In filings this week, Amazon and the Big Six publishers moved to dismiss a lawsuit filed by independent booksellers alleging that Amazon’s use of DRM in its Kindle e-reading program, and publishers exclusive agreements with Amazon, represent an illegal restraint of trade. In moving to dismiss Book House Of Stuyvesant Plaza, Inc. et al v. Amazon.Com, publishers, in a joint filing, argue that bookseller claims against the publishers are without merit, and that the true target of the suit is market-leading Amazon.
“Plaintiffs’ effort to draw the Publishers into their dispute with Amazon’s unilateral design of the Kindle ecosystem fails for at least two reasons,” the publishers argue. First, there is no “agreement between Amazon and any of the Publishers—let alone each of them” where a requirement of “device- specific DRM can be plausibly inferred.” Publishers further argue that the term “device specific DRM” is “legally meaningless” and that the allegation “appears to be a weak attempt to allege some form of ‘acquiescence’ under vertical restraints jurisprudence.” However, not only do no such agreements exist, they are not even plausible, as such an agreement would run counter to the publishers’ interests, the motion says.
Second, the booksellers can show no “actual adverse effect on competition as a whole in the relevant market.” Instead, the brief argues, the booksellers offer only “naked conclusions that Amazon’s use of ‘device specific’ DRM technology harms competition.” As such, and lacking any provable, factual basis, publishers ask the court to dismiss the case.
In its motion to dismiss, Amazon concurs with the publishers’ contention that the facts don’t facially support an antitrust case. “Plaintiffs’ true grievance is that Amazon is attracting consumers with low prices and popular products,” the Amazon brief states. “On its face, the Amended Complaint demonstrates that Amazon’s innovations have both revolutionized the book industry and resulted in undeniable consumer benefits. Because Amazon is not alleged to have done anything apart from engaging in proper, healthy competition, the Amended Complaint must be dismissed.”
Indeed, Amazon at times appears by turn frustrated by the lack of facts in the suit, and flattered, in that the action tacitly recognizes the e-tailer’s success in e-book innovation. “Plaintiffs claim that defendant Amazon and each of the Publisher Defendants have conspired to foreclose Plaintiffs from selling e-books, but their complaint is devoid of even the most basic allegations of such a conspiracy,” the brief states. “To the contrary, Plaintiffs’ own complaint admits that Amazon’s innovations in e-books and readers expanded consumer options and created new and exciting products for consumers. Amazon’s innovations have also reduced the prices of books and inspired others to compete to sell them. In short, Amazon has not hindered competition, it has promoted it.”
The initial suit was filed in February in the U.S. District Court for the Southern District of New York, and contends that Amazon along with Random House, Penguin, HarperCollins, Simon & Schuster, Hachette Book Group, and Macmillan signed contracts “specifically designed to limit the use of digital content” to various Kindle devices, while the publishers have not entered into any agreements with independent bricks-and-mortar or independent collectives to sell e-books.
The three named plaintiffs (The Book House of Stuyvesant Plaza of Albany, N.Y.; Fiction Addiction of Greenville, S.C.; and Posman Books of New York City) seek to represent a class of independent brick-and-mortar independent bookstores, and are seeking an injunction prohibiting the publishers and Amazon from “selling e-books with device and app specific DRMs,” while also requiring the big six publishers to allow independent bookstores to directly sell “open-source DRM e-books.”
Replies to the motions are now due by April 18, and oral arguments on the motions are set for April 25.