A federal judge has formally adopted a magistrate judge’s recommendation that a consumer class action lawsuit accusing Amazon of anticompetitive conduct in the e-book market be allowed to proceed. But in adopting the magistrate’s recommendation, the court also officially dismissed all claims against the Big Five publishers that were initially accused of being co-conspirators with Amazon in a bid to fix e-book prices.
In a 14-page written opinion, presiding district court judge Gregory Woods called magistrate judge Valerie Figueredo’s July 31, 2023, report and recommendation “thoughtful and well-reasoned,” and adopted it in full. Figeuerdo’s report found sufficient evidence to "plausibly" allege that Amazon’s conduct, including the imposition of various allegedly restrictive contract provisions, has led to “reduced competition” in the e-book marketplace and “higher e-book prices for consumers.” While the report rejected a number of the plaintiffs’ claims, it recommended that two claims against Amazon, “monopolization” and “attempted monopolization,” be allowed to proceed.
“Amazon’s arguments fail at this pleading stage,” Woods ruled, noting the plaintiffs are entitled to “all reasonable inferences drawn in their favor from their non-conclusory allegations,” including claims that Amazon’s contractual provisions with the publishers impose “material restrictions on publishers’ ability to freely contract with other eBook retailers and therefore have anticompetitive effects.” Woods also accepted Figueredo's conclusion that there was no evidence of the Big Five publishers conspiring with Amazon or each other to fix e-book prices, and ordered “the dismissal of the Publishers from this case.”
First filed in the Southern District of New York on January 14, 2021, by Hagens Berman—the firm that sued Apple and five major publishers for colluding to fix e-book prices in 2011—the suit initially alleged that Hachette Book Group, HarperCollins, Macmillan, Penguin Random House, and Simon & Schuster were co-conspirators in a hub-and-spoke scheme with Amazon to suppress retail price competition and to keep e-book prices artificially high, specifically through the use of various forms of a most-favored-nation (MFN) clause. In March 2021, a second, associated suit was also filed accusing Amazon and the Big Five publishers of a conspiracy to restrain price competition in the retail and online print trade book markets.
In September 2022, Figueredo recommended that Woods toss both cases for lack of evidence, which Woods did. But the judge also gave the plaintiffs an opportunity to file an amended complaint. Weeks later, lawyers for Hagens Berman returned with a 125-page Second Consolidated Amended complaint, arguing that Amazon's dominance in the e-book market enabled the company to “coerce” publishers into “contractual provisions that foreclose competition on price or product availability.”
In its defense, Amazon insists that its contract terms are “not inherently anticompetitive,” and that there is no evidence that the company's conduct “had the effect of raising agency commissions to anticompetitive levels.” But in her July 2023 report, Figueredo held that those issues didn't need to be resolved at this early stage, and found that the plaintiffs had pled sufficient facts to pursue their monopolization and attempted monopolization claims.
The suit against Amazon comes as the company also faces a sweeping antitrust lawsuit filed by the Federal Trade Commission, along with a number of states, accusing the e-tailer of using “a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power.”
