American Booksellers Ass'n v. Barnes & Noble

Citation135 F.Supp.2d 1031
Decision Date19 March 2001
Docket NumberNo. C-98-1059 WHO.,C-98-1059 WHO.
CourtU.S. District Court — Northern District of California
PartiesAMERICAN BOOKSELLERS ASSN., INC., et al., Plaintiff, v. BARNES & NOBLE, INC., et al., Defendants.
OPINION AND ORDER

ORRICK, District Court.

In this antitrust action brought by the American Booksellers Association on behalf of all California members ("ABA") and twenty-seven independent bookstores1 against various defendants associated with Barnes & Noble, Inc. ("the Barnes & Noble defendants")2 and Borders Group, Inc. ("the Borders defendants")3, three motions are currently before the Court. The Barnes & Noble defendants move for summary judgment, and the Borders defendants join in that motion. The Borders defendants, joined by the Barnes & Noble defendants, move for partial summary adjudication with respect to distribution center discounts, the statistical reserve program, and cooperative advertising allowances for placement. Plaintiffs move for partial summary judgment on defendants' "no harm to competition" and functional discount defenses. For the reasons set forth below, the motions are granted in part, and denied in part.

I.

In this action, the ABA and twenty-seven independent bookstores allege that defendants receive secret discounts and other favorable terms from book publishers and distributors that are not available to independent bookstores. Plaintiffs contend that these practices harm competition in the book industry, and violate the Robinson-Patman Act (15 U.S.C. § 13(f)), the California Unfair Trade Practices Act (Cal. Bus. & Prof.Code § 17045 et seq.), and the California Unfair Competition Law (Cal. Bus. & Prof.Code § 17200 et seq.).

II.

The Court will begin with the motion for summary judgment filed by the Barnes & Noble defendants, and joined in by the Borders defendants. In that motion, defendants move for summary judgment on all of plaintiffs' claims against them, on various grounds.

Defendants' first argument is that plaintiffs cannot show that any of the discounts received by defendants caused any actual injury to any of the individual plaintiffs. This argument is directed primarily at the economic model constructed by plaintiffs' expert, Dr. Franklin Fisher ("Fisher"), although defendants also contend that plaintiffs have no other evidence of causation.

Defendants' second argument is that plaintiffs cannot show that the retail distribution center ("RDC") discounts received by defendants violate the Robinson-Patman Act. Defendants argue that plaintiffs cannot show that the RDC discounts are not lawful functional discounts, or that defendants knew that they were not lawful functional discounts. Defendants also argue that plaintiffs cannot show that the RDC discounts are not cost-justified, or that defendants knew that they were not cost-justified.

Defendants' third argument is that plaintiffs cannot show that the discounts and incentives granted to defendants by Ingram Book Company ("Ingram") were not cost-justified, or that defendants knew that they were not cost-justified.

Defendants' fourth argument is that plaintiffs cannot assert a claim against them for receipt of discriminatory promotional allowances, as a matter of law. In the alternative, defendants argue that plaintiffs cannot show that the promotional allowances were not lawful functional discounts, or that defendants knew that they were not lawful functional discounts.

Defendants' fifth argument is that plaintiffs cannot show that defendants received unlawful discriminatory credit terms, or that defendants knew that they received unlawful discriminatory credit terms.

Defendants' sixth argument is that summary judgment should be granted in favor of defendants' Internet and mail order defendants because plaintiffs cannot prove causation or damages with respect to those defendants.

Defendants' seventh argument is that summary judgment should be granted for defendants with respect to the other alleged discounts not addressed in their motion for summary judgment because those discounts are relatively so small that they could not have caused antitrust injury or damage to plaintiffs.

A.

The Court will begin its analysis by reviewing the elements of a claim for violation of the Robinson-Patman Act. Under the Robinson-Patman Act, it is unlawful for any person engaged in commerce, ... either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, ... where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them[.]

