UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
Index No. 98 Civ. 5564 (JSM)
COMPLAINT
(Jury Demand)
CLASS ACTION
THE INTIMATE BOOKSHOP, INC. and WALLACE KURALT,
Plaintiffs,
-against-
BARNES & NOBLE, INC.; BARNESANDNOBLE.COM INC.; BORDERS GROUP, INC.; BORDERS, INC.; WALDEN ACQUISITION COMPANY; AMAZON.COM, INC.; PENGUIN BOOKS USA INC.; PENGUIN PUTNAM, INC.; THE PUTNAM BERKLEY GROUP, INC.; and HARPER COLLINS PUBLISHERS, INC.,
Defendants.
Plaintiffs, The Intimate Bookshop, Inc. ("TIBI") and Wallace Kuralt ("Kuralt"), by their attorney, Carl E. Person, as and for their complaint, respectfully allege:
1. The jurisdiction of this Court to hear this Complaint is based upon the original jurisdiction of the Court to hear "any civil action or proceeding arising under any Act of Congress regulating commerce or protecting trade and commerce against restraint and monopolies," and, as hereinafter set forth, this controversy involves @@ 1, 2, 4, 4B, 7, 12 and 16 of the Clayton Act (15 U.S.C. @@ 12, 13, 15, 15B, 18, 22 and 26), @ 3 of the Robinson-Patman Act, 15 U.S.C. @ 13a, and 28 U.S.C. @ 1337. Plaintiffs sue for appropriate injunctive relief and to recover treble damages and other damages which the plaintiffs have sustained because of the violations by defendants of the above-cited statutes and other law, plus costs of suit and reasonable attorneys' fees. Also, plaintiffs seek to represent as a class (for damages and/or for purposes of the statute of limitations and certain factual findings relating to defendants' pricing practices and policies) all independent retail booksellers who were in business anywhere in the United States at any time during the 4-year period preceding the filing of this complaint (hereinafter, the "Independent Retail Booksellers").
2. This Court has original jurisdiction over the antitrust claims under 28 U.S.C. @ 1337(a), as hereinafter more fully appears. Plaintiffs also invoke the supplemental jurisdiction of this Court to consider claims arising under state law. Alternatively, plaintiffs are citizens of and (as to TIBI) incorporated in, North Carolina, and none of the defendants is a citizen of, or incorporated or having its principal place of business in, North Carolina. The claims of each plaintiff exceeds $75,000 against each of the defendants, exclusive of interest and costs. Jurisdiction also exists by reason of diversity of citizenship and the amount in controversy, 28 U.S.C. @ 1332(a).
3. A table of contents for this complaint follows:
4. The staggering growth of retail booksellers Barnes and Noble ("B&N") and Borders during the past few years has been fueled by (i) discriminatory pricing and rebate practices, (ii) discriminatory promotional and advertising programs, (iii) use of the illegal profits to build new retail stores intended to drive existing independent booksellers out of business, (iv) creation of unneeded retail shelf space, (v) sales below cost, (vi) use of the capital markets through increased market share to obtain further expansion capital, (vii) destruction of the viability of the nation's independent retail booksellers, (viii) coercion, intimidation and threats to all book publishers to provide B&N and Borders with whatever Discounts, Rebates and Deductions they demand without such payments or services being offered or made known to plaintiffs or other competing book retailers.
5. Additionally, B&N (through BarnesandNoble.com Inc.) and Amazon.com Inc. ("Amazon") have extended discriminatory practices and policies into internet website book sales, with B&N and Amazon obtaining a combination of pricing and services for their website transactions at a substantially lower rate than plaintiffs and other independent booksellers are obtaining from the same publishers and distributors or wholesalers.
6. The activities of the defendants have adversely affected the market for non-academic hardcover and softcover trade books and mass-market paperback books and other books typically carried in the independent retail booksellers in the United States (collectively, "books") in each state in the United States, causing (i) the intentional destruction of more than 50% of the 5,000 independent retail booksellers in existence four years ago; (ii) the severe financial weakening of almost all of the 2,500 or so remaining independent retail booksellers; (iii) the virtual elimination of any new independent retail booksellers; (iv) the domination of book publishers by B&N and Borders through their practices and policies; (v) the forcing of consolidation of book publishers to try to deal with the business and economic problems created for book publishers by B&N and Borders; (vi) the destruction of business values, employment, careers and domestic relationships; (vii) the reduction of the number of book publishers with the consequent loss of competition for authors, agents and other book publishers; and (viii) the threat of oligopoly pricing and practices in the book publishing and sales industries with resultant decline in the number and variety of titles, the decline in quality and service, and an increase in price for consumers and others.
7. Plaintiff, The Intimate Bookshop, Inc. ("TIBI") is a corporation organized in 1959 under the laws of North Carolina and has its principal place of business at 119 East Franklin Street, Chapel Hill, NC 27514, and at all relevant times has been in the business of selling non-academic trade and mass-paperback books at retail through a chain of up to as many as 13 retail stores located in as many as 10 cities in North Carolina, Georgia and Washington, D.C. Annual sales ending March 31, 1996 amounted to $11,500,000, but have declined presently to annual sales of less than $500,000.
8. Plaintiff, Wallace Kuralt ("Kuralt") is the founder, president and principal shareholder of TIBI. Kuralt resides in Chapel Hill, and has his business address at 119 East Franklin Street, Chapel Hill, NC 27514. Kuralt, as principal shareholder of TIBI, has suffered damages during the past several years beyond the decline in value of his stock ownership in TIBI. Kuralt has incurred costs and litigation expenses, and has made guarantees, payments and settlements on behalf of TIBI, amounting to approximately $1,250,000, in his effort to save TIBI's business and the value of his shares from the ongoing and increasing damages caused by defendants.
9. Defendant, Barnes & Noble, Inc. ("B&N"), is a corporation organized under the laws of New York and has its principal place of business and address at 122 5th Avenue, New York, New York 10003. B&N sells books through retail stores, mail and internet website transactions. B&N operates under various trade names and subsidiary corporations including: Barnes & Noble Bookstores, Barnes & Noble Superstores, Bookstop, Bookstar, B. Dalton Bookseller, Doubleday Book Shops, Scribner's Bookstores and BarnesandNoble.com Inc. (collectively "B&N"). B&N is selling books at retail in every state in the United States, and has various retail booksellers in or near the cities in which plaintiff's bookstores are or were located. B&N competes directly against TIBI and all other independent retail booksellers. B&N is the alter ego of each subsidiary owned by it, including BarnesandNoble.com Inc., and dominates and controls the practices and policies of each of its subsidiaries.
10. Defendant, BarnesandNoble.com Inc. ("B&N.com"), is a corporation organized under the laws of New York and has its principal place of business and address at 122 5th Avenue, New York, New York 10003. B&N.com is a newly-created corporation which offers and sells books to consumers in competition with TIBI and the other independent retail booksellers, and obtains its books from publishers and book distributors or wholesalers such as Ingram Book Company and Baker & Taylor, Inc. at discriminatory low prices and with services not available to TIBI and the other independent retail booksellers. Upon information and belief, B&N and B&N.com are selling books below cost, as a predatory practice, to purchase market share and drive TIBI and the other independent retail booksellers out of business.
