Amazon and Big Five Publishers Face Renewed Antitrust Lawsuit Over E-Book Pricing

Background

In January 2021, a bombshell lawsuit was launched in the Southern District of New York, leveling serious accusations against Amazon and the Big Five publishers (Hachette, HarperCollins, Macmillan, Penguin Random House, and Simon & Schuster). The plaintiffs, a coalition of authors, booksellers, and consumer groups, alleged a calculated conspiracy to fix e-book prices, resulting in artificially inflated costs for readers. This alleged “hub-and-spoke” scheme was said to suppress retail price competition, stifling the industry’s natural dynamics.

In a related development, a second lawsuit emerged in March 2021, alleging a similar conspiracy between Amazon and the Big Five publishers, but this time extending its reach to the retail and online print trade book markets. These accusations painted a picture of an industry held captive by a restrictive pricing regime, denying consumers the benefits of a truly competitive marketplace.

Initial Dismissal and Amended Complaints

In July 2022, Magistrate Judge Valerie Figueredo issued a recommendation that both cases be dismissed, citing insufficient evidence to support the conspiracy claims. Judge Gregory Woods concurred with Figueredo’s assessment, and in September 2022, both cases were dismissed. However, this dismissal came with a crucial caveat: it was “without prejudice,” meaning the plaintiffs were granted the opportunity to file amended complaints, addressing the court’s concerns.

The plaintiffs seized this opportunity, submitting revised complaints in both cases. These amended complaints incorporated additional details and invoked a recent landmark decision by Judge Florence Pan, who blocked Penguin Random House’s acquisition of Simon & Schuster on antitrust grounds. The plaintiffs argued that this decision bolstered their case, providing further evidence of anticompetitive behavior within the industry.

Upcoming Hearing and Arguments

The stage is now set for a crucial hearing scheduled for June 22, 2024. At this hearing, Amazon and the Big Five publishers will present motions to dismiss the amended complaints, seeking to end the lawsuits before they can proceed further. Their primary argument rests on the assertion that the amended complaints still lack the necessary evidence to substantiate the conspiracy claims. They maintain that the mere existence of agreements between the publishers and Amazon does not, in itself, constitute direct evidence of a coordinated effort to fix prices.

The plaintiffs, however, are resolute in their stance. They contend that they have more than adequately met the pleading requirements, providing sufficient evidence to support their claims. They argue that the totality of the circumstances, including the alleged “hub-and-spoke” scheme and the publishers’ consistent adherence to Amazon’s pricing terms, paints an undeniable picture of collusion.

Key Issue: Lack of Direct Evidence

A critical challenge facing the plaintiffs is the absence of direct evidence suggesting explicit coordination among Amazon and the publishers. Judge Figueredo previously emphasized that the mere fact that the publishers entered into agreements with Amazon does not, by itself, constitute direct evidence of a conspiracy. This lack of a “smoking gun” has been a significant hurdle for the plaintiffs to overcome.

In their amended complaints, the plaintiffs have attempted to address this deficiency by presenting circumstantial evidence, such as the publishers’ alleged adherence to Amazon’s pricing terms and the industry’s overall shift towards e-books. However, it remains to be seen whether this evidence will be deemed sufficient to meet the court’s evidentiary threshold.

Potential Outcome

The outcome of the June 22 hearing will hinge on Judge Figueredo’s assessment of the plaintiffs’ amended complaints. If she concludes that the plaintiffs have failed to meet the pleading requirements and provide sufficient evidence, she may recommend that Judge Woods dismiss the amended complaints, effectively ending the lawsuits.

However, if Judge Figueredo finds that the plaintiffs have met these requirements, she may recommend that Judge Woods allow the cases to proceed to the next stage, known as discovery. This would involve a comprehensive exchange of evidence between the parties, potentially leading to a trial where a jury would ultimately decide the merits of the case.

Conclusion

The upcoming hearing on June 22, 2024, marks a pivotal moment in the ongoing legal battle between Amazon, the Big Five publishers, and the plaintiffs seeking to challenge the alleged e-book price-fixing conspiracy. The outcome of this hearing will determine whether the lawsuits will be allowed to proceed further or be dismissed entirely. As the industry awaits the court’s decision, the stakes remain high for all parties involved, with the potential implications reaching far beyond the realm of e-book pricing.