Independent Booksellers Sue Big Chains
A group of independent booksellers has sued the Barnes & Noble and Borders mega-chains for allegedly bullying publishers into giving them discounts and special deals in violation of antitrust laws.
The American Booksellers Assn. and 26 independent stores, including nine in California, contend the two chains have surreptitiously secured deals with publishers that undercut wholesale prices for the large chains, and that the same deals have not been offered to small retailers.
“It’s all about fairness. I’m looking for the same principles that guide my business dealings with publishers,” said Doug Dutton, owner of Dutton’s Brentwood and a plaintiff in the suit filed this week in U.S. District Court in San Francisco.
Dutton said his sales slumped after four superstores opened within 3 miles of his store.
The suit is the first to directly pit small stores against the big chains. In 1994, the ABA, a trade group made up of independent retailers, and six New York bookstores sued seven major publishers over allegedly unfair business practices. That suit was settled out of court, and the publishers agreed to refrain from favoring chains over independents.
The Federal Trade Commission last year dropped a similar investigation into the chains’ alleged business practices.
“This is the first time independent retailers fought back against corporate giants,” ABA President Barbara Thomas said Wednesday in announcing the suit. “It’s important. We have to keep all kinds of genres--not just moneymakers.”
In recent years, embattled independents have suffered from the onslaught of big chains that can offer deep discounts on popular titles. In the last four years, ABA membership has dropped by a third, to 3,500 in 1997, as more and more small retailers went bust. ABA officials said they chose to file the lawsuit in California because of the superstores’ large presence in the state--Barnes & Noble has 43 stores in Southern California and Borders has 24 statewide.
The lawsuit contends the chains violated federal and state laws that require manufacturers to treat the retailers of their products equally. If a special deal is offered to one retailer it must be offered to all, said USC law professor David Slauson, an antitrust expert. Under the statutes, volume discounts, which the suit claims were given to Borders and Barnes & Noble, are illegal.
“Retailers shouldn’t receive a discount just for buying a big amount,” Slauson said. “Everyone should receive, for example, 10% savings on the amount paid.”
However, if the chains could show that they were saving the publishers money--say, by reducing distribution or warehousing costs--then perhaps they could ask for a better wholesale deal, Slauson said.
Both New York-based Barnes & Noble and Ann Arbor, Mich.-based Borders Group declined to comment directly on the lawsuit but released statements saying their business operations are within the bounds of accepted industry practices. In the U.S., Barnes & Noble runs 480 superstores as well as 528. B. Dalton stores, and Borders operates 200 superstores and 900 Waldenbooks.
The dispute may not be a clear-cut David-and-Goliath fight. The combined market share of Barnes & Noble and Borders stores, including mall-based stores and superstores, is only 25%, said analyst Maureen McGrath at Salomon Smith Barney in New York. “They don’t control the market.”
“The public winds up voting with their pocketbook, and they haven’t had any problems so far with the chains,” said John Lyons, an analyst with ABN AMRO in New York who follows book retailers.
But small retailers argue that what’s at stake is the loss of choice for consumers.
Shares of Barnes & Noble fell 13 cents to close at $38.94, while Borders shares rose 81 cents to $32.44. Both trade on the New York Stock Exchange.