11. Defendant, Borders Group, Inc. ("BGI"), is a corporation organized under the laws of Delaware and has its principal place of business in Michigan. BGI's address in New York is at 5 World Trade Center, New York, New York 10004. BGI sells books through retail stores and mail and, upon information and belief, is preparing to engage in internet website transactions. BGI operates under various trade names and subsidiary corporations including: Borders, Inc., Borders Group, Inc., Borders Book Shops, Borders-Walden Group of K-Mart Corp., Library Limited, Walden Book Company, Walden Book Company, Inc., Walden Acquisition Company, Waldenbooks, Brentano's, and Bassett (collectively "BGI"). BGI is selling books at retail in every state in the United States, and has various retail bookstores in or near the cities in which plaintiff TIBI's bookstores are or were located. BGI competes directly against TIBI and all other independent retail booksellers. BGI is the alter ego of each subsidiary owned by it, and dominates and controls the practices and policies of each of its subsidiaries. Upon information and belief, BGI is selling books below cost, as a predatory practice, to purchase market share and drive TIBI and the other independent retail booksellers out of business.
12. Defendant, Borders, Inc. ("Borders"), is a corporation organized under the laws of Colorado and has its principal place of business in Michigan. Borders' address in New York is at 5 World Trade Center, New York, New York 10004. Borders sells books through retail stores and mail and, upon information and belief, is preparing to engage in internet website transactions. Upon information and belief, BGI and Borders are selling books below cost, as a predatory practice, to purchase market share and drive TIBI and the other independent retail booksellers out of business.
13. Defendant, Walden Acquisition Company ("Walden"), is a corporation organized in 1997 under the laws of Colorado and has its principal place of business in Michigan. Walden is the successor by merger to Walden Book Company, Inc. Walden's address in New York is at 57 Broadway, New York, New York 10004. Walden sells books through retail stores and mail. Upon information and belief, BGI, including Borders and Walden, are selling books below cost, as a predatory practice, to purchase market share and drive TIBI and the other independent retail booksellers out of business.
14. Defendant, Amazon.com, Inc. ("Amazon"), is a corporation organized under the laws of the State of Washington in 1996 and has its principal place of business and address at 1516 Second Ave. - 4th Floor, Seattle, WA 98101. Amazon is transacting and doing business in New York. Amazon offers and sells books to consumers through internet website transactions in competition with TIBI and the other independent retail booksellers. Amazon operates under various trade names and subsidiary corporations including: Amazon.com, Amazon.com, Inc., Amazon.com Books, Earth's Biggest Bookstore and Build Your Own Bookstore. Amazon obtains its books from publishers, and book distributors or wholesalers such as Ingram Book Company and Baker & Taylor, Inc. at discriminatory low prices and with services not available to TIBI and the other independent retail booksellers. Upon information and belief, Amazon is selling books below cost, as a predatory practice, to purchase market share and drive TIBI and the other independent retail booksellers out of business.
15. Defendant, Penguin Books USA Inc. ("Penguin"), is a corporation organized under the laws of New York and has its principal place of business and address at 375 Hudson Street, New York, NY 10014. Penguin is a book publisher and sells books it publishes to B&N, B&N.com, BGI (including Borders and Walden) and Amazon at prices and pursuant to programs, practices and policies which discriminate against plaintiff TIBI and the other Independent Retail Booksellers.
16. Defendant, The Putnam Berkley Group, Inc. ("Putnam Berkley"), is a corporation organized under the laws of New York and has its principal place of business and address at 375 Hudson Street, New York, NY 10014. Putnam Berkley is a book publisher publishing through various trade names and subsidiaries, including Penguin Books, P. G. Putnam, P. G. Putnam's Sons, Dutton, Grosset & Dunlap, Viking, Penguin Putnam Inc., Penguin Putnam, and sells books to B&N, B&N.com, BGI (including Borders and Walden) and Amazon at prices and pursuant to programs, practices and policies which discriminate against plaintiff TIBI and the other Independent Retail Booksellers.
17. Defendant, Penguin Putnam, Inc. ("PGI"), is a corporation organized under the laws of New York and has its principal place of business and address at 375 Hudson Street, New York, NY 10014. PGI is a book publisher owned by Penguin and/or Putnam Berkley and publishes books through various trade names and subsidiaries, including Penguin Books, P. G. Putnam and P. G. Putnam's Sons, and sells books to B&N, B&N.com, BGI (including Borders and Walden) and Amazon at prices and pursuant to programs, practices and policies which discriminate against plaintiff TIBI and the other Independent Retail Booksellers.
18. Defendant, Harper Collins Publishers, Inc. ("Harper Collins"), is a corporation organized under the laws of Delaware and has its principal place of business and address at 10 E. 53rd Street, New York NY 10022. Harper Collins is a book publisher, and sells books it publishes to B&N, B&N.com, BGI (including Borders and Walden) and Amazon at prices and pursuant to programs, practices and policies which discriminate against plaintiff TIBI and the other Independent Retail Booksellers. Harper Collins obtained a consent judgment against plaintiffs for an amount substantially less than its overcharges to plaintiff TIBI during the past 4 years, and is currently enforcing such judgment against plaintiffs, resulting in additional damages to the plaintiffs.
19. Each defendant maintains an office, transacts business, is found, or has an agent within this Southern District of New York.
20. The following definitions are used in this complaint:
...A. "ABA" refers to the American Booksellers Association, of which TIBI has been a member for the past 40 years.
...B. "B&N Defendants" refers to defendants B&N and B&N.com.
C. "Books" refers to non-academic hardcover and softcover trade books and mass-market paperback books and other books typically carried by the Independent Retail Booksellers in the United States.
D. "Borders Defendants" refers to defendants BGI, Borders and Walden.
E. "Covered Period" refers to the period commencing 4 years from the date of the filing of the within complaint.
F. "CPLR Class" refers to the members of the class of Independent Retail Booksellers to be established in this action pursuant to ## 901-909 of the CPLR and ## 21-24 of this Complaint.
G. "Discounts, Rebates and Deductions" refers to all ways in which the Retailer Defendants have been obtaining secret payments, services of value and other benefits from the Publisher Defendants and the other Publishers which have not been offered to, made available or provided to, or even known by the plaintiffs or any of the other Independent Retail Booksellers including, but not limited to, discounts, allowances, fees, rebates, brokerages, commissions, services, promotional and advertising programs and payments, slotting allowances, deductions from unpaid invoices, forgiveness of indebtedness or invoices, and other payments, benefits and services of value, as more fully described in ## 30-31 below.
H. "Distributors" refers to book wholesalers or distributors Ingram Book Company, Baker & Taylor, Inc. and other book wholesalers or distributors located in the United States (excluding the Retailer Defendants).
I. "Federal Class" refers to the members of the class of Independent Retail Booksellers to be established in this action pursuant to Rule 23, F.R.Civ.P. and ## 25-27 of this Complaint.
J. "Independent Retail Booksellers" refers to TIBI and other retail booksellers located in the United States, whether or not in business today, which were in business and were members of the American Booksellers Association at any time during the Covered Period.
