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AMERICAN BOOKSELLERS ASS'N v. BARNES & NOBLE
March 19, 2001
AMERICAN BOOKSELLERS ASSN., INC., ET AL., PLAINTIFF,
BARNES & NOBLE, INC., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Orrick, District Court.
In this antitrust action brought by the American Booksellers
Association on behalf of all California members ("ABA") and
twenty-seven independent bookstores*fn1 against various
defendants associated with Barnes & Noble, Inc. ("the Barnes &
Noble defendants")*fn2 and Borders Group, Inc. ("the Borders
defendants")*fn3, three motions are currently before the
Court. The Barnes & Noble defendants move for summary judgment,
and the Borders defendants join in that motion. The Borders
defendants, joined by the Barnes & Noble defendants, move for
partial summary adjudication with respect to distribution center
discounts, the statistical reserve program, and cooperative
advertising allowances for placement. Plaintiffs move for
partial summary judgment on defendants' "no harm to competition"
and functional discount defenses.
For the reasons set forth below, the motions are granted in
part, and denied in part.
In this action, the ABA and twenty-seven independent
bookstores allege that defendants receive secret discounts and
other favorable terms from book publishers and distributors that
are not available to independent bookstores. Plaintiffs contend
that these practices harm competition in the book industry, and
violate the Robinson-Patman Act (15 U.S.C. § 13(f)), the
California Unfair Trade Practices Act (Cal. Bus. & Prof.Code §
17045 et seq.), and the California Unfair Competition Law
(Cal. Bus. & Prof.Code § 17200 et seq.).
The Court will begin with the motion for summary judgment
filed by the Barnes & Noble defendants, and joined in by the
Borders defendants. In that motion, defendants move for summary
judgment on all of plaintiffs' claims against them, on various
Defendants' first argument is that plaintiffs cannot show that
any of the discounts received by defendants caused any actual
injury to any of the individual plaintiffs. This argument is
directed primarily at the economic model constructed by
plaintiffs' expert, Dr. Franklin Fisher ("Fisher"), although
defendants also contend that plaintiffs have no other evidence
Defendants' second argument is that plaintiffs cannot show
that the retail distribution center ("RDC") discounts received
by defendants violate the Robinson-Patman Act. Defendants argue
that plaintiffs cannot show that the RDC discounts are not
lawful functional discounts, or that defendants knew that they
were not lawful functional discounts. Defendants also argue that
plaintiffs cannot show that the RDC discounts are not
cost-justified, or that defendants knew that they were not
Defendants' third argument is that plaintiffs cannot show that
the discounts and incentives granted to defendants by Ingram
Book Company ("Ingram") were not cost-justified, or that
defendants knew that they were not cost-justified.
Defendants' fourth argument is that plaintiffs cannot assert a
claim against them for receipt of discriminatory promotional
allowances, as a matter of law. In the alternative, defendants
argue that plaintiffs cannot show that the promotional
allowances were not lawful functional discounts, or that
defendants knew that they were not lawful functional discounts.
Defendants' fifth argument is that plaintiffs cannot show that
defendants received unlawful discriminatory credit terms, or
that defendants knew that they received unlawful discriminatory
Defendants' sixth argument is that summary judgment should be
granted in favor of defendants' Internet and mail order
defendants because plaintiffs cannot prove causation or damages
with respect to those defendants.
Defendants' seventh argument is that summary judgment should
be granted for defendants with respect to the other alleged
discounts not addressed in their motion for summary judgment
because those discounts are relatively so small that they could
not have caused antitrust injury or damage to plaintiffs.
