Holt Uncensored

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  #231
by Pat Holt

Sunday, April 22, 2001

 





ABOUT THAT SETTLEMENT

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Dateline: Cincinnati (not that you'd notice, sigh)

Well, I have to admit to a bit of paralysis setting in after I read about the quicker-than-quick settlement in the long-awaited American Booksellers-vs.-Borders/Barnes & Noble lawsuit.

Somehow it seems inappropriate if not fraudulent to send out a funny "Tuffy Visits the Knuckleheads" column from Ohio (see #230) as though everything is business-as-usual.

I don't know which I dislike more: Barnes & Noble exec Len Riggio for foppishly pretending the trial's outcome was a victory for the chains; or the media for referring to the settlement as a "major defeat" (New York Times) or "a crushing blow" (San Francisco Chronicle) to independent booksellers.

Even Publishers Weekly made it appear that fatcat lawyers were exchanging "smiles and backslaps" at the expense of their clients while Judge William Orrick sat back with a fatuous air congratulating all by saying, "I love statesmen."

Statesmen? Judge, this was a GIANT ADVERSARIAL BATTLE WE'VE BEEN WAITING YEARS TO SEE. Of the three lawsuits initiated by booksellers, this was the one in which DOCUMENTS WOULD BE PRODUCED that would NAIL THE CHAINS TO THE WALL O' SHAME and show the world that independent booksellers are the bedrock of the book biz, not chain bookstores or any other thug business that's out to dominate the world.

Further, this was a trial in which principle was at stake: Their ranks having been devastated by chain bookstores and their financial knees cut out from under by Barnes & Noble's and Borders' illegal deals and under-the-table discounts, not to mention antitrust violations and a lot of smarmy talk on the part of chain bookstores, independent booksellers would finally get their day in court.

And what happened?

Well, if you read the media, the independents caved. They took the little money offered, tried to say the case had already "reformed the industry" and got out before getting clobbered - not by the chains but by a "very negative judge," as Andy Ross of Cody's Books told this column on Friday.

I do think that's partly the point: Orrick fits the classic image of the stuck-in-his-ways judge who, at 87, appeared to misinterpret the issue as a bunch of little guys whining about the unfairness of volume discounts extracted by the big guys.

Orrick, according to Hut Landon, who covered the trial for the ABA, even "asked expert witness Gail See what was wrong with trying to get the best deal you could -- 'Isn't that what capitalism is all about?' he queried, as if the words Robinson-Patman didn't exist." Evidence of illegality abounded (see below), yet Orrick apparently missed it.

Orrick, by the way, is the same judge who drove attorney/bookseller Bill Petrocelli crazy during the first trial (Northern California Booksellers Association vs. paperback publishers) back in the 1980s. Even then "he was completely unsympathetic and rigid in his positions," remembers Ross.

Of course Petrocelli stuck with that trial for many YEARS, finally getting another judge, Thelton Henderson, to rule in one portion of the trial that the discount given to Avon was illegal, "This caused the mass market publishers to change their terms," says Ross, and voila: A victory in principle AND practice.

But this time no chance existed for an end run, given that the real "major blow" to the independents had been dealt by Orrick early on: His decision that plaintiffs could not seek damages (and therefore could not have a jury trial) skewed the case toward "injunctive relief." That meant that proof had to be shown of illegalities happening now, rather than illegalities that went back for years, causing damages so extreme that thousands of independents were forced to close.

The other point that is made brilliantly by the ABA report called "Trial Highlights" is that the chains really did get caught playing thug-bookseller by obtaining special discounts, allowances, chargebacks, incentives and rebates from publishers and wholesalers, many of which weren't being offered to independents. And they knew it.

For example:

** "A 'high-level Borders executive stated in an internal memo' that despite hope for a level playing field among booksellers, 'in a couple of years there may be only a couple of players left who will dictate the game on their own terms.' " Wow.

** "Barnes & Noble purchased books through a sham wholesaling arrangement with a small book wholesaler called Bookazine. Under this arrangement, Barnes & Noble acquired books directly from publishers at Bookazine's wholesaler discounts, less payment of a 'fee' to Bookazine."

** "In connection with this sham wholesaling arrangement, a Barnes & Noble employee wrote in an email that terms agreed with a publisher 'CANNOT be put in writing for legal reasons.' "

** "Trial testimony disclosed that Barnes & Noble tracked 'special deals' which were provided to Barnes & Noble only and not made available 'industry-wide.' "

** " . . . Both Barnes & Noble and Borders have received 42% or 43% discounts from Ingram Book Company (the largest and most widely used book wholesaler in the country) in circumstances in which independent bookstores received only a 40% discount."

** " . . . Ingram requires independent bookstores to pay their bills 10 days after the end of the month in order to receive a 2% cash discount, whereas Ingram permits Barnes & Noble and Borders to pay their bills 25 days after the end of the month and still receive the cash discount."

** "In an email, a Borders executive acknowledged that 'they [Ingram] are selling to us (and presumably B&N) at a rate different from the rate that they sell to every other bookstore in the country.'"

And the list goes on: take an eye-opening look at www.bookweb.org/home/news/btw/4541.html.

So! What a heartbreaker, eh? The ABA really did have the goods on B&N and Borders, yet just as certainly, the judge who denied them a jury trial was demonstrating in every way that he would rule against 'em.

WHAT THEY MIGHT HAVE DONE

I'm a believer in the court of public opinion, especially on the Internet, and I wonder what would have happened if the ABA had gone public with these documents, every minute of every day they were shown in court.

To show the world what the stakes were really all about, perhaps aggressive press releases might have been issued with headlines like this:

AMERICAN BOOKSELLERS 'SHOCKED' AT SECRET BARNES AND NOBLE MEMO

CHAIN STORES RECEIVING ILLEGAL DISCOUNTS, INDEPENDENT BOOKSELLERS SAY

BORDERS EMPLOYEE: 'ONLY A FEW PLAYERS [WILL BE] LEFT' AFTER INDEPENDENTS DRIVEN OUT OF BUSINESS

And like that.

Maybe this approach would have teed off the judge (no great loss) or the defendant chains (tee hee), but at least bookstore customers, independents throughout the land and, even, media covering the trial, would have noticed that the case was indeed standing for something important and meaningful to each one of us, long before the rug was pulled out from under.


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