K. "Overcharges" refers to the difference between what a purchaser such as TIBI or other Independent Retail Bookseller paid for its book purchases less what it would have paid if the purchase price had been based instead on the Deductions, Rebates and Deductions applicable to purchases of the same books at the same time by the Retailer Defendants.
L. "Penguin Defendants" refers to defendants Penguin, Putnam Berkley and PGI.
M. "Publisher Defendants" refers to defendants Penguin, Putnam Berkley, PGI and Harper Collins.
N. "Plaintiffs" refers to TIBI and Kuralt.
O. "Publisher Discount Schedules" refer to the schedule of discounts and other terms (for book purchases) as published from time to time by each of the Publishers, including the Publisher Defendants, through telephone calls, meetings, mailings, publication in industry publications, word of mouth, hand delivery to Independent Retail Booksellers by Publishers' sales personnel or at industry book fairs or other events.
P. "Publishers" refers to all book publishers in the United States, including the Publisher Defendants, selling books to any Distributors, Retailer Defendants, TIBI or other Independent Retail Booksellers.
Q. "Relevant Market" refers to the product market for non-academic hardcover and softcover trade books and mass-market non-academic paperback books; and the geographic market of the United States.
R. "Retailer Defendants" refers to defendants B&N, B&N.com, BGI, Borders, Walden and Amazon.
21. Pursuant to CPLR 901-909, plaintiffs allege that they represent in each of Counts 1-9, as a class, each Independent Retail Bookseller who at any time during the four years preceding the filing of this complaint was a member of the ABA.
22. Pursuant to CPLR 901-909, plaintiffs seek recovery in each of Counts 1-9 from each of the Retailer Defendants, on behalf of each member of the alleged class, for the class members' damages caused by the activities of the Retailer Defendants. The class action allegations are not applicable to the Publisher Defendants.
23. Alternatively, if the Court should hold that the relief sought in the preceding paragraph is not available for any reason, plaintiffs allege that they are entitled to obtain the following relief on behalf of the class: (i) a tolling of the statute of limitations as of the day of the filing of this complaint, to enable each member of the class to file a complaint for and prove damages as if the class member had filed his complaint for relief on the date the within complaint was filed; and (ii) entry of a judgment and decree that each of the Retailer Defendants has been violating @ 340 of the New York General Business Law (the Donnelly Act), @@ 349-350 of the New York General Business Law (deceptive practices and false advertising), and other state law through the Covered Period, and that such violations have been applicable uniformly for substantially all book purchases for each of the retail stores of the Retailer Defendants located in the United States.
24. Plaintiffs allege that the prerequisites to a class action, as set forth in CPLR 901, have been met.
25. Pursuant to Rule 23, F.R.Civ.P., plaintiffs allege that they represent in each of Counts 1-9, as a class, each Independent Retail Bookseller who at any time during the four years preceding the filing of this complaint was a member of the ABA.
26. Plaintiffs allege that they are entitled to obtain the following relief in each of Counts 1-9 on behalf of the class: (i) a tolling of the statute of limitations as of the day of the filing of this complaint, to enable each member of the class to file a complaint for and prove damages as if the class member had filed his complaint for relief on the date the within complaint was filed; and (ii) entry of a judgment and decree that each of the Retailer Defendants has been violating @@ 2(f) of the Clayton Act, as Amended by the Robinson-Patman Act, 15 U.S.C. @ 12(f), @ 13a of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. @ 13a; and, to the extent not part of any class permitted under CPLR 901-909, @ 340 of the New York General Business Law (the Donnelly Act), @@ 349-350 of the New York General Business Law (deceptive practices), and other state law through the Covered Period, and that such violations have been applicable uniformly for substantially all book purchases for each of the retail stores of the Retailer Defendants located in the United States. The class action allegations are not applicable to the Publisher Defendants.
27. Plaintiffs allege that the prerequisites to a class action, as set forth in Rule 23(a) and Rule 23(b), F.R.Civ.P., have been met.
28. The Retailer Defendants are purchasing books from the Publisher Defendants and other Publishers at a unit price per book which is substantially lower than the unit price per book paid by TIBI and the other Independent Retail Booksellers for the same book from the same seller. The difference in unit price, when all discriminatory payments are taken into account, amounts to a discount off the Publishers' list price of about 60% to 65%. TIBI and the other Independent Retail Booksellers receive a discount amounting to about 41% to 46%.
29. TIBI and virtually all of the other Independent Retail Booksellers have lost substantial business and profits during the Covered Period by reason of this substantial difference in price.
30. The Retailer Defendants solicited, induced and knowingly received on their book purchases from Publisher Defendants, other Publishers and Distributors the following secret Discounts, Rebates and Deductions knowing that they were not to be offered or made available to any of the Independent Retail Booksellers:
...A. Volume discounts in excess of published schedules
...B. Markdown (additional) discounts
...C. Advertising allowances
...D. Shortage/defective allowances
...E. Slotting and start-up allowances
...F. Services (e.g., drop shipping)
...G. End cap, positioning and shelf display allowances
...H. Deductions from and renegotiations of unpaid invoices
...I. End-of-year and full-line discounts
...J. Promotional payments
...K. Expense reimbursement
...L. Brokerage fees
...M. Free or non-invoiced books
...N. Other ways of receiving discounts, rebates and refunds
31. Examples of the discriminatory payments, services and other benefits provided to the Retailer Defendants by the Publisher Defendants and the other Publishers as listed in the previous paragraph (# 30, subparagraphs A-N) are:
...A. Use by the Publisher Defendants and the other Publishers of a published schedule of discounts from the Publishers' list (cover) price of books which schedule is not in fact the basis for the Publishers' dealings with the Retailer Defendants; instead, a secret discount schedule is used with the Retailer Defendants.
...B. The Retailer Defendants (which may or may not include Amazon) issue "directives" or other edicts to the Publishers directing them to provide specified Discounts, Rebates and Deductions or run the risk of losing part or all of the business done with the Retailer Defendants.
...C. The Publisher Defendants and other Publishers communicate with each other through fax, mail, telephone and meetings to determine how they are to respond to these Retailer Defendant demands and at the same time not offer, provide or even mention such specified Discounts, Rebates and Deductions to the Independent Retail Booksellers.
...D. The Publisher Defendants and other Publishers pay various fees and allowances to the Retailer Defendants for displaying or featuring or shelving the Publishers' books in what are or are referred to as "slotting allowances", "end cap" allowances, "positioning" allowances, "promotional" allowances or other names which are used to disguise that the payments are no more than kickbacks and reductions in price from the Publishers' Discount Schedules.
...E. The Publisher Defendants and other Publishers pay various advertising, insert, catalog pages, direct-mail, radio, television and other marketing and promotional fees and provide facilities and services to the Retailer Defendants, directly or through Distributors, without requiring the Retailer Defendants to actually spend such sums in the advertising, marketing or promotion of the specific books, or any of the Publishers' books, for which the amounts are purportedly paid to the Retailer Defendants.
