ABA Litigation Update, Day 1 -- April 9, 2001 By Hut Landon It's about time. After eight long years of litigation against discriminatory publisher practices, including three years of waiting for this trial to begin, independent booksellers finally have their day in court. The lawsuit brought by the ABA and 26 independent bookseller plaintiffs against Barnes & Noble and Borders began today and ABA attorney Douglas Young lost no time reminding the court what this case is about. In his opening statement, Young asserted that our lawyers would prove an entire litany of unfair trade practices perpetrated by the chains from 1994 to the present, ranging from unfair discounts to special returns, from shortage allowances to illegal co-op deals. And while he didn't offer many specifics in his introduction, the one example he presented was a reminder that this case is about a lot more than discounts. Here's the deal, presented in a scenario that all booksellers can relate to: You're an independent bookseller and you just received your latest Ingram statement. You've had a pretty good month, good enough that you decide to follow the advice printed on the invoice -- pay the bill within 10 days and get that extra 2% discount. You haven't sold all the books that arrived in that month, of course, but your cash flow is OK right now so you pay the bill and take the 2%. Good deal, right? Yes, but not as good as the deal Barnes & Noble and Borders get. They get that same monthly statement and get that same 2% discount offer, but they don't have to pay for 25 days -- a rather handy 15-day float. We've been hearing about secret deals for years; now, with this trial, we have an opportunity to verify what we've known in our hearts all along. Our lawyers are seeking to prove that the two chains have knowingly solicited terms, promotional deals, allowances, and discounts that were not available to independents and were in violation of publishers' stated policies. If they can do that, then Judge William H. Orrick, in keeping with the spirit of the Robinson-Patman Act, can order injunctive relief. That would mean, basically, that the chains would have to stop doing what they're accused of doing. It would also allow the ABA to collect attorney fees from the defendants. One of the keys to the case will be proving that the chains knew what they were doing and that they knew or had reason to know it was wrong. In noting that, Young teased the court with reference to a Barnes & Noble internal e-mail describing non-public incentive payments, special add-ons, and non-public discount terms from publishers that ended with the caution against putting anything in writing "for legal reasons." Young also quoted a high-level Borders official who said, referring to a publisher's proposed terms change, "What they don't realize is that in a couple of years there may only be a couple of players left who will dictate the game on their terms." Young's 20-minute opening statement outlined the crux of the ABA's case, which is that independents have been competing in the marketplace following the guidelines of established publisher practices while Barnes & Noble and Borders have used myriad anti-competitive tools to drive business to their stores. No one denies that the chains have received preferential deals; the challenge for our side is to convince Judge Orrick, who is the sole arbiter in this trial, that the practices violate the law and should be stopped. After presenting his outline of the case and a scheduled list of witnesses, Young yielded to Barnes & Noble lead attorney Daniel Petrocelli and Borders chief lawyer Reginald Steer. As expected, both Petrocelli and Steer argued that their clients had done nothing wrong -- Steer went so far as to assert that Borders' success in the marketplace had to do primarily with innovative, unique retailing that caused customers to flock to their doors and set them apart from other bookstores. For his part, Petrocelli made it clear that he will attack the integrity of the ABA Book Buyer's Handbook, or Red Book, as the accepted source of publisher terms and practices. Following the opening statements, we called our first witness -- Rhett Jackson of The Happy Bookseller in Columbia, South Carolina. Jackson had the unenviable task of establishing the details and minutia of our industry for the record, from explaining how and when he orders from publishers versus wholesalers to defining the difference between trade cloth, trade paperback, and mass market books -- complete with visual aids! But the questioning also established Jackson as an experienced and savvy bookseller who pays all the bills and understands discount schedules. He made it clear that he uses the Red Book as it is intended to be used, as a representation of publishers' established discount prices. In cross-examining Jackson, Petrocelli sought to devalue the Red Book, pointing out all the special deals -- stock offers, trade show specials, etc. -- that were not described in the book. Presumably, his intention was to build a case that just because a discount given to B&N wasn't in the book did not mean it didn't exist or wasn't legal. But Jackson's answers pointed out the flaw in that presumed argument. He reminded Petrocelli that, whether in the Handbook or not, all special deals he was aware of were publicized to booksellers through mailings, faxes, or sales reps and were available to all bookstores. No secrets. Petrocelli also asked Jackson if he had ever called publishers trying to solicit better deals than those published in the Handbook. Jackson said no. Why not, asked Petrocelli? Because, said Jackson, it never occurred to him that there would be a better discount than the ones submitted by the publishers for official publication to all booksellers. "I assumed the publishers had integrity, just as I have integrity," he stated. __________________________________________ To view past ABA Litigation Updates, click here. If you wish to receive ABA Litigation Update as a daily e-mail, send an e-mail to [email protected] and fill in the subject as "Opt-in to ABA Litigation Update." In the body of the e-mail, please indicate the address at which you would like to receive your e-mail if it is not the same one from which you are e-mailing us, and include the addresses of any of your colleagues who would like to receive these daily updates. Topics: Fair Trade (B&N, Borders), ABA Flash, About ABA,