It’s only been a few weeks since the last of the 5 conspiring publisher settled the federal antitrust lawsuit which turned the ebook market on its head and today the market was turned upside down once more.
Three independent bookstores have filed a Class-action lawsuit today in New York. They allege that Amazon and all 6 of the Big 6 publishers (Random House, Penguin, Hachette, HarperCollins, Simon & Schuster and Macmillan) signed contracts that constituted a violation of section 1 and section 2 of the Sherman Anti-Trust Act.
To put it simply, the booksellers are suing as a class and argue that the Big 6 publishers insistence on DRM and Amazon’s decision to use a proprietary DRM is keeping them from effectively competing in the ebook market.
The plaintiffs claim they cannot sell the dominant ebook format because Amazon controls the DRM, and they can’t launch a competing platform because the publishers won’t deal directly.
The case was filed on Friday of last week by Book House of Stuyvesant Plaza, Posman Books, and Fiction Addiction. The first 2 stores are based in Manhattan and the third is located in South Carolina. They were filing on behalf of “all other similarly situated independent brick-and-mortar bookstores”.
You can find the full complaint on Scribd. It’s not a difficult read; all the statements of fact, the allegations, and the prayer for relief are relatively straightforward.
The big question here is whether they have a valid case. Frankly, I don’t know.
But one thing I can say is that there is a big problem with the case. The Dept of Justice Antitrust Division disclosed last summer that Amazon was investigated as part of the investigation into Apple and the 5 publishers. The DOJ declined to file a lawsuit against Amazon, and that suggests that the booksellers have an uphill battle.
Does Amazon have a monopoly on the ebook market? Pretty much, yes. Thanks to DRM they certainly have a lock-in on their format and platform.
But has the competition been “unreasonably” harmed and have consumers been harmed? I’m not so sure you can prove that one. At first glance consumers have not been harmed; there’s been a fair amount of innovation in ebook tech and competition on price so this count is going to be difficult to prove. And as for the competition, well, it sucks to be in the last place in any market but the fact Amazon dominates the market is not actually illegal.
In addition to costs and a declaration that the Sherman Anti-Trust Act was violated, the plaintiffs are asking for an injunction that blocks Amazon from selling DRM-specific devices and apps, a second injunction that blocks the publishers from distributing their ebooks with device and app-specific DRM.
And the plaintiffs also want to be able to sell ebooks that are encumbered by “open-source DRM”. That last bit is an interesting turn of phrase, and even though the booksellers don’t have a strong case I am hoping that the bookstores win.
The thing is, they goofed in asking for open source DRM. What they really meant was an industry standard interoperable DRM, (possibly a DRM schema like the IDPF is developing) that would allow the bookstores to compete directly with Amazon. If they really got an open source DRM then it would be completely ineffective because it would be trivially easy to download the DRM code, build a DRM-stripper, and then post it online. That would also be legal, too.
I kinda hope the bookstores win just because of the open source DRM.
But it’s not clear that they will win nor is it clear that they’ll get all of what they want. Antitrust law is a weird thing in the US, and there’s no telling whether the subject of a suit will actually be punished or deserved it.
For example, AT&T held a monopoly on parts of the US telephone industry which was tacitly supported by the US govt for decades before the company was broken up in the early 1980s. And Microsoft was found to be a monopoly in the late 1990 but still allowed to continue to monopolize the market for PC operating systems.
This is going to be a fun one.
image by greeblie