Nearly a year ago, I praised an objection Judge Alex Kozinski filed — as a consumer, not a judge — to a proposed class action settlement that he was a part of, and so I was dismayed to see a recent article noting Judge Kozinski’s complaint that “There’s a tendency for lawyers to buy themselves off” in class actions.
He’s missing the forest for the trees: whatever the problems of class actions, the “tendency” we need to worry about isn’t that plaintiffs’ lawyers might be able to settle these cases too soon, but that the cases aren’t filed at all because they’re too hard to win, even in the face of blatantly illegal conduct.
If you’re from the Philadelphia area, you know that the tallest building in the City is the Comcast Center, begun in 2005 and completed in 2008 at a cost of $540 million. What you may not know is that Comcast’s customers paid for the whole thing (and more) by way of a glaring antitrust violation.
Between 1998 and 2002, Comcast’s share of the “Philadelphia designated marketing area” — i.e., the surrounding counties of Pennsylvania, New Jersey, and Delaware* — grew from 23.9 percent to a whopping 77.8 percent. (See this brief, page 2.) In four years, Comcast went from controlling less than a quarter of the market to controlling over three-quarters of it. By 2007, Comcast still held 69.5 percent of the market.
Comcast wasn’t competing on price, and it didn’t grow that way by dramatically improving its services (I can tell you that from my personal experience!). Instead, it was buying entire cable companies within the Philadelphia area and swapping customers with other cable systems, like Time Warner. As a statistician and econometrician later established by comparing prices in the Philadelphia area to prices in comparable areas, Comcast’s anticompetitive behavior cost Philadelphia consumers a whopping $875,576,662 in inflated prices.
In December 2003, five customers and eight law firms filed an antitrust complaint against Comcast. The antitrust damages for any one customer aren’t much — probably under $1,000 for most — so the case was filed as a class action on behalf of all the customers in the area. Thus, before the case could reach the issue of whether or not Comcast actually violated antitrust laws, the case has to decide whether and how customers could bring their case as a class action.
Comcast unsurprisingly fought a war of attrition, so that the District Court didn’t get to class certification until May 3, 2007. Thereafter, the Third Circuit decided In re Hydrogen Peroxide Antitrust Litigation, 552 F.3d 305 (3d Cir. 2008), prompting the District Court to go back around to re-certify the class again on January 7, 2010. Then the case was appealed, and the Third Circuit upheld the class certification on August 23, 2011 in Behrend v. Comcast Corp., 655 F.3d 182 (3d Cir. 2011). The Supreme Court granted certiorari, and issued its opinion on March 27, 2013.
That is, it took almost ten years to sort out whether 2 million current and former Comcast subscribers apparently bilked out of nearly a billion dollars could bring their claims as a class action. It reminds me of a case I argued earlier this year in front of the Third Circuit involving investors defrauded by a gigantic bank. The bank’s lawyer was trying to explain to the panel of judges why the bank had waited nearly two years after litigation was filed to bother arguing that it felt my client’s case had been filed in the wrong court, and in the course of that argument he claimed there was a difference between “calendar time” and “litigation time.” In “litigation time,” he argued, a big company could let issues sit unresolved for months, even years, without consequence. (Thankfully, I won, and the Third Circuit held the bank had engaged in an “unsavory tactical maneuver” by waiting so long.) Continue reading
If I told you that, every week, between 4,200 and 8,400 people were poisoned by contaminated food, would you say restaurants needed special protection from negligence lawsuits because fear of such lawsuits would force them to clean too much? “Defensive cleaning,” so to speak.
If I told you that, every week, between 4,200 and 8,400 people were killed in fires caused by bad electrical wiring, would you say electricians needed special protection from negligence lawsuits because fear of such lawsuits would force them to insulate too much? Call it, “defensive wiring.”
Of course you wouldn’t. Thankfully, I made those numbers up: combined, foodborne illnesses and home electrical fires kill about 3,500 people per year. That’s one-hundredth as many people as the 210,000 and 440,000 patients killed each year by medical malpractice. But the “defensive medicine” myth — the claim that, when doctors are worried about getting sued, they start running unnecessary tests and doing unnecessary procedures, thereby increasing the health care costs for everyone — just won’t go away as a justification for “tort reform.”
