Copyright 1997 Chicago Sun-Times, Inc.  
Chicago Sun-Times
December 3, 1997,  WEDNESDAY,  Late Sports Final Edition

SECTION: FIN;  YOU AND THE LAW;  Pg. 72
LENGTH: 713 words

HEADLINE: A textbook case of bias in pricing

BYLINE: Steven P. Garmisa


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      Why are college textbooks so expensive? According to a lawsuit filed by the National Association of College Stores, college bookstores are victims of price discrimination by major textbook publishers.

When a book is ordered for classroom use, college bookstores typically get a 20 percent discount from publishers. But when the same book is ordered by other stores, according to the association, publishers give discounts ranging from 30 percent to 50 percent. The association argues that this price difference violates a federal law called the Robinson-Patman Act.

Since it was enacted in 1936, the Robinson-Patman Act has become the nation's most criticized antitrust law. While other antitrust laws are designed to protect free competition (such as by prohibiting monopolies and barring price-fixing agreements) the Robinson-Patman Act was designed to protect small businesses from the sometimes harsh consequences of competition. When Congress enacted the Robinson-Patman Act, the Great Atlantic & Pacific Tea Co. was unleashing a new concept called "supermarkets " across the country. With high-volume buying and selling, supermarkets had the economic clout to demand hefty discounts from suppliers. Small stores didn't have the power to demand the same discounts. Unable to compete, mom and pop grocery stores became an endangered species.

To protect small entrepreneurs, the Robinson-Patman Act makes it illegal for a company to sell the same product at the same time for different prices when the favored purchaser and the disfavored purchaser compete for the same business and there is a reasonable chance the price discrimination will result in substantially decreased competition.

Critics argue that the Robinson-Patman Act actually raises prices for consumers. But the statute has endured because of public distrust of big corporations and public affection for small entrepreneurs.

Small businesses are often on their own when it comes to enforcing the price discrimination law. In 1979, for example, the American Booksellers Association persuaded the Federal Trade Commission to launch an investigation into price discrimination by publishers against the small, independent bookstores that are threatened by the new breed of superstores. Sixteen years later, the FTC closed the investigation without issuing any conclusions about whether publishers violated the Robinson-Patman Act.

With the expense and difficulty of proving the amount of damages caused by price discrimination, a small business might not be able to afford to file a Robinson-Patman suit. But trade associations can sometimes pursue suits on behalf of their members. In the textbook case, for example, the association is asking for an injunction ordering the defendants to stop discriminating against college bookstores.

The publishers responded with a motion to dismiss the complaint. According to the publishers, the association can't pursue a lawsuit on behalf of its 3,000 members because the complaint doesn't allege there was actual competition between all the college bookstores and the superstores that got bigger discounts on textbooks.

Last month in New York, U.S. District Court Judge Shira Scheindlin issued her ruling on the motion to dismiss. When there is substantial price discrimination, Scheindlin said, judges and jurors can logically infer that the result will be decreased competition between favored and disfavored purchasers. The "closer question " was whether the complaint adequately alleged that the 3,000 members of the association were in direct competition with the superstores that got the bigger discounts.

The complaint alleges one of the retailers that benefits from the price discrimination is Amazon.com (the "virtual " bookstore on the Internet). According to the association, Amazon.com  --  which is available to every buyer with access to the Internet  --  is in competition with each of 3,000 college bookstores that belong to the association.

Since the complaint alleged that all of the college bookstores are in competition with one of the favored-purchasers, the motion to dismiss the complaint was denied.

Steven P. Garmisa, a partner in the Chicago law firm of Torshen, Spreyer, Garmisa & Slobig Ltd., specializes in civil litigation.

LANGUAGE: English

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Ralph R. Frasca, Ph.D. 2007