The Court will begin its analysis by reviewing the elements of
a claim for violation of the Robinson-Patman Act. Under the
Robinson-Patman Act, it is
unlawful for any person engaged in commerce, . . .
either directly or indirectly, to discriminate in
price between different purchasers of commodities of
like grade and quality, . . . where the effect of
such discrimination may be substantially to lessen
competition or tend to create a monopoly in any line
of commerce, or to injure, destroy, or prevent
competition with any person who either grants or
knowingly receives the benefit of such
discrimination, or with customers of either of
15 U.S.C. § 13(a) (Robinson-Patman Act § 2(a)). The
Robinson-Patman Act also prohibits buyers from receiving or
inducing price discrimination from sellers. "It shall be
unlawful for any person engaged in commerce, in the course of
such commerce, knowingly to induce or receive a discrimination
in price which is prohibited by this section." 15 U.S.C. § 13(f)
(Robinson-Patman Act § 2(f)). In this case, plaintiffs contend
that the Barnes & Noble and Borders defendants violated § 2(f)
by knowingly receiving unlawful discounts from book publishers.
An action for damages for violation of the Robinson-Patman Act
is set forth in 15 U.S.C. § 15.
[A]ny person who shall be injured in his business or
property by reason of anything forbidden in the
antitrust laws may sue therefor in any district court
of the United States in the district in which the
defendant resides or is found or has an agent,
without respect to the amount in controversy, and
shall recover threefold the damages by him sustained,
and the cost of suit, including a reasonable
"[B]uyer liability under § 2(f) is dependent on seller
liability under § 2(a)." Great Atlantic & Pac. Tea Co. v. FTC,
440 U.S. 69, 77, 99 S.Ct. 925, 59 L.Ed.2d 153 (1979). "Under
the plain meaning of § 2(f), therefore, a buyer cannot be liable
if a prima facie case could not be established against a seller
or if the seller has an affirmative defense." Id. at 76, 99
Thus, in order to obtain damages for violation of § 2(f) of
the Robinson-Patman Act, each plaintiff must show:
1. Two or more contemporaneous sales by the same seller to the
plaintiff and a competing buyer;
3. Of commodities of like grade and quality;
4. Where at least one of the sales was made in interstate
5. The price discrimination had the requisite effect upon
6. The competing buyer knew the price discrimination was
7. The price discrimination caused injury to the plaintiff.
Rutledge v. Electric Hose & Rubber Co., 511 F.2d 668, 677 (9th
Cir. 1975) (citations omitted); Automatic Canteen Co. of Am. v.
FTC, 346 U.S. 61, 73, 73 S.Ct. 1017, 97 L.Ed. 1454 (1953). Each
plaintiff seeking damages must make "some showing of actual
injury attributable to something the antitrust laws were
designed to prevent." J. Truett Payne Co. v. Chrysler Motors
Corp., 451 U.S. 557, 562, 101 S.Ct. 1923, 68 L.Ed.2d 442
(1981). Each such plaintiff "must, of course, be able to show a
causal connection between the price discrimination in violation
of the Act and the injury suffered." Id. (quoting Perkins v.
Standard Oil Co., 395 U.S. 642, 648, 89 S.Ct. 1871, 23 L.Ed.2d
In order to obtain an injunction for violation of § 2(f) of
the Robinson-Patman Act, each plaintiff does not need to prove
that it was actually injured by the unlawful price
discrimination. Instead, the plaintiffs must show only that
there is a reasonable possibility that the price discrimination
may harm competition; this reasonable possibility of harm is
referred to as "competitive injury." Falls City Indus., Inc. v.
Vanco Beverage, Inc., 460 U.S. 428, 434-35, 103 S.Ct. 1282, 75
L.Ed.2d 174 (1983). Competitive injury "is established prima
facie by proof of a substantial price discrimination between
competing purchasers over time." Id. at 435, 103 S.Ct. 1282.
"[T]his inference may be overcome by evidence breaking the
causal connection between a price differential and lost sales or
profits." Id. "Unless rebutted by one of the Robinson-Patman
Act's affirmative defenses, a showing of competitive injury as
part of a prima facie case is sufficient to support injunctive
relief, and to authorize further inquiry by the courts into
whether the plaintiff is entitled to treble damages[.]" Id.
Defendants' first argument is that plaintiffs cannot show that
any price discrimination received by defendants caused actual
injury to plaintiffs, other than through a defective economic
model constructed by plaintiffs' expert, Dr. Franklin M. Fisher
(the "Fisher model"). Defendants contend that the Fisher model
is fatally flawed in numerous ways.