The whole notion of “defensive medicine” has always been silly: doctors are held responsible for malpractice when they don’t do something required by the standard in the field that would have helped the patient. Doctors can’t be held accountable for not doing something that wouldn’t have made a difference. The notion has also always been misleading, too: as the Congressional Budget Office said a decade ago, “some so-called defensive medicine may be motivated less by liability concerns than by the income it generates for physicians…,” a point repeatedly echoed by others even in the medical field like Atul Gawande.
Yet, a quick search of case law reveals the myth’s pervasive, ongoing effect on the legal system. There are the obnoxious defense “experts” deliberately making speeches in front of juries (Pin v. Kramer, 41 A. 3d 657, Conn. 2012), legislatures enacting special laws to hinder malpractice victims (Jackson v. HCA Health Services, 383 SW 3d 497, Tenn. 2012), and federal judges who should know better than accepting the myth at face value when deciding federal tort law (Gipson v. US, 631 F. 3d 448, 7th Cir. 2011). Continue reading
A lawyer has two jobs. First, the lawyer thinks about how the law might work, good or bad, in their client’s situation, and then tells their client. Second, the lawyer brings others around to ideas about the law that are good for their client.
Outside my office, there’s a poster of the brilliant xkcd comic “Up Goer Five,” in which the various complicated parts of the Saturn V Moon Rocket are “explained using only the ten hundred words people use the most often.” As the comic explains, the “US Space Team’s Up Goer Five” is “the only flying space car that has taken anyone to another world.”
It is an amusing joke, juxtaposing one of the greatest engineering feats of humanity with a kindergarten-level vocabulary. It also carries an important reminder about the limitations of language: rightly or wrongly, words have different meanings for different people. (“Inconceivable!”) The first paragraph of this post won’t win any awards, but the vast majority of the population can read it and understand it: it is written at a 7th grade level with every word being one of the “ten hundred” most often used words except for law, lawyer, and client. You can check it with the Up-Goer Five Text Editor and the Hemingway Editor — in fact, you might want to check all of your writing with both of those tools.
Lawyers are routinely attacked for their use of language: just last week, the Chronicle of Higher Education noted sardonically, “Only two classes of people, it seems, stick up for the adverb: young adults and members of the bar.” (I’ll gladly stand up for adverbs: a lawyer should not needlessly omit them.) Yet, few professions agonize so thoroughly over language as the law. Back in August, the American Bar Association’s journal for young lawyers had an issue devoted to writing. It’s worth a review by all lawyers, including those who fancy themselves great writers. If you’re going to read only one article, make it Michael Bess’ pithy “How To Write Better.”
Similarly, although advice about writing never goes out of style — writers like to write about writing, no surprise there — there seems to be a bit more chatter devoted to the subject thanks to the recent promotion of Steven Pinker’s The Sense of Style. As The New York Times’ review summarized:
The cause of most bad writing, Pinker thinks, is not laziness or sloppiness or overexposure to the Internet and video games, but what he calls the curse of knowledge: the writer’s inability to put himself in the reader’s shoes or to imagine that the reader might not know all that the writer knows — the jargon, the shorthand, the slang, the received wisdom.
Yes, indeed. As Judge Richard Posner began his contribution to the aforementioned ABA article, “Successful communication requires the communicator to understand how much the person or persons to whom he is communicating understands.”
What I try to remember as a legal writer is that an ounce of empathy for the reader is worth a pound of grammar and vocabulary. Continue reading
Back in June, I wrote a short post on the fatal accident involving a Walmart truck plowing through traffic on the New Jersey Turnpike. It hit a charter bus carrying comedian Tracy Morgan and several of his friends and fellow comedians, including James McNair, who died in the crash. As I said then, “Walmart has responded with typical corporate doublespeak, promising to do ‘the right thing,’ at least to the extent the law forces them to do so.” Consider me jaded after enough years in this job: when a big corporation hurts someone and says they’ll do “the right thing,” they typically mean they’ll drag the injured person through years of litigation before paying as little as they can to resolve the claim.
Unsurprisingly, Morgan sued. Earlier this week, Walmart, represented by LeClairRyan, filed its Answer to Morgan’s Complaint, kicking off a firestorm with its “Eighth Affirmative Defense,” which alleged that Morgan’s and his friends’ injuries “were caused, in whole or in part, by plaintiffs’ failure to properly wear an appropriate available seatbelt restraint device.” Even Mashable, which is not known for its reporting on truck accident lawsuits, jumped into the fray. The Hollywood Reporter, Esq., has some more details about the Answer and the status of the case as a whole.
