An antitrust lawsuit brought against Amazon.com by an independent publishing company in Bangor recently entered a new chapter after a federal judge denied Amazon's request to have the suit thrown out.
BookLocker.com, a small print-on-demand publishing company, sued the Seattle-based online behemoth in Bangor's U.S. District Court in May 2008 to stop what it claims are unfair business practices that amount to a violation of federal antitrust laws. About a month ago, Chief U.S. District Court Judge John Woodcock Jr. denied Amazon's motion to dismiss the class action lawsuit.
Specifically, BookLocker claims Amazon's demand that publishing companies use a specific printer in order to sell their books in the Amazon marketplace "constitutes an illegal tying arrangement under the Sherman Act," according to the court filing.
"Booklocker.com is a print-on-demand publisher; this means we only print a book when a customer orders one, eliminating the need for printing and warehousing thousands of books that may never sell," said Angela Hoy, who owns BookLocker with her husband Richard, in an email. "This technology is very tree-friendly and also more reasonable, financially, for authors and publishers alike."
The print-on-demand system works like this: Authors contract with companies like BookLocker to carry their titles, but no books are printed unless someone orders one. BookLocker accesses a much larger marketplace to show off their titles through Amazon. If a title is purchased via Amazon, the company sends the order to a printing company contracted by BookLocker, according to court documents. The printer would then ship the book directly to the customer using an Amazon label. Publishers like BookLocker then pay Amazon a percentage of the sale price.
However, in early 2008, Amazon began telling companies like BookLocker that it would only directly sell print-on-demand books printed by a specific printer, which happens to be a subsidiary of Amazon called BookSurge.
Amazon's actions prevent print-on-demand publishing companies like BookLocker from selecting a printing service on a competitive basis if they want to sell via Amazon's website, which offers the widest possible distribution channel, according to BookLocker's legal complaint. BookLocker asserts in court documents that Amazon controls up to 70% of the print-on-demand market.
BookLocker is crying foul, invoking the Sherman Act in its offensive. The act, which was passed in 1890, prohibits a seller from "tying" the sale of one product to the purchase of a second product if the seller thereby avoids competition on the merits of the "tied" product. By forcing publishers to use a specific printer, the lawsuit alleges Amazon is preventing access to the benefits of a free market.
In addition, the quality and price that Amazon's subsidiary, BookSurge, offers is not on par with what BookLocker currently can find in the marketplace. "BookSurge charges higher fees than [BookLocker currently] pays for printing, and BookSurge prints books of lower quality than [BookLocker's] printer and other printers," the complaint says.
BookLocker alleges that the higher fees charged by BookSurge would result in a loss on almost every book sold. BookLocker would be forced to raise book prices across the board and lower author royalties, which would price many of the books beyond what the market will bear, according to the complaint.
Amazon filed a motion to dismiss the lawsuit, denying BookLocker's claim of product tying.
But in his ruling, Judge Woodcock said there was enough evidence in the case "to permit the plausible inference that Amazon is unlawfully forcing purchase of its (print-on-demand) service."
"The next step in the lawsuit is discovery, where we are able to request documents from Amazon," Angela Hoy said.
The lead counsel for BookLocker is Seth Klein of Izard Nobel of Hartford, Conn., with Anthony Pellegrini of Rudman and Winchell of Bangor serving as the local liaison. Amazon is being represented locally by Jeffrey White and William Kayatta of Pierce Atwood of Portland.