Independent Booksellers Sue Big Chains
A group of independent booksellers accused the Barnes & Noble and Borders mega-chains on Wednesday of bullying publishers into giving them special advantages that are driving mom-and-pop operations out of business.
The American Booksellers Assn. and 26 independent stores, including nine in California, alleged in a lawsuit that the two chains have violated state and federal antitrust laws by surreptitiously securing deals with publishers that undercut wholesale prices for the large chains, and that the same deals were not 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, which was filed Tuesday in U.S. District Court in San Francisco.
Dutton said 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, ABA, a trade group made up of independent retailers, and six New York bookstores sued seven publishers over allegedly unfair business practices. The 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 first time independent retailers fought back against corporate giants,” ABA President Barbara Thomas said. “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 these two statutes, volume discounts, which the suit contends 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 Inc. and Ann Arbor, Mi.-based Borders Group Inc. declined to comment directly about 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, vice president of the investment banking division of ABN AMRO in New York who follows book retailers.
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.
