Amazon colluded with publishers to fix book prices, class-action suit alleges

Amazon colluded with publishers to fix book prices, class-action suit alleges
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A small independent bookstore filed a class-action lawsuit against Amazon last week, alleging that the e-commerce giant colluded with the five major book publishers to fix wholesale prices and block other sellers “from competing on price or product availability.”

The suit seeks to compensate independent booksellers for Amazon’s and publishers’ practices and put an injunction on the alleged anticompetitive practices. The named plaintiff is Bookends and Beginnings, a physical and online bookstore located in Evanston, Illinois, just north of Chicago. Amazon, which got its start selling books during the dot-com boom, has dominated the retail book market in recent years, selling an estimated 90% of all e-books and over 40% of physical books.

The current lawsuit targets Amazon’s practices in the market for physical trade books, which is publishing industry lingo for fiction and nonfiction books that are not textbooks or other reference materials.

That’s not to say Amazon is off the hook for e-books. One of the law firms involved in the new class action also filed suit against Amazon and the so-called Big Five publishers—Hachette, HarperCollins, Macmillan, Penguin Random House, and Simon & Schuster—earlier this year for price fixing in the e-book market.

In a twist, that same firm also sued Apple and the Big Five a decade ago for setting e-book prices too high, which benefitted consumers by allowing lower prices but arguably helped cement Amazon’s dominant position in the market.

Despite being included as defendants in the lawsuit, the publishing industry, including the Big Five, have complained to Congress about Amazon’s dominant position. Last August, their trade association, the Association of American Publishers, joined with the Authors Guild and the American Booksellers Association in writing a letter to the House Subcommittee on Antitrust decrying Amazon’s pricing tactics, lack of transparency, and its requirement of so-called most-favored nation clauses in contracts. The clauses guarantee that Amazon will get pricing terms at least as favorable as any other retailer.

The lawsuit states that these most-favored nation clauses, along with other terms favorable to Amazon, have created a moat that defends the online retailer’s position while also keeping wholesale prices artificially high, which benefits the Big Five.

In legal and economic circles, there are debates over who receives benefits from most-favored nation clauses. Such clauses can facilitate anti-competitive behavior by helping different retailers tacitly collude; that is, they can fix prices without having an actual conversation about fixing prices. But they can also help consumers who don’t have time to search every possible site for the lowest price.

The class-action lawsuit seeks unspecified damages to compensate booksellers. In previous years, book publishers have paid tens of millions of dollars to settle price fixing lawsuits, and Apple paid $450 million in a settlement after its appeal to the Supreme Court was denied.