June 04, 1999 The Deal Is Dead In a stunning turn of events, on June 2, Barnes & Noble abandoned its $600 million purchase of Ingram Book Group, the nation's largest book wholesaler. Since Barnes & Noble first announced its intentions last November, the deal had come under fire from independent booksellers, as well as other competitors and industry players. The move came a day after numerous press reports stating that the Federal Trade Commission staff would be recommending to the full commission that it not approve B&N's proposed acquisition of Ingram because it violates U.S. antitrust law. In a statement released on the day of B&N's decision, ABA said that it was, "pleased that the proposed acquisition of the Ingram Book Company by Barnes and Noble, Inc. has been withdrawn, and is extremely gratified that the Federal Trade Commission recognized that this transaction would have had a devastating impact on the retail marketplace for books." ABA noted that "it was clear that the Federal Trade Commission conducted a complete and thorough investigation and heard the concern of booksellers, consumers, and others about the threat that this proposed acquisition posed to diversity in the marketplace" and added that "the grassroots efforts of booksellers--including a letter-writing campaign to the Federal Trade Commission, multiple communications with members of Congress, and a petition drive opposing the acquisition which collected over 125,000 customer signatures--proved, we believe, invaluable to this process." [The full text of the statement can be found here and may be reproduced..] In an interview with the New York Times, Robert Pitofsky, chairman of the Federal Trade Commission, said that he and his staff had concluded that the purchase would have been harmful to competition for three reasons: 1) Since Ingram would be owned by a major competitor (B&N), it would be dangerous for small booksellers to rely on them as their wholesaler, 2) It could make it difficult for booksellers who sell books on the Internet to find the books they need for their customers, and 3) Since Barnes & Noble has its own wholesale facility that competes with Ingram, there was also a "horizontal component" to be concerned with. Pitofsky seemed relieved, however, that Barnes & Noble had withdrawn its bid to buy Ingram. "This would not have been a slam dunk case," he said in an interview with the Times. "The government and this agency haven't won a vertical merger case in 20 or 25 years. These are not easy cases." Independent booksellers, led by ABA, had opposed the acquisition, arguing that it could permit B&N to delay delivery of important books to independent bookstores and other competitors. They also feared the merger would provide B&N with access to the buying patterns of independent booksellers. [Click here for a synopsis of the efforts of booksellers and others] Senator Ron Wyden (D-Ore.), who responded to a number of requests from booksellers in his home state by asking the FTC to conduct a thorough review of the acquisition, commented that "small bookstores need to be in a position to get the same treatment as the big guys in order to compete, and when you have one of the big retailers--Barnes & Noble--merging with a key player in the chain of supply, that makes it very tough for the small guys." It didn't take long for word to reach independent booksellers around the country. The following reactions (which BTW received by email from booksellers) were typical: "Great, great, great news. Gives me some renewed hope for the future," said one ABA member. Another noted, "We did it! How wonderful when 'the system' actually works!" [Click here for other bookseller reactions.] Some reactions, however, were less enthusiastic: "We don't have any regrets. None. Zero," said Leonard Riggio, CEO at Barnes & Noble, as reported by the New York Times. "I mean, I guess the emotion here is a combination of a sigh of relief and a feeling of perhaps frustration that something that should be an open-and-shut issue of business and law just gets confounded with emotion and innuendo." In a media release, the company noted that it will move "forward on alternative plans, including the building of two new distribution centers," in Reno, Nevada, and Memphis. John R. Ingram is reported in the Wall Street Journal as saying, "The FTC staff's view of the market appears to be shaped by the loudest voices instead of the rapidly changing realities of how and where people buy books." In a prepared release, he noted that "Ingram remains a strong company today with solid customer relationships and a loyal base of associates. For now, we plan to continue operating independently. We will continue to evaluate any opportunities that will help us better adapt to marketplace changes and strengthen services to our customers."--Richard T. Scott. Topics: News - Vendors, B&N/Ingram, News - Bookselling,