sell e-books on Amazon’s platform did not cause market harm, or serve to ice indie booksellers out of the e-book market—rather, it only kept competitors from selling onto Amazon's proprietary Kindle platform.
“Indeed, plaintiffs concede that, by virtue of the agreement between the ABA and Kobo, independent bookstores can sell e-books published by the Publishers to non-Kindle users,” Rakoff noted. And although the booksellers’ complain that Kobo is a “minor player in the e-reader market” and that the ABA-Kobo program “does not involve a direct agreement between the Publishers and independent bookstores,” that, Rakoff wrote, was beside the point.
“What the ABA-Kobo program shows is that plaintiffs are not foreclosed from selling Publishers’ e-books,” he held, “and to the extent plaintiffs have been frozen out of the e-book market, it is not because of any unlawful concerted action by the defendants. Rather, it is simply because consumers prefer the products offered by plaintiffs’ competitors.”
As to the monopoly counts against Amazon, Rakoff again cited a lack of plausibility, and a lack of supporting facts in dismissing the claim. “Plaintiffs complain that Amazon has not allowed them to sell e-books on Amazon’s devices and apps,” Rakoff wrote, acknowledging that the Kindle is a "closed" platform. “But," he concluded, "no business has a duty to aid competitors."