...F. These allowances, fees, discounts, promotional and marketing programs and other benefits are not made available or even told to TIBI and the other Independent Retail Booksellers, and such booksellers are led to believe (and to make commitments) based on the false representations by the Publishers that they are not providing discriminatory payments or benefits to the Retailer Defendants.
...F. Overpurchasing and underselling books purchased on returnable basis with additional costs equal to 150% of the return costs of Independent Retail Booksellers.
...G. Making payment of invoices through the return of unsold (i.e., near worthless) books.
...H. Overall increasing of return costs to publishers by 100% thereby causing the list prices of books to rise, including the amount paid by consumers.
...I. Receipt of special deals (involving discounts and other terms not justified by the quantity of books purchased), including the receipt of free books or being invoiced for fewer books than actually received by the Retailer Defendants.
...J. Receipt of special deals (involving discounts and other terms) regardless of the quantity of books purchased.
...K. Threats to return $1.6 billion in "returnable" books to induce discriminatory discounts and terms from the Publishers, including the Publisher Defendants.
...L. Discounts from the list price in excess of the Publishers' Discount Schedules available to the Independent Retail Booksellers.
...M. Discriminatory discounts applied across the board to all purchases of different titles regardless of the number of units bought for a specific title.
...N. Non-published discounts and terms more favorable than the largest discount and best terms in the Publishers' Discount Schedules.
...O. Discriminatory discounts and terms on book sales to retail distribution centers owned and operated by the Retailer Defendants to service their own retail sales, which discounts and terms are in excess of the amounts which should be paid for such function.
...P. Discriminatory conditions and the administration of such conditions by the Publishers, making it impractical for Independent Retail Booksellers to obtain the same discounts and terms on retail distribution centers owned and operated by TIBI or the other Independent retail Booksellers.
...Q. Receiving additional discounts or "shared markdowns" as to unsold books, thereby rewarding the Retailer Defendants for purchasing more books than they can sell.
...R. Extra discounts on small orders over and above the published discount for small orders.
...S. Slotting allowances in the form of additional discounts (such as a "3% allowance" and "free freight" on all back orders) over and above all other discriminatory discounts as to books purchased for a new or expanded store or a new fulfillment facility.
...T. "Incentive" payments or deductions based on the Retailer Defendants' "sell through" or percentage of purchased books which are not returned.
...U. Special discounts and terms upon the return of books, in what amounts to a deferred discount on the original sale.
...[U2.] Permitting the Retailer Defendants to take the special discounts upon the purchase rather than to wait for the future return.
...V. Special discounts for "nonreturnable" book purchases which are in excess of the discounts for returnable books, and then permitting the books to be returned without any price adjustment.
...W. Discounts and deductions for purported shortages, when in fact there was no shortage in the shipment to the Retailer Defendants.
...X. "Deductions" from unpaid invoices or "account reconciliations" or write offs without any valid basis, thereby increasing the discount on the original transactions
...Y. Price reductions disguised as promotional payments, where the services for which the promotional payments are supposedly made are not provided, or are worth less that the amount of the payment.
...Z. Price reductions on particular titles subsidized by additional discounts as to such titles received from the Publisher or Distributor.
...AA. Price reductions through receipt of promotional or cooperative advertising moneys which exceed any promotional or advertising costs incurred by the Retailer Defendants.
...BB. More favorable payment terms, which effectively lowers the price for the books paid by the Retailer Defendants.
...CC. Receipt of promotional and cooperative advertising moneys on terms and conditions not available to TIBI or the other Independent Retail Booksellers.
...DD. Payments for prominently displaying certain titles; for putting the book in a window; displaying the book's cover (rather than the book's spine) on the shelf; displaying the book at the end of an aisle; displaying the book in an "endcap" or end shelf; including the book in a store program such as "Great New Books" or "Manager's Choice" (with a tendency to mislead consumer retail purchasers).
...EE. Requiring pre-approval for Independent Retail Booksellers to qualify for promotional and cooperative advertising programs, and a lengthy process (such as detailed documentation of expenditures) for obtaining payment (or the issuance of a credit memorandum), while permitting the Retailer Defendants to deduct these moneys in advance without any qualifying activities.
...FF. "Super-coop" or similar program providing additional promotional and advertising funds to the Retailer Defendants at the start of the year, without waiting for the moneys to be earned by purchases throughout the year.
32. The Penguin Defendants had entered into a series of consent decrees during 1996-1998 (the "Consent Decree") prohibiting them from engaging in any of the activities described in ## 30-31 above.
33. During 1997, the Penguin Defendants admitted that they had violated the Consent Decree and agreed to make payment of $25,000,000 to the American Booksellers Association ("ABA") on behalf of its members to settle the admitted wrongdoing.
34. The ABA's distribution to its members, and use, of such settlement funds, was not on a fair, equitable or disclosed basis, and plaintiffs are suing the Penguin Defendants herein for the full amount of plaintiffs' damages.
35. The books of the Publisher Defendants and other Publishers are sold in interstate commerce, and are purchased by the Retailer Defendants, TIBI and other Independent Retail Booksellers from publishers throughout the United States.
36. Plaintiff TIBI and the other Independent Retail Booksellers are in competition with the Retailer Defendants.
37. The activities of the defendants as alleged have adversely impacted upon and injured competition between TIBI and the other Independent Retail Booksellers, on the one hand, and the Retailer Defendants, on the other hand. More than 50% of all Independent Retail Bookseller entities have gone out of business during the past 4 years, with most of the remaining Independent Retail Booksellers including TIBI suffering major financial reversals and having a difficult time remaining in business under the existing conditions.
38. Defendants, in the course of being engaged in commerce, have discriminated in price between different purchasers of the same book titles (of equal grade and quality), where the purchases involved in such discrimination are in commerce, and such books are sold for use, consumption or resale within the United States or the District of Columbia, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in the the following lines of commerce: book retailing, book publishing, and book wholesaling. Also, the activities alleged tend to injure, destroy, or prevent competition by TIBI and the other Independent Retail Booksellers with the Retailer Defendants who knowingly receive the benefit of such discrimination.
39. Books and a healthy book industry are vital to the United States economy and the well-being of persons in the United States for the following reasons:
...A. Books are an important part of the checks and balances of the American political system, as expressed in the First Amendment and its interpretation by the courts.
...B. Freedom of speech and freedom of the press, among other freedoms, are protected against government encroachment by the First Amendment.
...C. Government has set up antitrust laws, both federal and state, to further protect these freedoms, which are dependent on competition to maximize their utility.
...D. Radio, television, cable television, movies, newspapers and magazines are dominated by vested interests, and are being formed into major media or communications companies.
...E. Bill boards and direct mail are not interchangeable or adequate substitutes for books in the presentation and dissemination of complicated ideas.
...F. Soap box and letters to editors are equally ineffective.
...G. Books allow more complete development of ideas and arguments for and against the ideas.
...H. Internet as a communications medium has not demonstrated the ability to publish or market books in competition with the existing book industry and therefore at this time is not an adequate substitute for persons foreclosed from the book industry in its present form.