Plaintiffs have previously informed the Court that
"[p]laintiffs' proof of actual injury attributable to the
defendants' conduct will be presented through a single expert
witness, Dr. Franklin Fisher, who will present an economic
simulation model that automatically accounts for individualized
events and factors that affected the plaintiff bookstores during
the complaint period." (Summ. of Argument and Evidence Re: Pls.'
Mem. in Opp'n to Defs.' Joint Notice of Mot. and Mot. for
Severance of the Eight California Pls. and the American
Booksellers Association, filed Oct. 26, 2000, at 3.)
Defendants' argument that the Fisher model is inadequate to
prove actual injury to the individual plaintiffs provides no
support for granting summary judgment on plaintiffs' claim for
injunctive relief under the Robinson-Patman Act.
Claims for injunctive relief are governed by 15 U.S.C. § 26,
which provides, in relevant part:
Any person, firm, corporation, or association
shall be entitled to sue for and have injunctive
relief, in any court of the United States having
jurisdiction over the parties, against threatened
loss or damage by a violation of the antitrust
laws, including sections 13, 14, 18 and 19 of this
title, when and under the same conditions and
principles as injunctive relief against threatened
conduct that will cause loss or damage is granted
by courts of equity[.]
As the Court has already noted, plaintiffs do not have to show
that they suffered actual injury in order to obtain injunctive
relief under the Robinson-Patman Act. Instead, plaintiffs must
show only that there is a reasonable possibility that the
unlawful price discrimination received by defendants may harm
competition. Falls City, 460 U.S. at 434-45, 103 S.Ct. 1282.
Defendants do not address this test in their motion for summary
judgment. Thus, defendants' motion for summary judgment is
denied with respect to plaintiffs' claim for injunctive relief.
The Court turns to plaintiffs' claims for damages under the
Robinson-Patman Act, which do require a showing of actual
injury. J. Truett Payne, 451 U.S. at 562, 101 S.Ct. 1923. In
analyzing the Fisher model, the Court will keep in mind the
"`traditional rule excusing antitrust plaintiffs from an unduly
rigorous standard of proving antitrust injury.'" Texaco Inc. v.
Hasbrouck, 496 U.S. 543, 573, 110 S.Ct. 2535, 110 L.Ed.2d 492
(1990) (quoting J. Truett Payne, 451 U.S. at 565, 101 S.Ct.
Defendants contend that the Fisher model ignores the
requirements that each defendant and each plaintiff make
reasonably contemporaneous purchases of like grade and quality
from the same seller at different prices. It is important to
note that defendants do not move for summary judgment on these
elements of a Robinson-Patman Act claim. Rather, defendants
contend that Fisher's failure to take these elements into
account in constructing his model makes his conclusion that the
discounts received by defendants harmed plaintiffs, as well as
his conclusions about the amount of damages suffered by the
plaintiffs, fatally flawed.
The Fisher model compares an average differential calculated
from the actual prices defendants paid for books from
twenty-seven publishers and three wholesalers against the terms
set forth in an annual buyer's guide entitled the "ABA Book
Buyer's Handbook" (which the parties also refer to as the
"Redbook"). (DeBruin Decl. Ex. 10, Fisher Decl. Ex. A (Fisher
Expert Report) at 11 124 and 12 ¶ 27.) Fisher assumes that
plaintiffs will testify that they purchase books pursuant to the
discount schedules in the Redbook. (Id. at 12 ¶ 27.) Thus,
although the Fisher model takes into account actual prices that
defendants paid to certain publishers and wholesalers, it does
not take into account actual prices plaintiffs paid to
publishers and wholesalers. (Lobdell Decl. Ex. W, Fisher Dep. at
As Fisher concededly made no effort to base his model on
actual purchasing data from plaintiffs, his model makes no
attempt to determine the actual prices paid by defendants and
plaintiffs for the same books from the same publishers at
reasonably contemporaneous times. Rather, it assumes that
plaintiffs and defendants bought books from the same publishers
at reasonably contemporaneous times, and that the Redbook price
was in effect at all times with respect to all of plaintiffs'
purchases. Fisher also assumes that
the Plaintiffs are buying from a group of — buying a
set of books that overlaps or is substitutable for
the books that Barnes & Nobles buys and then resells,
so that we can treat these . . . of like grade and
quality. They don't have to be the same books. They
don't even have to be from the same publisher.