As Morgan said in a statement, “I can’t believe Walmart is blaming me for an accident that they caused.” Walmart responded, in turn, “As part of the ordinary course of legal proceedings, Walmart filed an initial response yesterday to the lawsuit that included facts and defenses that may impact the case moving forward.”
In one sense, Walmart is right: its Answer is indeed the “ordinary course of legal proceedings” for every major corporation or insurance company that finds itself defending an injury lawsuit. But that just raises a bigger question: why do we allow for-profit companies to reflexively claim they’re unaccountable when they hurt people? When someone abdicates responsibility because they want to save money, I don’t consider that “ordinary,” I consider it blameworthy, deplorable, disgraceful, indefensible, and unacceptable. Continue reading
When it comes to lawyer “war stories,” I agree with Philip Thomas: “The only stories about a lawyer that other lawyers want to hear are funny stories.” That said, cautionary tales have an important place in the law school curriculum: learning to “think like a lawyer” includes understanding how and why lawyers screw up. How else are law students supposed to learn just how dire the consequences can be?
Via the ABA Journal and the WSJ Law Blog, I saw a new law review article called, “This is Your Brain on Law School: The Impact of Fear-Based Narratives on Law Students.” Beginning and ending with Aristotle quotes,* lawprof Abigail Patthoff tackles the question of how law professors should use cautionary tales to ensure students take home the right messages. By way of social science research into the “extended parallel process model,” Patthoff concludes, “the listeners who are most fearful following a fear appeal are also the listeners who are least likely to benefit from the fear appeal.” Thus, given law students’ pre-existing high anxiety levels, law professors should use fear-inducing cautionary tales “sparingly, carefully, and never without an accompanying efficacy message.”
Patthoff argues law professors should give fewer cautionary tales because “the combined weight of a semester’s worth of threats may, after a while, cause students’ perceptions of the threats to outweigh their perceptions of their ability to avoid those threats,” and that “law professors should attempt to soften both the perceived severity and perceived susceptibility aspect of cautionary tales” by using neutral, impersonal language. The point, she says, is to ensure law students won’t be so anxious and overwhelmed that they either develop an emotional coping mechanism (e.g., “this won’t happen to me”) or ignore the message completely.
Part of her argument is indisputable. Patthoff says that, when professors give a cautionary tale from the law, they shouldn’t just scare law students, but should “articulate the recommended response — even if that response seems obvious.” Indeed, a “cautionary tale” is of little use if it is given without any clear guidance to the student to help them avoid making the same mistake.
But there’s a problem: given the dearth of practical experience among law professors (a problem that is getting worse over time), what advice do they have? Patthoff gives several exemplar “cautionary tales,” but they all involve rudimentary issues that are easily addressed, like, as she notes, “consult the local rules and the Bluebook before filing a brief.” These are not the sort of serious problems that can cause true mischief in lawyer’s careers. A real cautionary tale would look more like this precedential Third Circuit opinion from last week, in which the court reinstated a fraud case against BASF and Cahill Gordon & Reindel alleging they “conspired to prevent thousands of asbestos-injury victims from obtaining fair tort recoveries for their injuries” by destroying and concealing evidence. Continue reading
I represent clients in the consolidated Actos litigation, and so I’m well-versed with the science linking the drug’s use to bladder cancer. As the federal court overseeing the litigation held in a Daubert order, there’s ample scientific evidence demonstrating that even just one year of Actos use can increase the risk of bladder cancer. So, the headline at MedPage on August 29, 2014 was quite a surprise: “No Actos Cancer Link in Long Term Data.” I assumed that the headline reflected some new scientific study showing the absence of a link to bladder cancer.
Then I read the actual article:
A 10-year analysis of patients with type 2 diabetes treated with pioglitazone (Actos) found no statistically significant increased risk of bladder cancer, either with any exposure or for long duration of use, the drug’s manufacturer said.
Emphasis mine. As the article continues:
No association with bladder cancer was seen in the 10-year data with higher cumulative doses of the drug or with longer time since initiation of therapy, Takeda [the company that makes Actos] said.
Other details were not released. Takeda promised that the full results would be submitted for publication and shared with regulatory authorities in the U.S., Europe, and Japan.
