Amazon Books and the Robinson-Patman Act from an Antitrust Law Perspective

Following my most recent antitrust article looking into the Authors United Amicus Brief (which you can read here), I was contacted for my thoughts concerning Amazon's new book store and the Robinson-Patman Act. For some background and thoughts on this subject, you can check out this article from The Digital Reader. The article links to other articles about two cases related to booksellers and the Robinson-Patman Act. The first case was AMERICAN BOOKSELLERS ASS'N v. RANDOM HOUSE. I didn't link to that one and I won't be analyzing it because it isn't publicly available. I want everyone to be able to read the court opinion when I talk about a case. AMERICAN BOOKSELLERS ASS'N v. RANDOM HOUSE ended in a settlement, so the court didn't fully reach the merits of the claim anyways. The second case was AMERICAN BOOKSELLERS ASS'N v. BARNES & NOBLE, INC.. I would like to take some time to look at the court's opinion in this case so we can see what requirements the ABA will have to meet to win in a lawsuit against Amazon (arguing that Amazon is violating the Robinson-Patman Act with their new bookstore, Amazon Books, in Seattle). Unless I note otherwise, everything I quote comes from that link. I would provide more specific, targeted links if I could link to particular sections of the court opinion, but I don't know how to do that. Let me start by reminding everyone that I am not a lawyer and nothing I say on my blog is legal advice.




Let's start by noting the parties in this case. The district court judge sums it up nicely. "In this antitrust action brought by the American Booksellers Association on behalf of all California members ("ABA") and twenty-seven independent bookstores against various defendants associated with Barnes & Noble, Inc. ("the Barnes & Noble defendants") and Borders Group, Inc. ("the Borders defendants"), three motions are currently before the Court." Put simply, the ABA joined with 27 independent bookstores to sue Barnes & Noble and Borders for violating the Robinson-Patman Act.

In this case, the ABA and independent bookstores allege that Barnes & Noble and Borders were receiving discounts and other favorable terms from Ingram. The judge notes under Section (II)(A) of his opinion that "[u]nder the Robinson-Patman Act, it is 'unlawful for any person engaged in commerce, ... either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, ... where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them[.]' 15 U.S.C. § 13(a) (Robinson-Patman Act § 2(a))." Additionally, "'[i]t shall be unlawful for any person engaged in commerce, in the course of such commerce, knowingly to induce or receive a discrimination in price which is prohibited by this section.' 15 U.S.C. 13(f) (Robinson-Patman Act § 2(f))."

In simpler terms, a buyer cannot knowingly induce a seller to give them better terms or better prices than they give to other buyers for "commodities of like grade and quality" when to do so would (a) lessen competition, (b) create a monopoly in any line of commerce, or (c) injure, destroy, or prevent competition with anyone benefiting from such a transaction. The ABA was going for two things in this case:

1. Money damages (Which are automatically tripled under the Robinson-Patman Act, also known as "treble damages.")

2. An injunction (You can read about injunctions on Wikipedia here. Basically, it's a court order telling a party to either not do something or stop doing something.)

Since a party gets triple damages under the Robinson-Patman Act, it's more difficult to obtain money damages than it is to get an injunction. The court notes seven things that have to be proved (in this case, by the ABA) in order to get money damages:

"1. Two or more contemporaneous sales by the same seller to the plaintiff and a competing buyer;

2. At different prices;

3. Of commodities of like grade and quality;

4. Where at least one of the sales was made in interstate commerce;

5. The price discrimination had the requisite effect upon competition generally;

6. The competing buyer knew the price discrimination was unlawful; and

7. The price discrimination caused injury to the plaintiff. Rutledge v. Electric Hose & Rubber Co., 511 F.2d 668, 677 (9th Cir.1975) (citations omitted); Automatic Canteen Co. of Am. v. FTC, 346 U.S. 61, 73, 73 S.Ct. 1017, 97 L.Ed. 1454 (1953). Each plaintiff seeking damages must make 'some showing of actual injury attributable to something the antitrust laws were designed to prevent.' J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 562, 101 S.Ct. 1923, 68 L.Ed.2d 442 (1981). Each such plaintiff 'must, of course, be able to show a causal connection between the price discrimination in violation of the Act and the injury suffered.' Id. (quoting Perkins v. Standard Oil Co., 395 U.S. 642, 648, 89 S.Ct. 1871, 23 L.Ed.2d 599 (1969))."

The sticking point for money damages is the actual injury. The ABA and the independent bookstores needed to prove both that Barnes & Noble and Borders knowingly made agreements with Ingram that violated the Robinson-Patman Act and that these agreements actually injured them. To do so, they relied on the calculations of their expert witness, Dr. Franklin M. Fisher. The court refers to the evidence presented by Dr. Fisher as the "Fisher Model." I'll spare you the court's analysis. The judge ultimately concludes that "[b]ecause the Fisher model fails to show that discounts received by defendants from any particular publisher or wholesaler harmed any of plaintiffs, the Fisher model fails to show that any publisher's discounts to defendants caused any actual harm to plaintiffs." In other words, the ABA and independent bookstores lose their money damages claim on summary judgment (and you can read about summary judgment on Wikipedia here. It's basically when a court rules in favor of a party without a full trial).

The court did not grant summary judgment on the injunction claim, because the injunction claim can survive and move on to trial under a weaker standard. The judge explained the difference. "Instead, the plaintiffs must show only that there is a reasonable possibility that the price discrimination may harm competition; this reasonable possibility of harm is referred to as 'competitive injury.' Falls City Indus., Inc. v. Vanco Beverage, Inc., 460 U.S. 428, 434-35, 103 S.Ct. 1282, 75 L.Ed.2d 174 (1983)." Instead of proving actual injury, they would only have to prove "a reasonable possibility" of injury at trial.

What does this mean for Amazon? It means that the ABA would have to prove all seven elements I've quoted above from AMERICAN BOOKSELLERS ASS'N v. BARNES & NOBLE, INC. in order to obtain the triple damages provided for in the Robinson-Patman Act. That's why, as noted at The Digital Reader, Tiecher at the ABA has said, "that it's 'far too soon to speculate' about what Amazon is planning in terms of a bricks-and-mortar profile, ABA is watching the new physical store closely. And he promised his constituents that he has no intention of allowing Amazon Books to benefit from its ties to Amazon.com. He also pointed out that, for the small store to do so could be a violation of antitrust law." In other words, the ABA likely recognizes that a lawsuit against Amazon and Amazon's bookstore, Amazon Books, would be premature at this point.