Antitrust Law Daily Wrap Up, TOP STORY—S.D.N.Y.: E-book retailer’s lack of antitrust injury doomed price fixing claims, (Jan 25, 2016)

By Greg Hammond, J.D.

A defunct e-book retailer failed to provide sufficient evidence that an alleged conspiracy among five book publishers and Apple Inc. caused the retailer to suffer antitrust injury. The federal district court in New York City granted the publishers’ collective motion for summary judgment, finding that the retailer was failing as a business before the alleged conspiracy and that the retailer could not effectively compete through discounting or otherwise (Abbey House Media, Inc. v. Apple Inc., January 22, 2016, Cote, D.).

Abbey House Media, Inc., doing business as Books On Board (BOB), filed suit against Apple Inc. and publishers Hachette Book Group, Inc., HarperCollins Publishers, LLC, Macmillan Publishers Inc. and Verlagsgruppe Georg Von Holtzbrinck GmbH, The Penguin Group, and Simon & Schuster, Inc., alleging a conspiracy to fix prices and reduce competition in the e-book industry. Specifically, BOB claims that the publishers agreed to sign agency distribution agreements to supply Apple with their e-books; that similar e-book retailers were then also required to execute agency agreements; and that e-retailers lost the ability to discount e-books. The publisher defendants moved for summary judgment.

Antitrust injury. BOB failed to produce sufficient evidence to support its theory of injury and causation, according to the court. In particular, the publishers provided “overwhelming evidence” that their alleged elimination of retail price competition did not cause the demise of BOB’s business.

The court noted that there were numerous explanations from the evidentiary record about why BOB failed. Most notably were BOB’s failure to develop or become associated with any e-reading device; BOB’s association with a supply chain dependent on wholesalers rather than direct relationships with publishers; and BOB’s relatively meager financial resources. BOB’s argument that discounting was essential to its business strategy and that the inability to discount during the agency period deprived BOB of a critical tool was rejected. The court reasoned that it was indisputable that BOB could not compete effectively on price with the major retailers who employed discounting, such as Amazon and Barnes & Noble, particularly when both of those competitors also sold a device for reading e-books to which BOB did not have access.

The case is No. 14cv2000 (DLC).

Attorneys: Maxwell M. Blecher (Blecher Collins Pepperman & Joy P.C.) for Abbey House Media, Inc. Michael Lacovara (Freshfields Bruckhaus Deringer LLP) for Hachette Book Group, Inc. C. Scott Lent (Arnold & Porter, LLP) for HarperCollins Publishers, LLC. Joel M. Mitnick (Sidley Austin LLP) for Macmillan Publishers Inc. and Verlagsgruppe Georg Von Holtzbrinck GmbH. Saul P. Morganstern (Kaye Scholer LLP) for The Penguin Group. James W. Quinn (Weil, Gotshal & Manges LLP) for Simon & Schuster, Inc.

Companies: Abbey House Media, Inc.; Hachette Book Group, Inc.; HarperCollins Publishers, LLC; Macmillan Publishers Inc.; Verlagsgruppe Georg Von Holtzbrinck GmbH; The Penguin Group; Simon & Schuster, Inc.

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