The refusal to release “other details” kind of says it all, doesn’t it? You can say smoking doesn’t cause lung cancer if you don’t bother to release the “other details” explaining why you think so. The timing is just a bit suspicious as well: they released that statement on the same day the court upheld a multi-billion-dollar punitive damages judgment against them, a judgment based on part on Takeda hiding a link between Actos and bladder cancer.
The essence of science, as Richard Feynman explained decades ago, is whether our guesses about how the world works agree with our observations about how the world actually works. To tell whether a particular hypothesis lines up with the real world, you need to see the details of both the guess and the observation — which, I suppose, explains why the manufacturer of Actos doesn’t want to show us those details.
The old saying, “There are three kinds of lies: lies, damned lies, and statistics,” applies nowhere so forcefully as when a for-profit company is describing the safety of its own product. Unfortunately, the rich, complex world of epidemiology gives companies more than enough mathematical and scientific tools to pretend that their products are safe. The math behind “pharmacovigilance” (i.e., the epidemiological monitoring of drugs to look for problems) is insanely complicated, so that seemingly small changes — a “misreported” case here or there, or perhaps a slight tweak to the Bayesian filter used — can completely change the outcome.
And that’s why I’m so disappointed with MedPage Today. A statement by a for-profit company about its product without any supporting analysis or data to back it up isn’t “science” or “medical news,” it’s just marketing.
This week marks the 20th anniversary of the verdict in the Stella Liebeck v. McDonald’s hot coffee case. Abnormal Use has for years been one of the few places where people could find genuine information about the case itself, rather than just commentary about the case, the great majority of which is based upon misunderstood or mischaracterized facts. They’ve put up with a series of posts reflecting on the case’s enduring legacy.
They kindly let me step up on their soapbox for a day to give a plaintiff’s perspective. Here’s how my post begins:
Medical malpractice has killed more Americans in the past week than Ebola has killed worldwide since the first recorded outbreak in 1976. Two months ago, a Wal-Mart truck driver who had been awake for 25 hours, as permitted by company policy, plowed into a van full of comedians. But when it comes to tort law, those issues stand in the long shadow of a 49-cent cup of coffee served a week afterWayne’s World hit theaters.
It shouldn’t be that way, but it is, and so there is use in continued legal anthropology of the Liebeck v. McDonald’s case. That said, I’m not going to make another argument for the damage that misunderstandings about the Stella Liebeck case have done to the civil justice system. Go watch “Hot Coffee“ or read Priceonomics. Instead, I’m going to review the case as if it was just another personal injury case.
Read the rest at: “What If Liebeck v. McDonald’s Was Just Another Case?“
Earlier this week, I wrote about lawyers obstructing discovery by responding to discovery interrogatories themselves, either by letter or by an unverified response, rather than by having their client answer. Federal Rule of Civil Procedure 33(b) makes clear that’s just plain wrong.
When it comes to requests for production of documents (or electronically-stored information), the Rules are a bit more intricate — but, when used properly, more powerful.
Unlike Rule 33, Rule 34 (relating to requests for production of documents and electronically stored information) has no similar requirement that the party sign the responses. Thus, a lawyer may indeed sign responses to document requests. But a lawyer signs the response subject to Rule 26(g):
(1) Signature Required; Effect of Signature. Every disclosure under Rule 26(a)(1) or (a)(3) and every discovery request, response, or objection must be signed by at least one attorney of record in the attorney’s own name—or by the party personally, if unrepresented—and must state the signer’s address, e-mail address, and telephone number. By signing, an attorney or party certifies that to the best of the person’s knowledge, information, and belief formed after a reasonable inquiry:
(A) with respect to a disclosure, it is complete and correct as of the time it is made; and
(B) with respect to a discovery request, response, or objection, it is:
(i) consistent with these rules and warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law, or for establishing new law;
(ii) not interposed for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation; and
(iii) neither unreasonable nor unduly burdensome or expensive, considering the needs of the case, prior discovery in the case, the amount in controversy, and the importance of the issues at stake in the action.
(2) Failure to Sign. Other parties have no duty to act on an unsigned disclosure, request, response, or objection until it is signed, and the court must strike it unless a signature is promptly supplied after the omission is called to the attorney’s or party’s attention.
