It's not over yet: Nearly two months after being dismissed for lack of evidence, a potential class action lawsuit accusing Amazon and the Big Five publishers of colluding to fix e-book prices is back, having been been amended and re-refiled in federal court.
In a 125-page Second Consolidated Amended complaint, filed on November 21 in the Southern District of New York, lawyers led by prominent Seattle-based firm Hagens Berman once again accuse Amazon and the Big Five publishers (Hachette, HarperCollins, Macmillan, Simon & Schuster, and Penguin Random House) of a hub-and-spoke agreement to eliminate price competition from the e-book market in violation of the Sherman Act, specifically through the use of a Most Favored Nation clause and other contract terms.
The suit claims that Amazon is a monopoly that has used its market dominance to "coerce" e-book publishers into "entering into contractual provisions that foreclose competition on price or product availability." Such actions allow Amazon to reap "supracompetitive" profit margins on e-book sales, often in excess of 300%, and to harm consumers by keeping e-book prices artificially high.
"In a but-for competitive market, Amazon could not earn such a supracompetitive profit without losing sales to a competitor and experiencing reduced profits," the complaint notes. "There are numerous competitors and potential competitors with competing e-book distribution platforms—including well-known platforms from Google, Apple, Barnes & Noble, and Kobo, smaller platforms like Smashwords, and publishers like HarperCollins that distribute e-books directly. Multiple startups have also attempted to enter and compete with Amazon. Yet Amazon has been able to both maintain its market share and extract its supracompetitive transaction fees by exercising its market power to block competition."
And because Amazon is the nation's dominant retailer, lawyers say, even the Big Five publishers feel “market pressure" to "insulate" Amazon from competition.
"The Big Five have entered into these contractual restraints even though they claim not to 'benefit from immunizing Amazon from competition' and instead are motivated to abate 'Amazon’s dominance as an eBook retailer.'" the complaint reads. "Yet the publisher agreements with Amazon accomplish the exact opposite, resulting in reduced choice, stifled innovation, decreased output, and increased price in the transaction market for the sale of trade e-books to consumers."
The e-book case was first filed in the Southern District of New York on January 14, 2021 by Hagens Berman (the first firm to sue Apple and five major publishers for colluding to fix e-book prices in 2011). In addition, a second, associated suit was filed in March, 2021 (and later amended in July) on behalf of Evanston, Ill.-based Indie bookseller Bookends & Beginnings accusing Amazon and the Big Five publishers of a conspiracy to restrain price competition in the retail and online print trade book markets.
Amazon and the publishers have insisted from the outset that the suits are baseless and "irrational," and, crucially, that there is simply no evidence to suggest the Big Five publishers coordinated to hand monopoly power to Amazon.
At a marathon July 27 hearing before magistrate judge Valerie Figueredo, lawyers for Amazon and the publishers insisted that the suits were nothing more than an ill-fated fishing expedition in the wake of the publishers' 2012 price-fixing conspiracy with Apple. And just days later, Figueredo agreed, recommending that the presiding judge, Gregory Daniels, toss both cases for lack of evidence.
In two brief September 29 orders, Woods accepted Figeuredo's "well-reasoned" and thorough reports, and dismissed the cases. But in a twist, Daniels dismissed the cases without prejudice, giving the plaintiffs a chance to file amended complaints.
While the e-book case has been amended and re-filed, at press time an amended complaint for the Bookends & Beginnings case has not been made public, although a docket entry confirms that a Second Amended Complaint for the case was filed under seal. A motion seeking leave to file a redacted version notes that the amended complaint "includes substantial discussion of the Big Five Publisher Defendants’ confidential agreements relating to the sale of their print books to Defendant Amazon."
It's unclear how the plaintiffs will overcome the issues that plagued the initial complaints, specifically the lack of direct evidence suggesting coordination among Amazon and and the publishers.
“The mere fact that the Publishers entered into those agreements with Amazon is not direct evidence of a conspiracy to fix eBook prices and eliminate retail competition,” Figueredo concluded in her initial August 3 report. “Because the Publishers compete in a concentrated market with a single dominant retailer, each Publisher could have rationally expected that the other Publishers would have reached the same conclusion about the need to secure an agreement with Amazon."
