Three independent bookstores have filed a class action suit against Amazon and all of the big-six publishers, alleging that the proprietary DRM Amazon uses on ebooks, and the publisher contracts that allow this DRM, create a monopoly. The indies, represented by Los Angeles antitrust firm Blecher & Collins, argue that the contracts restrain ebook sales and that Amazon “has unlawfully monopolized or attempted to monopolize the market for ebooks in the United States” through its proprietary DRM.
The case was filed in New York’s Southern District court (which also oversaw the Department of Justice’s antitrust suit on ebook pricing) on February 15 and was first noticed by the Huffington Post Thursday afternoon. The plaintiffs are the Manhattan-based Posman Books and Book House of Stuyvesant Plaza and Fiction Addiction of Greenville, South Carolina, on behalf of “all other similarly situated independent brick-and-mortar bookstores.” (Posman has three bookstores in New York; the filing only names the Grand Central location as a plaintiff.)
The filing cites estimated market share for Kindle, Barnes & Noble’s Nook and Apple’s iBookstore as evidence that Amazon has a “dominant position” in the ebook market. The estimations cited are generally accepted in the publishing industry — over 60 percent for Amazon’s Kindle e-readers, around 25 percent for Nook and under 10 percent for the iBookstore (though some believe that Apple’s market share has grown ). The filing says Nook is Kindle’s “only substantial competition” but, in reference to recent news and earnings reports, notes Barnes & Noble is “experiencing financial difficulties and will be downsizing by closing a significant portion of their brick-and-mortar bookstores.” The filing doesn’t mention Kobo, but Posman, Book House and Fiction Addiction all sell Kobo ebooks through the company’s partnership with the American Booksellers Association.
To be clear, Barnes & Noble, Kobo and Apple also sell ebooks with DRM on them. Barnes & Noble and Kobo use Adobe DRM, and Apple uses its own proprietary DRM — but that appears not to be at issue in this case because of Apple’s purported small market share for ebooks. Rather, the filing takes issue with Amazon’s proprietary DRM, AZW: “Ebooks with the AZW DRM can only be read on a Kindle device or on another device enabled with a Kindle application…the Kindle app works solely with ebooks sold by Amazon.”
The filing says that big-six publishers, through their contracts with Amazon that allow for Amazon’s proprietary DRM on their ebooks, “unreasonably restrain trade and commerce in the market for ebooks” in violation of the Sherman Act,” and claims “consumers have been injured because they have been deprived of choice and also denied the benefits of innovation and competition resulting from the foreclosure of independent brick-and-mortar bookstores.”
Most of the filing, though, is spent on Amazon, which the plaintiffs accuse of purposely creating a monopoly on ebooks in the United States: “Amazon has and will restrain, suppress, and eliminate actual and potential competition in the market for the sale of ebooks in the United States.” According to the filing:
The aforesaid conduct and acts of Amazon and the big six were engaged in by Amazon with the purpose and intent: (1) to injure, suppress, destroy and irreparably harm Plaintiffs and the other Class Members in the relevant market; (2) to monopolize the market for the sale of ebooks in the United States; (3) to reduce or eliminate sales of ebooks by Plaintiffs and the other Class Members; (4) to control prices; (5) to reduce the variety of offerings that would otherwise be available to consumers; and (6) to unlawfully monopolize trade and commerce in said relevant market.
The plaintiffs seek both money and an injunction “prohibiting Amazon and the big six from publishing and selling ebooks with device and app specific DRMs and further requiring the big six to allow independent brick-and-mortar bookstores to directly sell open-source DRM ebooks published by the big six.” Alyson Decker, the Blecher & Collins attorney overseeing the case, told me that independent bookstores’ agreements to sell ebooks through Kobo aren’t sufficient: “My understanding is that the Big Six do not currently have any direct agreements for ebooks with independent brick and mortar bookstores comparable to the agreements they have entered into with them for traditional books. While some independent brick and mortar bookstores are able to sell ebooks for Kobo, my understanding is that that agreement is with Kobo and not directly with the big six.”
Many independent bookstores may lack the technical knowledge and infrastructure to be able to sell ebooks straight from the publishers, but the filing doesn’t get into details on exactly how such a system would work. Decker said she couldn’t comment specifically on the type of “open-source DRM” that the plaintiffs seek.
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