...I. The book industry, through mergers, acquisitions and failure to enforce the nation's antitrust laws, is becoming concentrated into the hands of a few companies, with the resulting loss of thousands of Independent Retail Booksellers, thousands of authors, tens of thousands of new book manuscripts, hundreds of Publishers, and presumably one or more book Distributors in due course.
...J. Books can be created for publication with little or no out-of-pocket expense by authors and their agents.
...K. Books have or should have a lengthy impact, in contrast to newspapers and magazines and their content.
...L. Books are the best way to offset false and misleading information or propaganda created by 5-15 second sound bites heard on television, or longer pieces appearing in radio shows, newspapers and magazines.
...M. Books collect and make knowledge available, and enable such knowledge to be passed on to future generations in convenient and easily searchable form.
...N. Books are a major and vital industry for a free country increasingly dependent on intellectual property for the well-being of its people and growth of the United States and world economy.
...O. Books affect all aspects of life including economic opportunity, jobs, education, creation and distribution of wealth, quality of life, and understanding the world in which we live (such as the "greenhouse effect" and "El Nino").
...P. Books have facilitated the creation and expansion of computer-related industries and exposed harmful industries (SILENT SPRING by Rachael Carson, UNSAFE AT ANY SPEED by Ralph Nader, and through Sinclair Lewis and other muckrakers have put a spotlight on bad business practices); books have helped persons win high elective office (PROFILES IN COURAGE by John F. Kennedy) and have helped a sitting president leave office (ALL THE PRESIDENT'S MEN, by Carl Bernstein and Bob Woodward), and have exposed how a sitting President's assassination was not competently investigated by the highest authority in the land (RUSH TO JUDGMENT by Mark Lane); and books have exposed major political/economic problems (GRAPES OF WRATH by John Steinbeck, UNCLE TOM'S CABIN by Harriet Beacher Stowe; and THE SHAME OF THE CITIES by Lincoln Steffens); books have created or justified major political and economic systems (THE WEALTH OF NATIONS by Adam Smith, and GENERAL THEORY OF EMPLOYMENT, INTEREST, AND MONEY by John Maynard Keynes); have set forth the rules of warfare (THE ART OF WAR by Sun Tzu, and the 1832 classic ON WAR by Karl Von Clausewitz); also, books have been made into classic motion pictures (GONE WITH THE WIND by Margaret Mitchell, and THE WIZARD OF OZ by L. Frank Baum); changed personal behavior through information and inspiration (HOW TO WIN FRIENDS AND INFLUENCE PEOPLE by Dale Carnegie; THINK AND GROW RICH by Napoleon Hill; THE POWER OF POSITIVE THINKING by Dr. Norman Vincent Peale); and one work was the basis for changing the country's sexual mores (SEXUAL BEHAVIOR IN THE HUMAN MALE, by Alfred C. Kinsey) and another book was the basis for changing variety shows into Broadway-type musicals (a play, THE CORN IS GREEN by Emlyn Williams, the basis for the first Broadway musical, OKLAHOMA); on the other hand, monopolized (state-controlled) book publishing/distribution systems caused publishing and marketing successes for the following classic books: DAS KAPITAL by Karl Marx, MEIN KAMPF by Adolf Hitler, and QUOTATIONS FROM CHAIRMAN MAO TSE TUNG by Mao Tse Tung.
...Q. Books often have specialized, narrow or local interests which are contrary to the interests of, and will be slighted or wholly ignored by, the dominant companies in a concentrated retail book industry; e.g., Independent Retail Bookseller Bunch of Grapes in Vineyard Haven, Martha's Vineyard, Massachusetts, with only 7% of the selling space of a B&N or Borders superstore, offers window displays and specialized book sections for books, magazines and other publications relating to Martha's Vineyard and Cape Cod, and to sailing, fishing, water sports and other maritime subjects; and provides space for and publicizes meetings between authors of local-interest books and interested consumers; competing Independent Retail Bookseller Bickerton & Ripley Books, in Edgartown, Martha's Vineyard, in addition to duplicating some of the activities of Bunch of Grapes, provides two bulletin boards relating to community activities, sponsors events such as a concert by the Boston Pops Orchestra with the proceeds going to fight AIDS, and contributes (in its "Community Giveback Program") a percentage of annual gross book sales for sharing by 4-5 local non-profit agencies.
...R. There will be no need for any industry publications such as PUBLISHERS' WEEKLY, which probably would be replaced by daily or weekly e-mail newsletters or directives from the Retailer Defendants to their thousands of local-monopolizing retail stores throughout every city, town and mall in the United States.
40. The activities of defendants as alleged have had, and/or are creating or increasing, the following adverse effects upon competition in the book industry:
...A. Consumers: (1) forcing Publishers to increase their list price for books; (2) payment of higher retail prices for books; (3) reduction in number of book titles; (4) reduction in range of book topics; (5) reduction in quality of development of book topics; (6) slanting of book subject matter to conform to economic and/or political interests of large companies in the book industry; (7) increased use of formula approach in deciding which books to commission, write and publish, based on past successes for the large companies; (8) shorter life cycle for published books and resulting decline in effectiveness of books as a medium for advocacy of ideas in competition with other media; (9) tendency for books to become a public relations vehicle for large companies rather than a medium for dissemination of controversial ideas; (10) reduction of utility of books to enable individuals to create business and other economic opportunities for themselves in competition with established interests; (11) reduction in First Amendment freedoms; and (12) the foregoing adverse effects in exchange for the range of services, including larger selection of book titles, remaindered books, CD's, videos, software, magazines, coffee and snacks, reading chairs and floor space, hanging-out opportunity, and unlimited browsing without purchasing, offered by the Retailer Defendants and made available or purchased by them with the unlawful Discounts, Rebates and Deductions they obtain from the Publishers and ultimately the consuming public.
...B. Independent Retail Booksellers: (1) elimination of existing Independent Retail Booksellers; (2) decline in opportunities for new Independent Retail Booksellers; (3) loss of competitive opportunity for new books to be published and sold to thousands of competing booksellers, with publishing, marketing decisions made by only a handful of large-retailer executives instead; (4) decline in retailers interested in specialized, local or controversial book subjects; (5) loss of sounding board for new book ideas; (6) loss of means for testing new books or marketing techniques; and (7) loss of mobility of employment and business opportunities for persons and companies no longer deemed suitable by the major book companies.
...C. Distributors or Wholesalers: (1) threatened loss of independent Distributors, inasmuch as Distributors would be unnecessary and an avoidable expense if most book purchases in the United States were made for resale by the three Retailer Defendants; (2) independent retail booksellers would be forced to buy their books from the three Retailer Defendants (similar to the way in which many small retailers buy some of their merchandise from from Sam's Club, Costco or a large supermarket chain such as A&P or Pathmark at lower prices than they can buy the same goods from a wholesaler); (3) the Retailer Defendants will wind up as the only available source of books for the Independent Retail Bookseller, if history proves accurate, because the publishers will refuse to deal directly with or will set up impediments to discourage, small accounts (as in the case of the toy and game industry).
