Robinson-Patman, Amazon, the publishers, and the ABA: Where’s the lawsuit? (Updated)
June 3, 2014 | 3:16 pm
Two different op-eds have popped up on CNN and Al Jazeera suggesting that Amazon, big bully that it is in the Hachette negotiation, needs to be taken down a peg under the Robinson-Patman Act. (If you didn’t hear a raspy voice say “I’m Patman” when I mentioned the name of that law, I’m pretty sure you did just now.)
Robinson-Patman is an anti-predatory-pricing regulation that’s on the books dating back to the ‘30s, intended to prevent businesses from charging different prices in different towns to undercut local competition, or from using their size to bully suppliers into giving them better deals than they give smaller companies. Sound familiar? The editorialists (whose views, it should be noted, do not represent CNN or Al Jazeera) seem to think so.
Writer Onnesha Roychoudhuri writes in Al Jazeera:
The Federal Trade Commission and the Department of Justice used to measure competition in diversity of retailers as well as low prices. The Robinson-Patman Act — on the books since the 1930s — made it illegal for a company to charge different prices in different towns in order to undersell local stores. With good reason: It’s a strategy that breeds monopolies, allowing a big company to come in, eliminate competitors by underselling them and then charge whatever it wants to a newly captive consumer audience. While the Robinson-Patman Act still exists, as evidenced by the metastasizing of Wal-Mart stores over the years, the FTC and DOJ don’t enforce it. “They’ve almost completely backed away,” former FTC lawyer John Kirkwood told me, pointing out that courts now view such cases as anti-consumer. In other words, opinion has shifted to a near fundamentalist faith in the idea that low prices are all that matter.
Lina Khan, policy analyst at the New America Foundation, adds in the CNN piece:
"If the government still enforced Robinson-Patman, it would go a fair way towards limiting the power of Amazon," said Oren Teicher, CEO of the American Booksellers Association, which represents independent bookstores. He would know: In the 1990s, ABA brought numerous cases against both publishers and chain stores for violating Robinson-Patman.
Not a lawyer or anything, but there are a couple of problems I see here.
First of all, economy of scale is a defense to Robinson-Patman Act charges. Volume discounts are explicitly declared all right. The FTC’s Q&A page on the Act puts it thus:
Q: I operate two stores that sell compact discs. My business is being ruined by giant discount chains that sell their products for less than my wholesale cost. What can I do?
A: Discount chains may be able to buy compact discs at a lower wholesale price because it costs the manufacturer less, on a per-unit basis, to deal with large-volume customers. If so, the manufacturer may have a "cost justification" defense to the differential pricing and the policy would not violate the Robinson-Patman Act.
And I ask you: who moves more volume than Amazon?
The second, and perhaps more damning problem actually comes courtesy of Khan herself, who points out that in the ‘90s the ABA successfully filed suit against big publishers for offering the big chain stores secret discounts, and Barnes & Noble and Borders for pressuring the publishers into providing those discounts. The ABA didn’t wait around for the government to get involved—it went out there and smacked those price discriminators upside the head with a lawyer-powered cosh. It won victories in court, including a $25 million judgment from Penguin and various consent decree settlements from other publishers.
Where’s the private lawsuit now? Did Ms. Khan ask the ABA why it hasn’t gone after Amazon yet, like it went after the publishers, Barnes & Noble, and Borders, rather than standing around wishing the government would? (Could it be they recognize Amazon is actually helping independent bookstores by weakening Barnes & Noble?)
[Update: While I was researching another story, I ran across something I’d forgotten about on The Digital Reader. It turns out that, last year, three booksellers did file an anti-trust lawsuit against Amazon. In December, it was thrown out for a lack of any proof behind their “threadbare allegations.” So, all right, there was one anti-trust lawsuit, and it fizzled. Anyone think they can do better?]
For that matter, if they really thought Amazon was doing something illegal, why haven’t the publishers themselves done anything in a lawyerly manner? As Michael W. Perry has pointed out here several times, when Amazon illegally tried to force small publishers to use its CreateSpace (nee BookSurge) print on demand service, BookLocker sued and Amazon backed down and settled. You can’t tell me that the multi-billion-dollar publishing conglomerates can’t afford lawyers at least as good as a small press’s!
(But no, no legal action for the Big Six publishers, even when they were just positive Amazon was practicing predatory pricing. They took some of the good old-fashioned illegal kind, instead. Why do you suppose they’d rather break the law than use it if it was so readily in their favor? Sort of makes you wonder, doesn’t it?)
You can’t point out that a private group sued successfully in the ‘90s and then use that as your basis to complain the government isn’t suing now. It’s a non sequitur. It doesn’t follow. If these private groups were so rah-rah over Robinson-Patman in the ‘90s, well, let’s see them prove they’re not all talk. Let them put their money where their mouth is and do it again. I’ll be waiting.
So, in conclusion: