Antitrust Law Daily Lack of antitrust injury doomed e-book retailer’s price fixing conspiracy claims
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Monday, February 8, 2016

Lack of antitrust injury doomed e-book retailer’s price fixing conspiracy claims

By Greg Hammond, J.D.

An e-book retail store failed to provide sufficient evidence of antitrust injury to support claims that five major publishers violated the Sherman and Donnelly Acts by conspiring with Apple Inc. to fix prices and reduce competition in the e-book industry. The publishers’ joint motion for summary judgment was therefore granted (Lavoho, LLC v. Apple, Inc., February 5, 2016, Cote, D.).

Lavoho, LLC, the successor in interest to Diesel eBooks, LLC, filed suit against Apple, Inc. and major book publishers Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster, alleging that the defendants violated the Sherman and Donnelly Acts by conspiring to implement agency distribution agreements with e-book retailers with the purpose and effect of eliminating retail price competition and raising the retail prices for many e-books. The publishers filed a joint motion for summary judgment.

Antitrust injury. The court granted the motion for summary judgment, concluding that Diesel produced no evidence to demonstrate antitrust injury from a conspiracy that eliminated retail price competition for the publishers’ titles or to raise a question of fact that the conspiracy caused the failure of Diesel’s business. In particular, there was no evidence that Diesel competed or desired to compete on price with major e-book retailers when selling certain titles and that the alleged conspiracy rendered Diesel unable to compete.

Instead, the publishers produced overwhelming evidence from Diesel’s own documents demonstrating that (1) Diesel’s business was not predicated on price competition; (2) Diesel did not seek to match or beat Amazon and Barnes & Noble’s prices prior to or even after the start of agency pricing; and (3) Diesel’s e-book prices were higher than those of Amazon or Barnes & Noble, even when Diesel’s discounts, promotions, and rewards program were taken into account. Diesel provided no analysis of its sales data to suggest otherwise, the court noted.

Although the switch to the agency model did eliminate Diesel’s ability to include many of the publisher’s e-books in a bundle associated with a rewards program, Diesel still provided no evidence to demonstrate that the limitation created a hardship for it or impacted the company negatively at all. Rather, Diesel’s documents demonstrated that the switch to agency pricing levelled the playing field and benefitted Diesel.

An expert’s conclusion that Diesel was harmed by the implementation of agency pricing was disregarded because there was no quantitative evidence or transactional data from which someone could calculate Diesel’s average retail prices as a percent of list price, the extent of its rewards program, or the share of e-books sold under bundles before the introduction of the agency model. In addition, Diesel could not rely solely on its description of its financial performance to carry its burden of showing that the publishers’ conspiracy was a substantial or materially contributing factor to the company’s decline.

The case is No. 14cv1768 (DLC).

Attorneys: Maxwell M. Blecher (Blecher Collins Pepperman & Joy P.C.) for Lavoho, LLC. 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 (Kay Scholer LLP) for The Penguin Group. James W. Quinn (Weil, Gotshal & Manges LLP) for Simon & Schuster, Inc.

Companies: Lavoho, LLC; Apple, Inc.; Hachette Book Group, Inc.; HarperCollins Publishers, LLC; Verlagsgruppe Georg Von Holtzbrinck GmbH; Holtzbrinck Publishers, LLC; The Penguin Group; Simon & Schuster, Inc.

MainStory: TopStory Antitrust NewYorkNews

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