Again, the rule leaves little doubt: every response must be signed — which means a vague letter generally discussing discovery is insufficient, as are a variety of boilerplate objections without a real answer — and the signing is a certification by the lawyer that the production is consistent and adequate.
As I’ve written before, even well-intentioned lawyers can sometimes deceive themselves into lying in service of their clients. The financial and practical incentives can be quite large for some lawyers to become a “truth shield” for their clients by exaggerating “facts” about discovery, and by feigning ignorance (or by intentionally remaining ignorant) about the evidence in the clients’ possession.
But the Rules account for those possibilities, and keep lawyers in their rightful place. As Rule 26(g) continues in subsection (3):
(3) Sanction for Improper Certification. If a certification violates this rule without substantial justification, the court, on motion or on its own, must impose an appropriate sanction on the signer, the party on whose behalf the signer was acting, or both. The sanction may include an order to pay the reasonable expenses, including attorney’s fees, caused by the violation.
When lawyers think of sanctions in federal court, they tend to think of Rule 11 (for false statements in filings) or 28 U.S.C. § 1927 (which allows sanctions against a lawyer who “multiplies the proceedings in any case unreasonably and vexatiously”), but Rule 26(g)(3) is more potent than either. Unlike Rule 11, Rule 26(g)(3) includes no “safe harbor” allowing a lawyer to correct an offending document. Unlike § 1927, which says a court may sanction a lawyer for obstructing the proceedings, Rule 26(g)(3) says the court must sanction a lawyer for filing an improper certification.
There’s also no “bad faith” requirement, either. A lawyer can run into mandatory sanctions, without any safe harbor, for an inadequate investigation of their client’s documents. As recently explained by Magistrate Judge Terence P. Kemp in Brown v. Tellermate Holdings Ltd., 2014 U.S. Dist. LEXIS 90123 (S.D. Ohio July 1, 2014), copy available at ediscoverylaw.com:
Those sanctions can be imposed if an attorney fails in his or her “duty to make a reasonable investigation to assure that their clients have provided all available responsive information and documents.” Bernal v. All American Investment Realty, Inc., 479 F.Supp.2d 1291, 1333 (S.D. Fla. 2007). This rule, like the parallel provisions of Fed.R.Civ.P. 11, contains “an objective standard” governing the reasonableness of counsel’s actions, see National Ass’n of Radiation Survivors v. Turnage, 115 F.R.D. 543, 555 (N.D. Cal. 1987), so that counsel may not simply plead lack of subjective good faith as a way to avoid sanctions. “An attorney has made a ‘reasonable inquiry’ if the ‘investigation undertaken by the attorney and the conclusions drawn therefrom are reasonable under the circumstances…. Ultimately, what is reasonable is a matter for the court to decide on the totality of the circumstances.'” Quinby v. WestLB AG, 2005 U.S. Dist. LEXIS 35583, 2005 WL 3453908, *4 (S.D.N.Y. Dec. 15, 2005), quoting the 1983 Advisory Committee Notes to Rule 26.
On the basis of those principles, the Court in Tellermate Holdings awarded sanctions against the attorneys for the responding party, which had tried every trick in the book, from “failure either to learn or communicate the truth about matters related to discovery,” to “counsel’s failure to make the reasonable inquiries required by Rule 26(g),” to a “document dump … largely consisting of irrelevant and unresponsive documents,” to the excessive designation of documents as “Attorney’s Eyes Only.”
In short, Rule 34 allows a lawyer to stand in for their client in responding to discovery, but, when a lawyer does so, they are representing to the opposing party and to the court that they have done a reasonable investigation to assure that their clients have provided all available responsive information and documents.
A couple weeks ago, I wrote about how lawyers abuse “meet and confer” requirements to obstruct civil discovery. This time, let’s talk about lawyers obstructing discovery by responding to discovery interrogatories themselves, rather than by having their client answer.
It’s a common progression of events:
1. Lawyer A serves a bunch of interrogatories on Lawyer B.
2. Lawyer B responds with a bunch of boilerplate objections. (See my prior post for more.)
3. Lawyer A threatens to file a motion to compel.
4. Lawyer B “answers” some of the requests either:
a. by sending a letter that generally discusses discovery (rather than a formal discovery answer actually answering the specific interrogatories) or
b. by serving a formal discovery answers signed by the lawyer (rather than signed by the party).