(Lobdell Decl. Ex. W, Fisher Dep. at 270:10-17.)
Under the Federal Rules of Evidence, Fisher is permitted to
base his expert opinion on evidence that will be proved by other
witnesses at trial. Fed.R.Evid. 703 ("The facts or data in the
particular case upon which an expert bases his opinion or
inference may be those perceived by or made known to the expert
at or before the hearing."); id. 1972 Advisory Committee Notes
("Facts or data upon which expert opinions are based may, under
the rule, be derived from . . . presentation at the trial[.]").
Plaintiffs have submitted deposition testimony from the
plaintiff bookstores, in which they attest that they sometimes
refer to the Redbook, but also purchase books pursuant to
special seasonal discounts that are offered to all retailers.
(See, generally, DeBruin Decl. Ex. 2.) Some of the plaintiff
bookstores, however, buy some, but not all, of their books
pursuant to lower RDC discounts. (See, e.g.,
Lobdell Decl. Ex. II, Meskis Dep. at 428:11-18; id. Ex. DD,
Kepler Dep. at 146:18-24, 147:10-12.) From this evidence, it is
clear that Fisher's assumption that all plaintiffs purchase all
of their books pursuant to the terms set forth in the Redbook is
Plaintiffs have submitted declarations from the plaintiff
bookstores, in which they attest in detail that they frequently
and regularly purchase books from the same twenty-seven
publishers and three wholesalers from which defendants purchase
books. (See DeBruin Decl. Ex. 1.) It also appears to be
undisputed that defendants purchase nearly every book that is
available on the market. Pamela Bryant of Barnes & Noble
testified at deposition that "[c]urrently, we stock every title
a publisher has to offer." (DeBruin Decl. Ex. 30, Bryant Dep. at
88:17-18.) Roger Stefanski of Borders testified at deposition
that "Borders is buying virtually everything in the catalog in
order to give the customer the widest possible selection."
(Hohengarten Decl. Accompanying Notice of Errata Ex. 51,
Stefanski Decl. at 32:9-11.) The trier of fact could reasonably
conclude from this evidence that plaintiffs and defendants make
reasonably contemporaneous purchases from the same sellers.
There is also evidence that publishers offer standardized
discounts on entire lines of books, such as discounts on all
trade book or mass market books, rather than offering
individualized discounts on specific titles. (DeBruin Decl. Ex.
13, Expert Report of Gail See at 4.) Defendants do not appear to
dispute that they receive discounts that are not available to
plaintiffs. The trier of fact could infer from this evidence
that plaintiffs and defendants must have contemporaneously
bought books of like grade and quality from the same sellers at
different prices. There is no need to show that each plaintiff
bought a specific title at a greater price than that paid by
defendants for the same title at the same time. See, e.g., Moog
Indus.; Inc. v. FTC, 238 F.2d 43, 49-50 (8th Cir. 1956) (where
uniform discounts were given across entire lines of automobile
parts, it was not necessary to show that the parties purchased
the exact same part at the same time, even though the parts were
Defendants also correctly point out that the Fisher model
fails to even try to show that any discounts defendants received
from any individual publisher caused injury to any plaintiff.
Instead, the Fisher model uses an average price differential
that averages the discounts defendants receive from all
publishers and wholesalers for each year, and uses that number
to demonstrate injury to plaintiffs and the damages plaintiffs
allegedly suffered. (DeBruin Decl. Ex. 10, Fisher Decl. Ex. A
(Fisher Expert Report) at 11 ¶ 24 and 12 ¶ 27; Lobdell Decl. Ex.
