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The Franchise Memorandum

Court Denies's Motion to Dismiss Tying Claim Brought by Putative Class of "Print on Demand" Publishers
Posted in Antitrust

A Maine federal court recently denied Amazon’s motion to dismiss an antitrust tying claim brought by a putative class of print on demand (“POD”) publishers., Inc. v., Inc., 2009 WL 2709396 (D. Me. Aug. 26, 2009). The court held that sufficiently pled that Amazon’s policy of refusing to allow POD books to be sold through its Direct Amazon Sales Channel unless those books were printed by a wholly owned subsidiary of Amazon constituted a per se tying violation under Section 1 of the Sherman Act.   

After Amazon acquired BookSurge, a company that provides printing services to POD publishers, Amazon gave POD publishers a choice: either agree to use BookSurge for printing services (BookSurge charged 20% more than a major competitor) or lose access to the Direct Amazon Sales Channel. 

The court denied Amazon’s motion to dismiss, finding that Booklocker had sufficiently pled that:  (1) the Direct Amazon Sales Channel (the alleged tying service) and BookSurge’s POD book printing service (the tied service) were two distinct services, even though POD publishers did not make an out-of-pocket payment for the Direct Amazon Sales Channel service; (2) a tying agreement existed since Amazon coerced at least four POD publishers into agreeing to use BookSurge; (3) Amazon had sufficient economic power; and (4) Amazon’s tie foreclosed a substantial amount of commerce in POD book printing services. 

What is interesting for manufacturers and franchisors about the Booklocker case is that the enhanced scrutiny of the adequacy of complaints required under the Supreme Court’s decisions in Twombly in 2007 and Iqbal this year did not lead to dismissal. While Twombly and Iqbal certainly will give ammunition to defendants seeking early dismissal of “implausible” claims, they do not amount to a free pass, even for alleged antitrust violations.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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