Wednesday, May 28, 2008
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Court Rejects Challenge to Amazon’s Operation of Borders Website
By STEVEN M. ELLIS, Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday threw out an antitrust challenge to online bookseller Amazon.com’s agreement to operate the website of “brick-and-mortar” bookseller Borders Group Inc.
Concurring that Gary Gerlinger lacked standing to challenge the agreement under the Sherman Antitrust Act because the price he paid as a customer of Amazon to purchase books had actually gone down as a result of it, the court affirmed U.S. District Judge Marilyn H. Patel of the Northern District of California’s order dismissing the action.
The two retailers entered into the agreement in 2001 after Borders unsuccessfully tried to operate its own website.
Under the agreement, Borders’ website address directs shoppers to what is known as a mirror website, hosted by Amazon. The books purchased through the mirror website are sold and shipped by Amazon, and Borders receives a commission for each book sold, allowing it to tap the online market and Amazon to expand its customer base.
Direct Participation Abandoned
As part of the agreement, Borders abandoned its direct participation in the online market and agreed that it would not reenter the market during the term of the agreement, while Amazon agreed not to charge customers of the mirror site higher prices than it charged to customers on its own site.
Gerlinger challenged the former condition as a per se market allocation and the latter as price-fixing, both violations of the Sherman Act.
Both sides moved for summary judgment, but Amazon’s motion was supported by a declaration by one of its vice presidents showing five specific instances in which the company had lowered its pricing after the retailers entered into the agreement.
Gerlinger sought to depose the vice president, but declined Patel’s invitation to explain how the testimony would show that he suffered an injury necessary to confer standing under Article III. Instead, he submitted academic articles and asserted that prices would have been even lower had there been no agreement.
He also contended that no court could determine whether he had an injury until it reached the damages stage, but Patel disagreed. Finding that he lacked standing, she dismissed his claims with prejudice.
On appeal, the Ninth Circuit affirmed Patel’s conclusion in an opinion by Judge Mary M. Schroeder.
Market Allocation Claim
Examining Gerlinger’s market allocation claim, Schroeder first noted that he failed to establish a genuine issue as to whether he suffered an injury.
“Although Gerlinger asked for supplemental discovery to depose [the vice president], Gerlinger did not respond to the district court’s invitation to explain why he needed the discovery,” she wrote. “The academic articles he submitted did not establish that Gerlinger personally paid a higher price for a book as a result of the agreement. Nor did he show or even allege that he himself experienced any reduced selection of titles, poorer service or any other potentially conceivable form of injury.”
Turning to Gerlinger’s price-fixing claim, Schroeder noted that Patel had rejected it on the merits, but declined to examine the merits, again because Gerlinger failed to show any injury.
“He has not shown that he paid higher prices after the agreement than he would have paid otherwise,” she concluded.
Judge Jay S. Bybee and U.S. District Judge George H. Wu of the Central District of California, sitting by designation, joined Schroeder in her opinion.
The case is Gerlinger v. Amazon.com Inc., 05-17328.
Copyright 2008, Metropolitan News Company