W, Fisher Dep. at 245:4-249:4, 265:16-25.) By using this average
differential, the Fisher model fails to even attempt to show
that defendants' receipt of a discount from any particular
publisher caused injury to any plaintiff.
"[B]uyer liability under § 2(f) is dependent on seller
liability under § 2(a)." Great Atlantic, 440 U.S. at 77, 99
S.Ct. 925 (footnote omitted). Each plaintiff "`must, of course,
be able to show a causal connection between the price
discrimination in violation of the Act and the injury
suffered.'" J. Truett Payne, 451 U.S. at 562, 101 S.Ct. 1923
(quoting Perkins, 395 U.S. at 648, 89 S.Ct. 1871). Plaintiffs
have cited no law that permits them to average the effects of
the purportedly unlawful acts of many publishers and wholesalers
in order to show that, on average, plaintiffs were harmed by
defendants' receipt of the benefit of those violations. Because
Fisher model fails to show that discounts received by defendants
from any particular publisher or wholesaler harmed any of
plaintiffs, the Fisher model fails to show that any publisher's
discounts to defendants caused any actual harm to plaintiffs.
Defendants also contend that the Fisher model is fatally
flawed because it contains no empirical data or analysis to
support many of its key assumptions.
Defendants are correct that the Fisher Model does not take
into account the costs of the publishers and wholesalers. The
Fisher Model assumes that the entire difference between the
discounts granted to plaintiffs and the discounts granted to
defendants is unlawful. (Lobdell Decl. Ex. W, Fisher Dep. at
53:14-54:1.) It makes no allowance for the possibility that the
additional discounts granted to defendants may be functional
discounts or are costjustified in light of the publishers'
costs, because Fisher was asked to assume that the entire price
differential between defendants and plaintiffs was illegal.
(Id.) Thus, depending upon whether any of the publishers' or
wholesalers' discounts actually are cost-justified or functional
discounts, the Fisher model may overstate the actual unlawful
price differential between the prices paid by defendants and the
prices paid by plaintiffs. As a result, the damage calculations
are completely speculative.
Defendants are also correct that the Fisher model fails to
take into account the actual retail pricing policies of
plaintiffs or defendants and, thus, fails to show that any
discounts received by defendants were passed on to consumers.
Rather, it simply assumes that prices will be set in a way that
maximizes profits. (DeBruin Decl. Ex. 10, Fisher Decl. Ex. A
(Fisher Expert Report) at 64 ¶ 175.) By failing to determine
whether any of the discounts received by defendants actually are
passed on to consumers in the form of lower prices, the Fisher
model fails to show that those discounts caused any harm to
Defendants also complain that the Fisher model fails to
determine the relevant geographic markets in enough detail. The
Fisher model does attempt to take into account the competition
among plaintiffs, defendants, and other bookstores in specific
geographic markets. It generally assumes that plaintiffs compete
with other bookstores in the same city, or in some instances the
same county or metropolitan area. (Id. at 66 ¶ 184.) The model
also takes into account testimony from certain plaintiffs that
they compete with certain of defendants' stores that are not in
the same city or county, but are still nearby. (Id.; Lobdell
Decl. Ex. W, Fisher Dep. at 202:11-20.) Defendants are correct,
however, that the Fisher model does not attempt to measure the
actual extent to which stores in the same area compete with each
other, or to determine, for instance, whether there are natural
barriers such as highways or rivers between stores in the same
city that might reduce the degree to which they compete. (See,
e.g., Lobdell Decl. Ex. W, Fisher Dep. at 123:719.) Thus, the
Fisher model may over or underestimate the actual degree to
which the stores compete, and this potential error may also
affect the damage calculations.
The Fisher model also assumes that plaintiffs and defendants
are general book stores, and that they compete only with each
other. (DeBruin Decl. Ex. 10, Fisher Decl. Ex. A (Fisher Expert
Report) at 64 ¶ 185 and n. 94.) The Fisher model thus ignores
competition from Internet booksellers, and competition from
booksellers who are not general book stores (such as specialty
bookstores, price clubs, department stores, etc.). The Fisher
artificially limits the relevant market in which plaintiffs and
Defendants also correctly note that the Fisher model uses
arbitrary retention ratios to determine the extent to which
plaintiffs' and defendants' sales are affected by price changes.
