Antitrust Law Daily Wrap Up, ANTITRUST—S.D.N.Y.: Amazon eBook antitrust litigation drastically pared down with dismissal of most parties., (Mar 7, 2024)

By Kenneth H. Ryesky, M.B.A., J.D.

Judge finds that further reprise of thrice-amended complaint would be futile.

A federal district judge in New York City has mostly granted motions to dismiss the allegations lodged against Amazon in the eBook class action antitrust litigation. Thirteen of the 15 plaintiffs were dismissed for want of direct purchaser standing to bring the lawsuit, and the Section 1 restraint of trade claims of the two remaining direct purchaser plaintiffs were also dismissed. The judge also denied leave to once again amend the complaint. The publisher defendants were dismissed from the case, leaving only the direct purchasers to litigate their Section 2 monopolization claims against Amazon alone (In Re Amazon.com, Inc. eBook Antitrust Litigation, March 2, 2024, Woods, G.).

Background. The developments in sound recording during the 1920's, when integrated in with the celluloid film and cameras of the day, gave rise to the motion picture as a new medium in which to preserve and present dramatic works and speeches. There were, at the time, individuals who pondered on the concept of the analogous development of a new medium to which the ink-on-paper literature might evolve. Innovations in electronics technologies provided such alternative media for the printed word, and the development and expansion of the Internet facilitated many new channels through which works in the new media could be bought and sold. Existing booksellers adapted to the new environment by purveying electronic books (e-Books or eBooks), and other entrepreneurs entered the market. Amazon.com, Inc. (Amazon), an online retailer, emerged as both a publisher of eBooks and a seller of its own eBooks and those of other publishers.

Amazon's highly visible dominance in the eBook market drew the attention of antitrust regulators and legislators, including but not limited to the FTC, the House Judiciary Committee, and the European Commission.

In 2021, some individuals who had purchased eBooks filed a putative class action lawsuit against Amazon and the five leading United States book publishers (who previously had been conspired with Apple to fix the prices of eBooks [United States v. Apple, Inc., 791 F.3d 290 (2d Cir. 2015)], alleging Sherman Act monopolization and conspiracy claims and Robinson-Patman Act (RPA) discriminatory pricing claims. Lawsuits with substantially identical allegations, brought by other individuals and traditional "brick-and-mortar" booksellers, were consolidated with this lawsuit.

In 2022, the court adopted a magistrate judge's recommendations to dismiss the class action complaint as amended, but gave leave to the plaintiffs to file a second amended complaint, which was filed shortly thereafter. The second amended complaint was referred to a magistrate judge, who issued a Report and Recommendation (R&R) on the defendants' dismissal motions. This R&R was submitted to a federal district judge for review.

Antitrust standing. The district judge adopted the magistrate judge's recommendation to dismiss 13 of the 15 plaintiffs for want of antitrust standing. These 13 plaintiffs had purchased their eBooks from retailers who had neither been named as defendants nor alleged to have been part of any conspiracy with the defendants; the 13 plaintiffs accordingly were indirect purchasers under the Illinois Brick doctrine [Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S. Ct. 2061, 52 L. Ed. 2d 707 (1977)].

The district judge also adopted the magistrate judge's recommendation to deny Amazon's motion to dismiss the remaining two plaintiffs. These two plaintiffs purchased their eBooks from Amazon itself, and accordingly stood as direct purchasers whose purchase price included the high commission fees charged by Amazon to the publishers in its alleged illegal agreements.

Anticompetitive conduct-monopolization. The district judge adopted the magistrate judge's recommendation to deny Amazon's motion to dismiss the direct purchaser plaintiffs' Sherman Act Section 2 monopolization claims. These claims asserted that Amazon's conduct effectively restricted the publishers from freely negotiating deals with other eBook retail sellers. At the pleading stage of litigation, these assertions were accepted as true and found to plausibly plead monopolization.

Anticompetitive conduct-restraint of trade. The district judge adopted the magistrate judge's recommendation to grant Amazon's motion to dismiss the direct purchaser plaintiffs' Sherman Act Section 1 trade restraint claims. The complaint is couched in terms of a necessary horizontal restraint agreement, which the complaint failed to plausibly plead; this eliminates a "hub-and-spoke" agreement, which necessarily entails a horizontal restraint component. "Amazon's separate, individual agreements with the Publishers" without a horizontal agreement among the publishers themselves could not serve as a basis for an illegal Section 1 trade restraint.

Leave to amend. The district judge sua sponte declined to give the plaintiffs leave to further amend the complaint. Leave to amend had neither been requested by the plaintiffs nor recommended by the magistrate judge. The complaint had already been three times amended, including once following the district judge's review of a magistrate judge's R&R, without curing the deficiencies noted. Thirteen of the 15 plaintiffs had been dropped from the case. Under the circumstances, the district judge found that further amendment would prove futile.

The case is No. 1:21-cv-00351-GHW-VF.

Attorneys: Steve W. Berman (Hagens Berman Sobol Shapiro LLP) for Sandra Wilde and Michael Wilder. John E. Schmidtlein (Williams & Connolly LLP) for Amazon.com, Inc.

Companies: Amazon.com, Inc.

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