Borders sued for pricing practices

The American Booksellers Association and 25 independent bookstores have filed a lawsuit in a U.S. District Court accusing Barnes & Noble and Borders Group, Inc. of engaging in illegal pricing practices.

The lawsuit, filed in California on Wednesday, claims the two national chains are using their market power to pressure publishers into granting them special discounts and privileges. It also alleges that Borders and Barnes & Noble use their price advantages to drive independent bookstores out of business.

The number of independent booksellers has dropped 42 percent between 1991 and 1996, according to an ABA press release.

"Using market pressure to gain favored terms in discounts is illegal under the Robinson-Packman Antitrust Act," ABA Chief Executive Officer Avin Domnitz said. In filing the lawsuit, "we are having the wherewithal to say we want things to be on a fair playing field."

Domnitz said plaintiffs are requesting punitory damages and immediate cessation of "anticompetitive" activities.

Under California law, if the lawsuit is successful, defendants also may be required to pay the state an amount equivalent to the illegal profits earned in California during the past four years.

Barnes & Noble and Borders officials refused to comment on the lawsuit.

Kate Berkhardt, co-owner of Common Language Bookstore, said the rapid expansion of large national chains with illegal price advantages has driven many independent bookstores out of business.

"It's clear that (the chains) are getting major discounts and its getting harder for the independent bookstores to survive," Berkhardt said. "There's a network of feminist bookstores (that we're a member of) that has been around for years and some of them have been closing down because of competition from chain bookstores moving into town."

But independent bookstores' interests do not necessarily coincide with those of consumers, said University of California at Los Angeles Law School Prof. John Wiley. He said if ABA's allegations are true, and the lawsuit is successful, retail book prices will rise.

"If Barnes & Noble and Borders are seeking big discounts (from publishers), that's exactly the kind of behavior consumers want and exactly what this (antitrust) law tries to prevent," said Wiley, a specialist in antitrust law.

"It's surprising to many people to find out that discounting by businesses is something that could violate at least one of our antitrust laws," he said.

But independent booksellers in Ann Arbor said their mission is not to provide the lowest prices. Some said the fall of independent bookstores has dangerous and widespread implications.

Bernharkt said national bookstores influence publishers' contract decisions and are "homogenizing" the literature market.

"I've heard of publishers showing books to Barnes & Noble and Borders to see if they'd sell them before they give a contract to the writer," she said. "I think it's a dangerous situation and threatens freedom of press when bookstores can dictate what's published."

The lawsuit claims the decrease in the number of independent bookstores is correlated with Borders and Barnes & Noble's rapid expansion and predatory pricing policies.

Los Angeles lawyer Max Bleacher, one of the nation's top antitrust litigators, said basic volume discount levels for books were negotiated between publishers and bookstores six years ago. He said the lawsuit's result will partly depend on whether the court rules these book discounts apply on a product-by-product or on a total title basis.

"The law permits discrimination based on quantity cost savings," Bleacher said. "But two purchasers of relatively equal status cannot be discriminated against."

If the suit succeeds, Wiley said, the penalties for the two book chains will be colossal. Corporations found guilty under antitrust law must pay damages equal to three times the profits earned.

03-20-98