At deposition, Fisher acknowledged that he arbitrarily set the
retention ratios at 0.5, without attempting to determine what
those ratios actually were in the real world. (Lobdell Decl. Ex.
W, Fisher Dep. at 316:1-10, 322:6-10.)
The Fisher model also assumes that the sales that defendants
would lose once their unlawful discounts were eliminated would
go to plaintiffs and other bookstores in direct proportion to
their share of the general bookstore market. (DeBruin Decl. Ex.
10, Fisher Decl. Ex. A (Fisher Expert Report) at 66-67 ¶ 186.)
This assumption disregards other factors that may affect the
distribution of defendants' lost sales, such as the distance
between defendants' stores and their competitors.
The Fisher model also calculates damages up through the
present day for five of the plaintiffs that closed during the
complaint period, but Fisher admitted at deposition that he made
no attempt to determine whether those stores closed because of
competition from defendants. (Lobdell Decl. Ex. W, Fisher Dep.
at 163:17164:24.) Fisher admitted that if those stores went out
of business for reasons that had nothing to do with defendants,
damages should not be awarded for the years after they closed.
(Id. at 166:17-25.)
Damages in antitrust cases do not have to be calculated with
certainty. "`[D]amages issues in these cases are rarely
susceptible of the kind of concrete, detailed proof of injury
which is available in other contexts.'" Hasbrouck, 496 U.S. at
573 n. 31, 110 S.Ct. 2535 (quoting J. Truett Payne, 451 U.S.
at 565-66, 101 S.Ct. 1923 (quoting Bigelow v. RKO Pictures
Inc., 327 U.S. at 264, 66 S.Ct. 574)). "The vagaries of the
marketplace usually deny us sure knowledge of what plaintiffs
situation would have been in the absence of the defendant's
antitrust violation." J. Truett Payne, 451 U.S. at 567, 101
S.Ct. 1923. The wrongdoer cannot "insist upon specific and
certain proof of the injury which it has itself inflicted."
On the other hand, "[w]hen an expert opinion is not supported
by sufficient facts to validate it in the eyes of the law, or
when indisputable record facts contradict or otherwise render
the opinion unreasonable, it cannot support a jury's verdict."
Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.,
509 U.S. 209, 242, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993). One of
the factors the Court must consider in determining whether to
admit expert testimony is whether it "`is sufficiently tied to
the facts of the case that it will aid the jury in resolving a
factual dispute.'" Daubert v. Merrell Dow Pharmaceuticals,
Inc., 509 U.S. 579, 591, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993)
(quoting United States v. Dowuing, 753 F.2d 1224, 1242 (3d
Cir. 1985)). "A court may conclude that there is simply too
great an analytic gap between the data and the opinion
proffered." General Elec. Co. v. Joiner, 522 U.S. 136, 146,
118 S.Ct. 512, 139 L.Ed.2d 508 (1997). "`[N]othing in either
Daubert or the Federal Rules of Evidence requires a district
court to admit opinion evidence that is connected to existing
data only by the ipse dixit of the expert.'" Kumho Tire Co.
v. Carmichael 526 U.S. 137, 157, 119 S.Ct. 1167, 143 L.Ed.2d
238 (1999) (quoting Joiner, 522 U.S. at 146, 118 S.Ct. 512).
The Fisher model contains entirely too many assumptions and
simplifications that are not supported by real-world evidence.
As a result, its conclusions that the discounts defendants
actual injury to the individual plaintiffs, and the amount of
damages caused by that injury, are entirely too speculative to
support a jury verdict. See, e.g., McGlinchy v. Shell Chem.
