Three Indies File Class Action Suit Against Amazon, Big Six

This article is as it appears in Shelf-Awareness for February 27th,2013
Three independent booksellers quietly filed a class-action suit last week against Amazon and the Big Six publishers, charging that contracts between Amazon and the publishers concerning e-books “unreasonably restrain trade and commerce in the market for e-books” in the U.S. in violation of the Sherman Act and charging that Amazon “engaged in” the contracts “with the purpose and intent” to hurt indies, monopolize e-book markets and sales, control prices and limit customer choices.

The suit focuses on DRM (digital rights management, an anti-piracy measure) on Kindle e-books, which, it says, requires that e-books have Amazon AZW DRM to be used on Kindles or Kindle apps–and, conversely, that people who buy e-books on Amazon must have Kindles or Kindle apps to read them.

The plaintiffs are seeking damages and an immediate injunction “prohibiting Amazon and the Big Six from publishing and selling e-books 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 e-books.”

The suit, filed February 15 in the Southern District of New York, was first reported on by the Huffington Post yesterday, whose story includes a photocopy of the 15-page suit–with no DRM.

The plaintiffs are Posman Books, New York City, the Book House of Stuyvesant Plaza, Albany, N.Y., and Fiction Addiction, Greenville, S.C., who say they represent all indie bricks-and-mortar bookstores that sell e-books. Owned by longtime booksellers Gene and Maxene Posman, Posman Books has stores in Grand Central Terminal, Rockefeller Center and Chelsea Market. Book House is owned by Susan Novotny, who also owns Market Block Books in Troy, N.Y., and is publisher of Staff Picks Press, as well as co-owner of printer Troy Book Makers. Fiction Addiction is owned by Jill Hendrix. The publisher defendants are Random House, Penguin Group, Simon & Schuster, Hachette Book Group, HarperCollins and Macmillan.

The plaintiffs’ legal counsel is Blecher & Collins, a Los Angeles firm that specializes, it says, in “prosecuting and defending precedent-setting cases involving antitrust, unfair competition and complex business issues.” Speaking with the Huffington Post, Alyson Decker of Blecher & Collins called DRM “a problem that affects many independent bookstores.” She “declined” to say how the suit “came about or whether other bookstores had been approached to be party to the suit,” the Huffington Post said.

So far, of all the plaintiffs and defendants, only Simon & Schuster has commented publicly; spokesperson Adam Rothberg told the New York Times: “We believe the case is without merit or any basis in the law and intend to vigorously contest it. Furthermore, we believe the plaintiff retailers will be better served by working with us to grow their business rather than litigating.”

The suit is confusing on several key points.

The suit estimates the Big Six publishers represent 60% of U.S. print book revenues and 85% of all New York Times bestseller revenues; that Amazon’s Kindle has about 60% of the dedicated e-reader market and Amazon’s Fire has 60% of the “small media tablet market”; that B&N’s Nook has 27% of the e-book market and Apple’s iBookstore has 10% of the e-book market. Without elaboration, the suit concludes: “Amazon’s well-known domination of the traditional book market and its domination of both the dedicated e-reader and small media tablet markets has allowed it to dominate the e-book market.”

The suit contends that none of the Big Six publishers have “any agreements with any independent brick-and-mortar bookstores or independent collectives to sell their e-books. Consequently, the vast majority of readers who wish to read an e-book published by the Big Six will purchase the e-book from Amazon.” Yet, the three plaintiffs and many indies sell e-readers and e-books via Kobo, which is the ABA’s digital book partner. Presumably publishers have “agreements” with Kobo.

While it notes that Apple used DRM on music but stopped in 2009, the suit doesn’t recognize that DRM is required by most major publishers (excluding Macmillan’s Tor and Forge imprints) for e-books wherever they’re sold, including the Nook, Apple’s iBookstore and Kobo.

The suit also states that Amazon’s DRM limits Kindle usage so that only e-books bought from Amazon can be used on Kindles and Kindles will work only for e-books bought on Amazon. But many e-books not purchased from Amazon can be read on Kindles: it is possible to convert e-books in non-Amazon formats like ePub to MOBI format, which can be read on Kindles. Likewise, PDFs can be read on Kindles, as can e-books from such sellers as Smashwords and Baen and from free sites like Project Gutenberg and the Internet Archives and from libraries lending e-books via OverDrive. (We’re not sure if e-books bought on Amazon can be read on non-Amazon devices such as the Nook or Kobo.)

On BoingBoing, Cory Doctorow noted that one of the plaintiffs’ main remedies is for publishers to sell e-books with “open source DRM,” which he said makes no sense since DRM limits usage of sold material and open source doesn’t mean “standardized” or “interoperable,” as the suit seems to define the term. “These booksellers don’t really care if the books are DRM-free, they just want them locked up using a DRM that the booksellers can also use.”

He added: “I empathize with these booksellers. I hate DRM. But I wish they’d actually bothered to spend 15 minutes trying to understand how DRM works and what it is, and how open source works, and what it is, before they filed their lawsuit. Grossly misusing technical terms (and demanding a remedy that no customer wants–there’s no market for DRM among book-buyers) makes you look like fools and bodes poorly for the suit.”

We’re not experts on DRM, but it seems that the issue for the plaintiffs is not so much DRM as it is Amazon’s proprietary format–which steers the average, less technically adept Kindle user to Amazon e-books–as well as other aspects of Amazon’s often cutthroat approach to business.

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