In oral arguments on July 27, lawyers for the Big Five publishers and Amazon asked a federal court to dismiss a potential consumer class action lawsuit accusing them of a conspiracy to fix e-book prices. Over nearly five hours of arguments in New York, Amazon and the publishers insisted the alleged conspiracy—in which the five largest American trade publishers are alleged to have colluded to solidify Amazon's monopoly power—fundamentally makes no sense, and, crucially, that there is no evidence of any coordination or agreement among them.
"I would submit to your honor that it is absolutely irrational for the publishers to enter into a conspiracy to make Amazon a monopolist in the retail market," Amazon lawyer John Schmidtlein told the court.
Furthermore, not only is there no direct evidence of any coordination, all of the major publishers were under a consent decree from the Apple e-books case at the time of the alleged collusion, Schmidtlein noted, meaning that the alleged illegal conduct would have had to have taken place right under the nose of the the U.S. Department of Justice and a group of state attorneys general, which reviewed the publishers' contracts.
The e-book suit was first filed in the Southern District of New York on January 14, 2021 (and later amended) by Seattle-based firm Hagens Berman—the first firm to sue Apple and five major publishers for colluding to fix e-book prices in 2011. The suit alleges that Amazon and the Big Five publishers—Hachette, HarperCollins, Macmillan, Simon & Schuster, and Penguin Random House—are co-conspirators in an alleged hub-and-spoke scheme with Amazon to keep e-book prices artificially high and to ensure there is no retail price competition—specifically through the use of various forms of a Most Favored Nations clause (MFN).
Following Schimdtlein, Scott Lent, arguing for the publishers, insisted that, post-Apple, each of the publisher's agency agreements with Amazon was reached independently. Such parallel conduct is perfectly legal, Lent said, arguing that without "a coherent theory" and evidence showing there was "a meeting of the minds" among the publishers to collude with Amazon, there is not enough to sustain the case.
"There's no direct communications between the publishers. There's no allegations that Amazon went from publishing house to publishing house like Apple did in in the e-books case," Lent told the court. "But somehow, the publishers, at least according to the plaintiffs still reached an agreement...and the facts just don't support that."
The lack of direct evidence is a key point. In the Apple case, Schmidtlein noted, Judge Denise Cote held that the use of agency agreements and the use of Most Favored Nation clauses were independently legal. What was not legal in the Apple case was the collusion and coordination among the publishers and Apple. But there is simply no evidence in this case of any coordination of collusion.
At the hearing, Judge Valerie Figueredo repeatedly pressed the plaintiffs on the lack of direct evidence. "You don't dispute that you still need some evidence to get you to plausibly infer conspiracy? You can't just have the agreements alone by themselves?" the judge asked at one point.
"We've alleged that the agreements themselves are direct evidence of common agreement," countered plaintiff attorney Barbara Mahoney. "The inference that we draw from the horizontal plane, we think it is a reasonable inference, is that it would have been economically extremely risky and unsound for the publisher to enter into those agreements unless there was a tacit agreement or a pretty firm understanding what the other publishers were going to do," Mahoney offered, an argument Figueredo was clearly skeptical of.
In addition to the e-books case, the court also heard the defendants' motion to dismiss another price-fixing suit, this one regarding the sale of print books, also led by Hagens Berman with Illinois bookseller Bookends & Beginnings as the named plaintiff. First filed in March, 2021, that case also initially centered around Amazon’s use of Most Favored Nation clauses—until it was revealed that Amazon's print contracts with the publishers did not contain MFN clauses. Rather than drop the case, however, the plaintiffs pivoted to charging a Robinson-Patman violation.
Both lawsuits, filed early in 2021, draw heavily upon an October, 2020 congressional subcommittee report on competition in the digital market which detailed some of Amazon’s hardball practices surrounding e-book pricing. And this week's oral arguments come after Amazon and the publishers filed separate motions filed last fall asking the court to dismiss the cases against them, describing both as unsupported and nonsensical.
“Plaintiffs allege that the Publisher Defendants have conspired to do exactly what they have resisted for over a decade—‘immunize’ Amazon from competition and solidify Amazon’s market position," the publishers argued in their brief.
There is no timeline for decision on the motions.