News & Announcements

Simon & Schuster Secures Dismissal of Antitrust Class Action Regarding the Use of DRM Software

On December 9, 2013, Weil achieved a significant victory for Simon & Schuster, Inc. (“S&S”) in a putative antitrust class action, The Book House Of Stuyvesant Plaza, Inc. et al. v., Inc. et al. The putative class action was filed by a group of independent bricks-and-mortar bookstores against S&S, other major e-book publishers, and, alleging claims of unlawful agreements and monopolization in violation of the Sherman Antitrust Act. Ruling on motions to dismiss filed by S&S and the other defendants, Judge Rakoff in the U.S. District Court for the Southern District of New York found that the plaintiffs’ complaint was insufficient to support their antitrust claims and dismissed it with prejudice.

The action was initially commenced on February 15, 2013 by bookstores on behalf of a putative class of independent bricks-and-mortar bookstores that sell e-books. The complaint alleged that the defendant publishers, including S&S, entered into agreements with Amazon providing for the use of Digital Rights Management (“DRM”) software, and that Amazon’s DRM was purposely designed so that e-books purchased from Amazon could only be read on Amazon devices. The plaintiffs alleged that these restrictions favored Amazon unlawfully by creating an environment in which traditional independent bookstores could not sell e-books to Amazon Kindle owners. Specifically, the complaint alleged that S&S and the other publishers “confirmed, affirmed, and/or condoned” the restrictive DRMs used by Amazon and thus unlawfully restrained trade in the alleged market in violation of federal antitrust laws.

On December 9, 2013, Judge Rakoff granted motions to dismiss filed by S&S and the other defendants. The court agreed with the defendants’ argument that the complaint failed to show either that there was concerted action between the publishers and Amazon, or that any agreements constituted an unreasonable restraint of trade. Rather, the complaint only plausibly alleged an independent agreement between each publisher and Amazon to provide for DRM software to protect the publishers’ copyrights. The court noted that the plaintiffs had made only a vague allegation referring to the possibility that the publishers “may have had discussions” and collectively agreed with Amazon on the use of restrictive DRM. The court observed that “the evasiveness of this allegation is remarkable.” The court further found that the plaintiffs could not explain why the publishers would enter into these restrictive agreements, and agreed with the publishers’ response to the plaintiffs’ arguments distinguishing cases that the plaintiffs had offered to support their argument. The court also noted that the plaintiffs were not shut out from the e-book market, and were able to sell e-books through an arrangement in place with another e-books distributor, Kobo. Thus, according to the court, the plaintiffs’ complaint essentially argued that any agreement only affected the market for e-books on Amazon devices and apps, which the plaintiffs had not shown to be a relevant product market. Further, the court found that the complaint’s allegations were insufficient to support its claim that the alleged e-book market was sufficiently distinct from the sale of print books. For instance, the plaintiffs alleged that the publishers had market power in e-books by alleging their market share in print books. The court held that this undermined the alleged distinction between print books and e-books.

The Weil team includes attorneys from our New York and Washington offices, including New York partner Yehudah Buchweitz and associate Joseph Adamson and Washington associate Jeff White (elected to partner effective January 1, 2014).

This news appeared in the following outlets (may require registration/subscription):

  • Law360: Amazon, Publishers Dodge Bookstores' E-Book Antitrust Suit (December 9, 2013)
  • Global Competition Review: Judge pulps indie booksellers’ claims against Amazon and publishers (December 10, 2013)