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AMERICAN BOOKSELLERS ASS'N v. BARNES & NOBLE

March 19, 2001

AMERICAN BOOKSELLERS ASSN., INC., ET AL., PLAINTIFF,
V.
BARNES & NOBLE, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Orrick, District Court.

    OPINION AND ORDER

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.

I.

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.).

II.

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 grounds.

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 of causation.

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 cost-justified.

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 credit terms.

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.

A.

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 them[.]

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 attorney's fee.

Id.

"[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 S.Ct. 925.

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;

2. At different prices;

3. Of commodities of like grade and quality;

4. Where at least one of the sales was made in interstate commerce;

5. The price discrimination had the requisite effect upon competition generally;

6. The competing buyer knew the price discrimination was unlawful; and

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 599 (1969)).

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.

B.

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.)

1.

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.

2.

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. 1923).

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 273:16-274:5.)

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 not justified.

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 not interchangeable).

3.

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 the 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.

4.

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 plaintiffs.

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 model thus artificially limits the relevant market in which plaintiffs and defendants compete.

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." Id.

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 received caused 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 relevant market).

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.

5.

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.

6.

7.

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.

a.

Section 17045 provides:

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' unlawful conduct).

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 this argument.

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.

b.

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.

III.

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 discounts.

The Court will begin with the Borders' defendants motion for partial summary judgment, joined by the Barnes & Noble defendants.

A.

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 ...


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