Tellingly, small and mid-sized casualty insurance firms that litigate and try cases all day long rarely insult plaintiff’s counsel intelligence or the court’s time with such nonsense. I wish I could say the same of the big corporate law firms I’ve dealt with, but they seem to do this as a matter of routine, repeatedly sending vague letters about discovery that never answer the discovery requests. Often, they act insulted when I gently point out that their vague letters and emails mean far less to me than their client’s sworn answers.
It may seem pedantic to just quote the Rules at length, but I have come to believe that a significant percent of lawyers — including highly-paid litigators — either haven’t read the rule or don’t care about their contents. Continue reading
I read a lot of book-related publications and blogs, and thus I have endured weeks of Hachette-versus-Amazon posts, as the publishing giant has wrangled with the online retail giant over the terms of their contract. Perhaps unsurprisingly, the writers and publications with ties to the “Big Five” in the publishing industry have sided with Hachette, whereas the commenters to the articles and the blogs (most of which are presumably customers of books) tend to wonder why a garden-variety dispute between two big companies over money is being billed as the downfall of civilization.
I ignored most of these articles until I read Steve Wasserman’s* op-ed in The Nation — which argues “the time has come for closer scrutiny and regulation of a company that, like Standard Oil a century ago, provides an indispensable service for a modern economy and a healthy culture” — and I just couldn’t take it anymore. For the sake of our “modern economy” and “healthy culture,” we must stop calling Amazon a “monopoly.”
Please don’t misunderstand: I believe in the vigorous enforcement of antitrust laws in all industries. I’ve written before about how the Supreme Court wrongly decided Bell Atlantic v. Twombly, which made it harder to begin antitrust cases of any sort, and wrongly decided Comcast v. Behrend, which made it harder to win antitrust claims on behalf of consumers. I wrote before that the Bush Administration’s policy was “that anti-monopoly law was so dead there was no point in the Justice Department even bothering to enforce it,” and I applauded when the Obama Administration rescinded that policy and took seriously the threat of monopolies.
But we can’t be cavalier about accusations of “monopoly” or “predatory pricing,” or we risk diluting the terms and losing sight of real antitrust violations. Amazon is neither a “monopoly” nor a “monopsony.”
A “monopoly” is when one supplier of a particular product or service is able to control the market. That does not remotely describe Amazon: the vast majority of books sold by Amazon are supplied by someone else, i.e., the publisher, and those same books are available elsewhere. As Hachette’s own statement on the Amazon dispute says:
HBG’s titles are widely and immediately available on barnesandnoble.com, powells.com, booksamillion.com, walmart.com, target.com, overstock.com, and in thousands of great chain and independent bookstores across the country.
It is rather hard to have a “monopoly” over sales of something when the exactly same product is also sold online, through the largest retailers in the country, and through “thousands” of independent stores.
A “monopsony” is when one buyer of a particular productive or service is able to control the market. (Consider, for example, if there were several commercial airplane manufacturers, but only one commercial airline.) “Monopsony” is potentially a better fit for Amazon than “monopoly,” because Amazon’s real pricing power is that it can push a hard bargain with publishers when it buys the ebooks, whereas with consumers Amazon sells the books at or below the prevailing market prices. And, indeed, publishers feel obligated to deal with Amazon given its position as the largest retailer of ebooks.
But the claim just doesn’t hold up. In a monopsony, the monopsonist refrains from buying to force the suppliers to start discounting against one another (because there are no other buyers), until they are no longer making a profit. That simply isn’t the case here. First, the publishers have total control over where they sell their ebooks, and they exercise that power: the “Big Five” chose to not participate in Amazon Unlimited. Second, the ebooks are available all over the place, like Walmart and Target. Apple, for example, has used the feud as an opportunity to discount Hachette’s books. There’s nothing wrong with Apple doing that: this is competitive capitalism working for the benefit of consumers, as it should.
Even if a company is not a monopolist or monopsonist, it can engage in predatory pricing — but Amazon didn’t. Wasserman claims, “the Obama Justice Department, seemingly mesmerized by visions of a digital utopia, is oddly blind to the threat to publishing posed by Amazon’s growing monopoly,” and concludes, “A serious Justice Department investigation is past due.” But the Justice Department already investigated Amazon as part of the Apple case, and they published the results two years ago.