...D. Publishers: (1) loss of Publishers, through mergers and acquisitions; (2) loss of Publishers through going out of business for an increasing inability to sell their books to the Retailer Defendants; (3) loss of Publishers through going out of business for an increasing inability to sell their books to Independent Retail Booksellers directly, or indirectly through Distributors; (4) loss of Publishers through going out of business for an increasing unwillingness to commission and publish books of the type demanded by the Retailer Defendants; (5) loss of Publishers through an inability to compete for author and manuscripts, and to market published books, in an increasingly concentrated book publishing market, with extensive tie-ins to low-cost affiliated communications media (such as movies, radio, television, talk shows, newspapers, magazines, other publicity outlets); and (6) a marked increase in book-authorship opportunities to write books without authorship credit without royalties and according to the outlines and facts supplied by the commissioning publisher or Retailer Defendants (similar to the way in which Time Warner publishes and sells more books in the United States than any other publisher).
...E. Authors and Agents: (1) loss of authors and their agents through the decline in markets for their ideas and manuscripts; (2) loss of authors and their agents through a reduction in advances payable to the typical author and his/her agent, in contrast to the "star" author and his/her newest book manuscript; (3) loss of authors and their agents through the decline in the market for the types of books which the author wants, or know how to, write; (4) loss of authors and their agents for the decline in anticipated profits for the manuscripts and books of most authors and prospective authors; and (5) loss of new authors and agents and the books which they would have created and offered for publication.
...F. United States Economy: (1) reduction of the quality and quantity of books, and an increase in the retail price of books; (2) decrease in competition in all aspects of the book industry with consequent loss of employment and writing and business opportunities for many persons; (3) increase in concentration of all parts of the book industry, with a probability of efforts by the Retailer Defendants to take over parts of the industry not yet owned by them; (4) increase in the probability that the Retailer Defendants will be acquired by even larger (media or communications company) monopolies, to take advantage of the array of related businesses (such as radio, television, producing, financing, public relations, character licensing, sports teams, amusement parks, software/fantasy arcades, movie production, cable interests, joint-venture interests with other communications companies) owned by a single international conglomerate; (5) tendency to look to other parts of the world and their inhabitants for lower-cost manuscripts, products and services (to increase the profitability of the conglomerate) at the expense of the United States economy and most of persons living in the United States; and (6) a substantial headway toward further concentration, monopolization and globalization of the United States economy with resulting loss in living standard and economic opportunities for persons in the United States.
...G. American Political System: (1) loss of political control by United States citizens due to the economic influence of the companies which result from the ever-increasing concentration of the different components of the book industry; (2) loss of additional political control by United States citizens due to the inability of book publishing to provide the First Amendment benefits which flow from competition in this basic industry, of the creation, writing, offering and marketing of ideas in book form; and (3) a change in the existing political structure to something closer to the Japanese model (with large companies dealing with their own respective families of companies with independent contractors, and the large companies controlling the governmental agencies in charge of regulating the economy); (4) reducing of the people's constitutionally-guaranteed freedoms; (5) stifling of dissenting opinion; (6) inability to transmit complicated ideas to the non-book media for further, but abbreviated, dissemination; (7) stifling of the development and dissemination of new and unpopular ideas and ideas offsetting current economic and political developments in the United States.
41. The Retailer Defendants have joined, conspired and acted in concert with others (the "Co-Conspirators") to obtain the capital and the unlawful Discounts, Rebates and Deductions needed by the Retailer Defendants to (i) unnecessarily expand, (ii) create unneeded shelf or selling space, (iii) drive most of the Independent Retail Booksellers out of business or into an unprofitable and deteriorating financial position, (iv) force consolidation, concentration and vertical integration on the book industry, (v) and then deliver the industry through later acquisition or merger to one or more major media or communications companies such as Disney and Time Warner.
42. Relevant statements by any of the Co-Conspirators concerning the subject-matter of the alleged joint and concerted activities, and the conspiracy, are admissible in evidence against the defendants as an exception to the Hearsay Rule.
43. The Co-Conspirators (in addition to the Retailer Defendants) are: (i) Leonard Riggio, C.E.O., Chairman of the Board, founder and a principal shareholder of B&N, and apparent architect of the joint, concerted and conspiratorial activities, and Stephen Riggio, Vice-Chairman of the Board, founder and a principal shareholder of B&N; (ii) Robert F. Diromulado, Chairman of the Board, C.E.O., founder and a principal shareholder of BGI and Bruce A. Quinnell, President and Chief Operating Officer, founder and a principal shareholder of BGI; (iii) Jeffrey P. Bezos, Chairman of the Board, C.E.O., President, founder and principal shareholder of Amazon, and Richard L. Dazell, Vice President of Amazon; (iv) the investment banking firms providing equity and non-equity financing to the Retailer Defendants during the past six years, approximately; (v) the accounting firms which have certified the financial statements of the Retailer Defendants without providing any reserves for treble-damage or other liability for wholesale and continuing violations of the Robinson-Patman Act; (vi) the Publisher Defendants and the other Publishers as coerced and unwilling Co-Conspirators who have been forced into granting the discriminatory discounts to the Retailer Defendants; and (vii) other persons the identities of whom are not now known to the plaintiffs.
44. The Retailer Defendants have orchestrated and intertwined the following events to reach their current stage of financing and growth:
...A. Construction of book "superstores" in high-volume book-purchasing areas of the United States being serviced adequately and responsibly with no more than a reasonable profit, if any, by law-abiding, community-concerned Independent Retail Booksellers.
...B. Disrupting the businesses of the Publishers, Distributors and particularly the Independent Retail Booksellers through the widely publicized offering of 30% discounts on best-selling books, 20% discounts on other categories of books, and in any event 10% discounts on all books sold by the Retailer Defendants (or similar retail price-redution scheme).
...C. The initial pricing scheme was below the Retailer Defendants costs, and done obviously to purchase market share at the expense of the established Independent Retail Booksellers in competition with them.
...D. The below-cost selling created sufficient volume of book purchases by the Retailer Defendants, coupled especially with the number of superstore ("category killer") outlets being built by them, for them to make demands upon the Publishers, including the Publisher Defendants, to provide ever-increasing discriminatory, unlawful Discounts, Rebates and Deductions to the Retailer Defendants to partially subsidize the below-cost retail sales, and to further weaken and/or destroy the competing Independent Retail Booksellers.
...E. To make such demands and receive such discriminatory payments and services knowing that none of such Discounts, Rebates and Deductions were being offered, made available or paid to, or even known by, the competing Independent Retail Booksellers, and to conspire with the Publishers, including the Publisher Defendants to make such discounts and payments in secret while falsely maintaining to the ABA and the Independent Retail Booksellers that they are not making such payments.
...F. Such fraud and misrepresentation misled many Independent Retail Booksellers into believing that the Retailer Defendants had found a better and lawful way of doing business as retail booksellers, instead of taking away the business, customers and assets of the Independent Retail Booksellers through the aforesaid unlawful means.
...G. Steadily decreasing the discount given by the Retailer Defendants to their retail customers while steadily increasing the amount of discriminatory payments they demanded and received from the Publisher Defendants and the other Publishers, all in proportion to the steadily increasing growth of the business of the Retailer Defendants, and the steady decline in the businesses of the TIBI and the other Independent Retail Booksellers.