Co., 845 F.2d 802, 807-08 (9th Cir. 1988) (affirming summary
judgment for the defendants because district court properly
excluded "hopelessly flawed" damages studies that rested "on
unsupported assumptions"); City of Vernon v. Southern
California Edison Co., 955 F.2d 1361, 1371-73 (9th Cir. 1992)
(affirming summary judgment for the defendant where the
plaintiff submitted flawed damages model); Concord Boat Corp.
v. Brunswick Corp., 207 F.3d 1039, 10551057 (8th Cir. 2000)
(finding that expert testimony in antitrust case should have
been excluded because it did not incorporate all relevant
circumstances, ignored inconvenient evidence, and did not
separate lawful from unlawful conduct); Merit Motors, Inc. v.
Chrysler Corp., 569 F.2d 666, 673 (D.C.Cir. 1977) (affirming
exclusion of expert testimony in antitrust case because it made
unsupported assumptions about elasticities of demand in various
markets, and ignored the impact of other dominant forces in the
Plaintiffs cannot prove causation of actual injury without
Fisher's expert testimony, because only expert testimony can
demonstrate that any injury to plaintiffs was caused by
defendants' unlawful conduct, and not because of lawful
competition or other factors. Accordingly, defendants' motion
for summary judgment on plaintiffs' claims for damages under the
Robinson-Patman Act*fn4 is granted.
Even if the Fisher model were admissible to show causation of
the individual plaintiffs' alleged injuries, the Internet and
mail order defendants would still be entitled to summary
judgment on plaintiffs' damages claims under the Robinson-Patman
Act. The Fisher model relies entirely upon competition between
plaintiffs' and defendants' physical stores in the same
geographic location. It expressly does not purport to address
competition between plaintiffs and defendants' Internet sales
and mail order sales subsidiaries. (DeBruin Decl. Ex. 10, Fisher
Decl. Ex. A (Fisher Expert Report) at 16 ¶ 32.) The Fisher
expert report states:
Documents produced by defendants show that defendants
received favorable discounts on purchases of books
for resale through the Internet and for customer
special orders. However, at the time of writing this
report, there was not sufficient information to
quantify price differentials resulting from this term
of sale and they are omitted from the analysis.
(Id.) (footnote omitted). The Internet and mail order
defendants are Marboro Books Corp., Barnes & Noble Online, Inc.,
barnesandnoble.com llc, barnesandnoble.com, inc., and Borders
Online, Inc. As plaintiffs concededly have no evidence to show
that they were injured by differential discounts received by
defendants' Internet and mail order subsidiaries, summary
judgment is granted for those defendants on plaintiffs' claims
for damages under the Robinson-Patman Act, even if the Fisher
model were otherwise admissible to prove causation.
Defendants also move for summary judgment on plaintiffs' state
law claims for violation of the California Unfair Practices Act
(Cal. Bus. & Prof.Code § 17045), and the California Unfair
Competition Law (Cal. Bus. & Prof.Code § 17200 et seq.).
Defendants contend that plaintiffs' inability to prove causation
of actual injury to the individual plaintiffs through the Fisher
model also requires that summary judgment be granted for
defendants on the state law claims.
The secret payment or allowance of rebates,
refunds, commissions, or unearned discounts,
whether in the form of money or otherwise, or
secretly extending to certain purchasers special
services or privileges not extended to all
purchasers purchasing upon like terms and
conditions, to the injury of a competitor and where
such payment or allowance tends to destroy
competition, is unlawful."
Cal. Bus. & Prof.Code § 17045.
Section 17045 prohibits sellers from giving secret discounts
to certain purchasers when the discount "injures a competitor
and tends to destroy competition." ABC Int'l Traders, Inc. v.