15 U.S.C. § 13(a) (Robinson-Patman Act § 2(a)). The Robinson-Patman Act also prohibits buyers from receiving or inducing price discrimination from sellers. "It shall be unlawful for any person engaged in commerce, in the course of such commerce, knowingly to induce or receive a discrimination in price which is prohibited by this section." 15 U.S.C. 13(f) (Robinson-Patman Act § 2(f)). In this case, plaintiffs contend that the Barnes & Noble and Borders defendants violated § 2(f) by knowingly receiving unlawful discounts from book publishers.

An action for damages for violation of the Robinson-Patman Act is set forth in 15 U.S.C. § 15.

[A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee.

Id.

"[B]uyer liability under § 2(f) is dependent on seller liability under § 2(a)." Great Atlantic & Pac. Tea Co. v. FTC, 440 U.S. 69, 77, 99 S.Ct. 925, 59 L.Ed.2d 153 (1979). "Under the plain meaning of § 2(f), therefore, a buyer cannot be liable if a prima facie case could not be established against a seller or if the seller has an affirmative defense." Id. at 76, 99 S.Ct. 925.

Thus, in order to obtain damages for violation of § 2(f) of the Robinson-Patman Act, each plaintiff must show:

1. Two or more contemporaneous sales by the same seller to the plaintiff and a competing buyer;

2. At different prices;

3. Of commodities of like grade and quality;

4. Where at least one of the sales was made in interstate commerce;

5. The price discrimination had the requisite effect upon competition generally;

6. The competing buyer knew the price discrimination was unlawful; and

7. The price discrimination caused injury to the plaintiff. Rutledge v. Electric Hose & Rubber Co., 511 F.2d 668, 677 (9th Cir.1975) (citations omitted); Automatic Canteen Co. of Am. v. FTC, 346 U.S. 61, 73, 73 S.Ct. 1017, 97 L.Ed. 1454 (1953). Each plaintiff seeking damages must make "some showing of actual injury attributable to something the antitrust laws were designed to prevent." J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 562, 101 S.Ct. 1923, 68 L.Ed.2d 442 (1981). Each such plaintiff "must, of course, be able to show a causal connection between the price discrimination in violation of the Act and the injury suffered." Id. (quoting Perkins v. Standard Oil Co., 395 U.S. 642, 648, 89 S.Ct. 1871, 23 L.Ed.2d 599 (1969)).

In order to obtain an injunction for violation of § 2(f) of the Robinson-Patman Act, each plaintiff does not need to prove that it was actually injured by the unlawful price discrimination. Instead, the plaintiffs must show only that there is a reasonable possibility that the price discrimination may harm competition; this reasonable possibility of harm is referred to as "competitive injury." Falls City Indus., Inc. v. Vanco Beverage, Inc., 460 U.S. 428, 434-35, 103 S.Ct. 1282, 75 L.Ed.2d 174 (1983). Competitive injury "is established prima facie by proof of a substantial price discrimination between competing purchasers over time." Id. at 435, 103 S.Ct. 1282. "[T]his inference may be overcome by evidence breaking the causal connection between a price differential and lost sales or profits." Id. "Unless rebutted by one of the Robinson-Patman Act's affirmative defenses, a showing of competitive injury as part of a prima facie case is sufficient to support injunctive relief, and to authorize further inquiry by the courts into whether the plaintiff is entitled to treble damages[.]" Id.

B.

Defendants' first argument is that plaintiffs cannot show that any price discrimination received by defendants caused actual injury to plaintiffs, other than through a defective economic model constructed by plaintiffs' expert, Dr. Franklin M. Fisher (the "Fisher model"). Defendants contend that the Fisher model is fatally flawed in numerous ways.

Plaintiffs have previously informed the Court that "[p]laintiffs' proof of actual injury attributable to the defendants' conduct will be presented through a single expert witness, Dr. Franklin Fisher, who will present an economic simulation model that automatically accounts for individualized events and factors that...

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