...H. The Retailer Defendants with the cooperation and approval of their accounting firms create and publish materially false earnings reports based on accounting practices which fail to meet Securities and Exchange Commission or accounting-industry standards by (i) failing to recognize illegal discounts as components of the costs of book inventory and (ii) simultaneously failing to create reserves for the liability for damages, treble damages to TIBI and other Independent Retail Booksellers and disgorgement to the Publishers.
...I. With the grossly inflated earnings (which really should be reported as losses), the Retailer Defendants acting in concert with the Co-Conspirators sell the non-existent profits to investors in the securities marketplace, through private and public offerings, to raise the capital needed for further, unnecessary expansion, for the purpose of taking more market share away from TIBI and the other Independent Retail Booksellers, and in furtherance of the overall plan to consolidate, vertically integrate and sell the book industry (through acquisition or merger) to one or more of the major media or communications corporations.
...J. Ultimately, the Retailer Defendants are attempting to take away all or virtually all retail book sales from TIBI (which has already lost 96% of its sales) and the other Independent Retail Booksellers.
...K. Also, ultimately, the Retailer Defendants will consolidate further by vertical integration with the weakened Distributors and then Publishers, and finally to some extent into book authorship (without payment of substantial royalties on retail sales, similar to Time-Warner's sales of books through cable and television advertising).
...L. After the vertical integration of the book industry takes place, the last step apparently will be to sell the integrated company to one or more major or future media or communications companies (such as Disney, Time-Warner or Microsoft), for use by it or them in furtherance of their varied business interests, and those of their joint ventures with other companies.
...M. Meanwhile, TIBI and the other Independent Retail Booksellers and Distributors will have gone out of business (with their sales and assets transferred as described above to the Retailer Defendants); Publishers will either be acquired by the Retailer Defendants or will face severe financial challenges and force them to look for other business opportunities; most Authors and their Agents will find it difficult to get their books published, and when they do place their books with any of the Retailer Defendants, the terms will be substantially less attractive than available today (because publication by the Retailer Defendants will generally guarantee a certain minimum number of sales).
45. Each of the defendants is engaged in commerce and in the course of such commerce, directly or indirectly, the Publisher Defendants and the other Publishers discriminated in price between the Retailer Defendants and the Independent retail Booksellers, including TIBI, who were the purchasers of commodities (books) of like grade and quality, where the purchases involved in such discrimination were in commerce, such commodities (books) were sold for use, consumption, or resale within the United States, and the effect of such discrimination may be, and has been, substantially to lessen competition or tend to create a monopoly in the retail, wholesale and/or publishing lines of commerce in the book industry; and has injured, destroyed, or prevented competition with the Retailer Defendants who knowingly have been receiving the benefit of such discrimination.
46. Each of the Retailer Defendants has been engaged in commerce, and in the course of such commerce, has knowingly induced, and has knowingly received, discriminations in price as alleged above.
47. Plaintiffs repeat and reallege each of the allegations set forth in ## 1-46 above and further allege that the activities of defendants constitute violations of @@ 2(a) and 2(f) of the Clayton Act, 15 U.S.C. @@ 13(a) and 13(f), as unlawful price discrimination by each of the Publisher Defendants; and by each of the Retailer Defendants unlawfully and knowingly inducing and receiving discriminatory prices which are not offered to or received by TIBI or the other Independent retail Booksellers.
48. TIBI has been damaged by reason of the defendants' activities to the extent of the loss of all but 2 of its 14 retail bookstores; the loss of $11,000,000 in annual sales volume (from $11,500,000 in fiscal year 1996 to $500,000 in the current fiscal year). The dollar amount of TIBI's damages is approximately $10,000,000 or more, which will be ascertained with certainty at the time of trial.
49. Kuralt has been damaged by reason of the defendants' activities to the extent of $1,250,000.
50. Plaintiffs are entitled to an award of treble damages and attorneys' fees.
51. Plaintiffs repeat and reallege each of the allegations set forth in ## 1-46 above and further allege that the activities of defendants constitute a violation of @ 2(c) of the Clayton Act, 15 U.S.C. @ 13(c), as unlawful payment and the unlawful acceptance of a commission, brokerage or other compensation.
52. The Retailer Defendants or their agents or controlled intermediaries have received and accepted payments of money, book inventory and services of value from the Publisher Defendants and the other Publishers as a commission, brokerage, or other compensation, or an allowance or discount in lieu thereof.
53. These payments were not made for services rendered by the Retailer Defendants in connection with the purchase of books from said Publishers.
54. TIBI has been damaged by reason of the defendants' activities to the extent of the loss of all but 2 of its 14 retail bookstores; the loss of $11,000,000 in annual sales volume (from $11,500,000 in fiscal year 1996 to $500,000 in the current fiscal year). The dollar amount of TIBI's damages is approximately $10,000,000 or more, which will be ascertained with certainty at the time of trial.
55. Kuralt has been damaged by reason of the defendants' activities to the extent of $1,250,000.
56. Plaintiffs are entitled to an award of treble damages and attorneys' fees.
57. Plaintiffs repeat and reallege each of the allegations set forth in ## 1-56 above and further allege that the activities of defendants constitute a violation of @ 13a of the Clayton Act, as Amended by the Robinson-Patman Act, 15 U.S.C. @ 13a, as predatory pricing with the probability of recoupment.
58. Section 13a of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. @ 13a, entitled "Discrimination in rebates, discounts, or advertising service charges; underselling in particular localities; penalties" provides:
It shall be unlawful for any person engaged in commerce, in the course of such commerce, to be a party to, or assist in, any transaction or sale, or contract to sell, which discriminates to his knowledge against competitors of the purchaser, in that, any discount, rebate, allowance, or advertising service charge is granted to the purchaser over and above any discount, rebate, allowance, or advertising service charge available at the time of such transaction to said competitors in respect of a sale of goods of like grade, quality, and quantity; to sell, or contract to sell, goods in any part of the United States at prices lower than those exacted by said person elsewhere in the United States for the purpose of destroying competition, or eliminating a competitor in such part of the United States; or, to sell, or contract to sell, goods at unreasonably low prices for the purpose of destroying competition or eliminating a competitor.
59. Each of the defendants has been a party to, and/or has assisted in, transactions and/or sales, or has contracted to sell, which discriminate to said defendants' knowledge against competitors of the Retailer Defendants.
60. The discounts, rebates, allowances, and advertising and promotional allowances and service charges granted by the Publishers and Distributors to the Retailer Defendants have substantially exceeded any discounts, rebates, allowances, and/or promotional and advertising allowances and service charges available at the time of such transaction to said competitors in respect of sales of the same titles of books, of like grade, quality, and quantity.
61. Also, the Publisher Defendants and other Publishers have sold, and contracted to sell, books in all parts of the United States to said Retailer Defendants at prices lower than those exacted by said Publisher Defendants and other Publishers elsewhere in the United States.
62. The purpose of said transactions described in the preceding three paragraphs has been to destroy competition, and/or eliminate Independent Retail Bookseller competitors, including TIBI, in all parts of the United States.