Back in 2012, as part of the settlement with the Big Five publishers for their admitted collusion with Apple to raise prices, the Justice Department solicited public comment, receiving hundreds of comments, including from Barnes & Noble, the Authors Guild, and the American Booksellers Association. As the Justice Department summarized in its response to the comments, the most common complaint against Amazon is that it sometimes charges too little for ebooks, and that “that lower pricing will mean reduced profits for bookstores, authors, literary agents, and publishers, and an eventual reduction in quality, service, variety, and other benefits to consumers.”
In response, the Justice Department explained — I know this is a long blockquote, but it’s the root of the issue — on page 21-22:
The United States recognizes that many of the comments reflect a concern that a firm with the heft of Amazon may harm competition through sustained low or predatory pricing. In the course of its investigation, the United States examined complaints about Amazon’s alleged predatory practices and found persuasive evidence lacking. As is alleged in the Complaint, the United States concluded, based on its investigation and review of data from Amazon and others, that “[f]rom the time of its launch, Amazon’s e-book distribution business has been consistently profitable, even when substantially discounting some newly released and bestselling titles.” Compl. ¶ 30.
Some of the criticism directed at Amazon may be attributed to a misunderstanding of the legal standard for predatory pricing. Low prices, of course, are one of the principal goals of the antitrust laws. Cf. Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 340 (1990). This is because of the unmistakable benefit to consumers when firms cut prices. Id. “Loss leaders,” two-for-one specials, deep discounting, and other aggressive price strategies are common in many industries, including among booksellers. This is to be celebrated, not outlawed. Unlawful “predatory pricing,” therefore, is something more than prices that are “too low.” Antitrust law prohibits low prices only if the price is “below an appropriate measure of . . . cost,” and there exists “a dangerous probability” that the discounter will be able to drive out competition, raise prices, and thereby “recoup its investment in below-cost pricing.” Brooke Group v. Brown and Williamson Tobacco Corp., 509 U.S. 209, 222-24 (1993). No objector to the proposed Final Judgment has supplied evidence that, in the dynamic and evolving e-book industry, Amazon threatens to drive out competition and obtain the monopoly pricing power which is the ultimate concern of predatory pricing law. The presence and continued investment by technology giants, multinational book publishers, and national retailers in e-books businesses renders such a prospect highly speculative. Of course, should Amazon or any other firm commit future antitrust violations, the United States (as well as private parties) will remain free to challenge that conduct.
This is basic antitrust law. Professor John Kirkwood recently agreed in his article, “Collusion to Control a Powerful Customer: Amazon, E-Books, and Antitrust Policy.” As he wrote, “considerable evidence suggests that Amazon was engaged in loss leading, not predatory pricing. … Amazon was almost certainly using loss leading not as a predatory device but as an efficient promotional tool, drawing consumers to its website to buy products they might not otherwise purchase.”
But sometimes an ounce of common sense is worth a pound of legal analysis. Consider this part of Onnesha Roychoudhuri’s article calling for increased regulation:
What’s a book lover to do? Hachette authors have taken the fight online, calling their readers to boycott Amazon. In spirit, I’m all for a boycott, but given Amazon’s size and ubiquity, we’re not going to buy our way out of this, and we shouldn’t. The idea that we can spend our way to a more just world reduces us in value to the money we’ve got in our wallets. Nor should the responsibility lie solely with us as consumers. And that’s where regulation comes in.
What sense does that make? If you don’t like how Amazon deals with ebook publishers, then stop buying ebooks from them! A boycott is exactly the right idea — vote with your wallets! Amazon is not Bell Telephone. Amazon is not Standard Oil. Amazon is not the Hollywood studio system.** If you don’t want to deal with them, you don’t have to; the fact that everyone, from publishers to consumers, continues to want to deal with Amazon is proof enough that they’re not abusing a monopoly position, they’re just doing a better job.
* Wasserman, says his bio, “served as editorial director of Times Books and publisher of Hill & Wang, an imprint of Farrar, Straus & Giroux. He is a past partner of the Kneerim & Williams Literary Agency and is currently editor at large for Yale University Press.”
** Wasserman gives one example of “precedent,” United States v. Paramount Pictures, Inc., which broke up Hollywood’s studio system. There, the Hollywood studios (i.e., the suppliers), conspired to preclude independent theaters from showing their films, thereby controlling the theater market. It is indeed precedent: it’s similar to what the ebook publishers did to Amazon by refusing to sell their books to it except on very specific terms.