Matsushita Elec. Corp. of Am., 14 Cal.4th 1247, 1256,
61 Cal.Rptr.2d 112, 116, 931 P.2d 290 (1997) (emphasis added); see
also Diesel Elec. Sales & Serv., Inc. v. Marco Marine San Diego,
Inc., 16 Cal.App.4th 202, 20 Cal.Rptr.2d 62 (1993) (element of
"injury to a competitor" is met when plaintiff demonstrates that
it lost sales and profits as a result of the defendants'
Defendants contend that plaintiffs cannot show that the
discounts defendants receive have a tendency to destroy
competition. In Diesel Electric, however, the court held that
"where one competitor is given a major pricing advantage over
another competitor, such pricing discrimination has an inherent
tendency to destroy competition." 16 Cal.App.4th at 213-14, 20
Cal.Rptr.2d at 68. As defendants do not dispute that they
received discounts that were not available to plaintiffs,
defendants' motion for summary judgment cannot be granted on
For the reasons set forth above in the discussion of the
Robinson-Patman Act claim, however, plaintiffs cannot show that
they suffered actual injury as a result of defendants' receipt
of allegedly unlawful discounts from publishers. Thus, they
cannot show the "injury to a competitor" element of their claim
for violation of § 17045, either. Accordingly, summary judgment
is granted for defendants on plaintiffs' claim for violation of
§ 17045 of the California Business and Professions Code.
Section 17200 of the California Business and Professions Code
defines "unfair competition" to include "any unlawful, unfair or
fraudulent business act or practice." Cal. Bus. & Prof.Code §
17200. By proscribing any unlawful business practice, § 17200
borrows violations of other laws and treats them as unlawful
practices that the unfair competition law makes independently
actionable. Cel-Tech Communications, Inc. v. Los Angeles
Cellular Tel. Co., 20 Cal.4th 163, 180, 83 Cal.Rptr.2d 548,
561, 973 P.2d 527 (1999). Section 17200, however, also prohibits
unfair or fraudulent business practices, even
if those practices are not specifically made unlawful by some
other law. Id.
Plaintiffs' claim for violation of § 17200 is based on both
unlawful and unfair business practices. (Second Am. Compl. ¶¶
122-126.) Plaintiffs allege that the differential discounts
received by defendants are unlawful because they violate the
Robinson-Patman Act, the California Unfair Practices Act, and §
5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a)(1).
(Second Am. Compl. ¶ 123.) Plaintiffs also contend that the
discounts are unfair, within the meaning of § 17200, because
they are harmful to plaintiffs, harmful to consumers, and
harmful to competition. (Id. ¶ 124.)
Defendants move for summary judgment on the § 17200 claim on
the sole ground that plaintiffs cannot state a claim for
violation of the Robinson-Patman Act or the Unfair Practices
Act. As plaintiffs' claim for injunctive relief under the
Robinson-Patman Act has survived defendants' motion for summary
judgment, their § 17200 claim necessarily survives as well.
Defendants' motion for summary judgment on plaintiffs' claim for
violation of § 17200 is denied.
Defendants also move for summary judgment as to whether
plaintiffs can show that certain discounts defendants receive
violate the Robinson-Patman Act. Before the Court can rule on
this part of their motion, however, it must decide two other
related motions for summary judgment filed by the Borders
defendants and by plaintiffs.
The Borders defendants, joined by the Barnes & Noble
defendants, move separately for partial summary judgment,
arguing that plaintiffs cannot challenge the RDC discounts
received by defendants, the discounts they received in the
Return of Goods program, or the amount of cooperative
advertising funds they received for product placement. The
Borders defendants contend that plaintiffs are collaterally and
judicially estopped from arguing that these discounts are
unlawful because plaintiffs signed consent decrees with
publishers in prior litigation that expressly approved the same
discounts that are at issue in this lawsuit.
Plaintiffs also move for summary judgment on defendants' claim
that the RDC discounts they receive are lawful functional
discounts. Plaintiffs argue that, as a matter of law, functional
discounts are available only to wholesalers. Plaintiffs contend
that defendants are retailers, not wholesalers and, thus, as a
matter of law, cannot claim to be receiving functional
The Court will begin with the Borders' defendants motion for
partial summary judgment, joined by the Barnes & Noble
In 1994, the ABA and five independent booksellers ("the New
York plaintiffs") — Dickens Books Ltd. d/b/a Harry W. Schwarz
Bookshops; B & R Books, Inc. d/b/a Little Professor Book Center
("B & R"); Olsson Enterprises, Inc.; Sam Weller's Zion Book
Stores, Inc. ("Sam Weller"); and Tattered Cover, Inc. ("Tattered
Cover") — sued a number of ...