June 11, 1999 BTW Gets Inside Story from FTC Chair The rapid endgame that led to Barnes & Noble's June 2 decision to drop its planned acquisition of the Ingram Book Group was quite a contrast to many industry predictions. Since the news of the deal was first announced last November, many industry pundits said that the vertical merger would ultimately pass Federal Trade Commission muster. B&N's move came a day after press reports had stated that the FTC staff would recommend to the full commission that it not approve the deal because it would violate U.S. antitrust law. In an interview with BTW last week, FTC Chair Robert Pitofsky acknowledged that "it was pretty widely known" that this vertical merger would be challenged, and he provided additional insight into the commission's analysis of the proposed purchase. Pitofsky explained that although the government has not litigated a vertical merger in a long time, and it's been an even longer time since the government won a challenge to one in court, the FTC's analysis left it ready to move against the proposed deal. "Our main concern was that the relatively small bookstores and the small chains could be disadvantaged," explained Pitofsky. Specifically, he noted that the FTC recognized that the deal would put independent booksellers' "number-one supplier in the hands of their number-one competitor." Additionally, Pitofsky said that the commission also took into account the possible effects of the deal on e-commerce. He noted that despite the addition of distribution centers, Amazon.com is "still dependent on Ingram," and, further, looking ahead, he said that the FTC questioned "where will the next [online] party turn to for a supplier of books?" Pitofsky characterized the thousands of telephone calls and more than one hundred thousand petition signatures from consumers protesting the planned acquisition as "quite unusual," adding that "this was more than almost any other instance I can recall." He also told BTW that he believed that because the deal involved books, authors, and the reading public, First Amendment issues were at stake, and that "I'm influenced by this." For instance, he noted that the FTC heard from some smaller publishers that "they depend on the small bookstores to reach their audience" and that they would suffer without a strong independent bookseller network. Regarding the news leak that preceded B&N's decision, Pitofsky said, "I'm always unhappy about that," adding that "the process profits from people maintaining confidentiality until the very end." He dismissed the theory that the FTC had used a leak to push B&N toward a decision, contending that "I don't believe [the leak] came from the FTC" and explained that "Barnes & Noble is entitled to know not just what the staff is recommending but why."--Dan Cullen Topics: B&N/Ingram, News - Bookselling,