63. An additional purpose of said transactions has been to sell, or contract to sell, books at unreasonably low prices for the purpose of destroying competition of TIBI and the other Independent Retail Booksellers or eliminating them as competitors of the Retailer Defendants.
64. The Retailer Defendants have been making their retail sales below cost whether or not the unlawful payments are taken into consideration when calculating said defendants' costs.
65. The Retailer Defendants have a reasonable possibility of recoupment of the losses they have sustained by reason of their below-cost sales because of the dramatic increase in market share they have acquired directly from the competing Independent Retail Booksellers, including TIBI, and the Retailer Defendants' concerted activities in which they are acting, collectively, as a monopolist.
66. Plaintiffs repeat and reallege each of the allegations set forth in ## 1-65 above and further allege that the activities of the Retailer Defendants constitute a violation of @ 7 of the Clayton Act, 15 U.S.C. @ 18 as the unlawful acquisition of businesses having a tendency to create a monopoly.
67. The activities of the Retailer Defendants are intentionally driving TIBI and other Independent Retail Booksellers into unprofitable operations and bankruptcy for the purpose of taking over their customers, business and market share, in what amounts to unlawful acquisitions of these booksellers' businesses on a wholesale, industry-wide basis.
68. Such acquisitions of customers, business and market share are tending to substantially lessen competition in the book retailing industry, and/or creating a monopoly in the retail bookselling industry.
69. The acquisitions of business are not taking place through superior business acumen of the Retailer Defendants, but through a scheme of unlawful transactions forced upon the Publishers by the Retailer Defendants.
70. Plaintiffs are entitled to the return of their businesses through an injunction by this Court ordering the Retailer Defendants (other than Amazon, unless Amazon meanwhile establishes physical retail locations) to close all retail bookstores owned, controlled, financed or operated by them within 10 miles of any location in which TIBI has or had a retail bookselling store during the past four years, and not to open up any additional stores in any such areas for the next 10 years.
71. Plaintiffs repeat and reallege each of the allegations set forth in ## 1-70 above and further allege that the activities constitute a violation by each of the defendants of @ 340 of the New York General Business Law, known as the Donnelly Act.
72. Section 340 of the New York General Business Law, known as the Donnelly Act and entitled "Contracts or agreements for monopoly or in restraint of trade illegal and void", provides in relevant part as follows:
1. Every contract, agreement, arrangement or combination whereby
A monopoly in the conduct of any business, trade or commerce or in the furnishing of any service in this state, is or may be established or maintained, or whereby
Competition or the free exercise of any activity in the conduct of any business, trade or commerce or in the furnishing of any service in this state is or may be restrained or whereby
For the purpose of establishing or maintaining any such monopoly or unlawfully interfering with the free exercise of any activity in the conduct of any business, trade or commerce or in the furnishing of any service in this state any business, trade or commerce or the furnishing of any service is or may be restrained, is hereby declared to be against public policy, illegal and void.
73. Most of the purchases by the Retailer Defendants have been from Publishers located in the State of New York, and the sales by the Publishers to the Retailer Defendants have been in violation of the Donnelly Act, even though the books have been delivered in many instances to locations outside of New York State. New York has an interest in protecting the book publishing industry, which services the United States and the rest of the world, from intentional injury and substantial dislocation and destruction by the Retailer Defendants and others.
74. The retail resale, by the Retailer Defendants, of a substantial portion of said purchased books have been at below-cost prices, whether or not the discriminatory Discounts, Rebates and Deductions are taken into account when determining the Retailer Defendants' actual costs.
75. Said retail sales by the Retailer Defendants were for the predatory purpose of putting TIBI and the other Independent Retail Booksellers out of business, and taking over their share of the retail book market in the United States.
76. The Retailer Defendants have had a reasonable possibility of recouping their losses by reason of their scheme, which is to take over virtually all of the retail market for books in the United States, and to increase retail prices and the Retailer Defendants' profits through the absence of meaningful competition at the retail level.
77. TIBI has been damaged by reason of the defendants' activities to the extent of the loss of all but 2 of its 13 retail bookstores; the loss of $11,000,000 in annual sales volume (from $11,500,000 in fiscal year 1996 to $500,000 in the current fiscal year). The dollar amount of TIBI's damages is approximately $10,000,000 or more, which will be ascertained with certainty at the time of trial.
78. Kuralt has been damaged by reason of the defendants' activities to the extent of $1,250,000.
79. Plaintiffs are entitled to an award of treble damages, disgorgement of defendants illegally retained Discounts, Rebates and Deductions, and attorneys' fees.
80. Plaintiffs repeat and reallege each of the allegations set forth in ## 1-79 above and further allege that the activities of the Publisher Defendants and other Publishers amounts to a breach of contract that all Discounts, Rebates and Deductions published by the Publisher Defendants and other Publishers are the only Discounts, Rebates and Deductions available to the Independent Retail Booksellers or the Retailer Defendants, and the inducing of breach by the Retailer Defendants of said contracts with the Publishers.
81. The Publisher Discount Schedules published by the Publisher Defendants and the other Publishers are part of the terms of the contract created when books are ordered from the Publisher, and the terms state, literally or impliedly, that they are applicable to all purchasers for the volume of purchases involved.
82. By reason of the alleged activities of the Retailer Defendants, the Publisher Discount Schedules failed to state the actual Discounts, Rebates and Deductions which were available under law.
83. The failure to include the actual Discounts, Rebates and Deductions which were being paid to the Retailer Defendants, and were therefore payable to TIBI and the other Independent retail Bookstores, was a breach of contract by the Publisher Defendants and the other Publishers, and a breach of the covenant of good faith and fair dealing inherent in every contract.
84. The aforesaid breach of contract by the Publishers, including the Publisher Defendants, was unlawfully induced by the Retailer Defendants.
85. Each of the Publisher Defendants is liable to the plaintiffs for breach of contract, and each of the Retailer Defendants is liable to the plaintiffs for unlawfully inducing breach of said contracts.
86. Plaintiff TIBI was damaged by the amount of the Overcharges paid by plaintiff on all of its book purchases, plus pre-judgment interest, amounting to an estimated $10,000,000.
87. The defendants acted with malice, and with near-criminal or criminal indifference to defendants' civil obligations, and adversely affected many thousands of Independent Retail Booksellers, and many tens of millions of book purchasers in the United States.
88. Plaintiff TIBI is entitled to punitive damages in an amount equal to at least 3 times the amount of plaintiff TIBI's actual damages.
89. Plaintiffs repeat and reallege each of the allegations set forth in ## 1-88 above and further allege that the activities constitute an unlawful interference by the Retailer Defendants with plaintiff's advantageous business relationships the the Independent Retail Booksellers, including plaintiffs, with their retail customers and with the Publishers and Distributors from whom they purchase books.
90. If the Retailer Defendants merely took their unlawful, discriminatory Discounts, Rebates and Deductions and put such money into real estate, mutual funds, the stock market or various bank accounts, the Independent retail Booksellers, including TIBI, would not have been damaged to the extent they have been damaged.
91. Instead, the Retailer Defendants used their illegal Discounts, Rebates and Deductions to pay for a variety of goods, services and reduced retail prices (including the raising of vast amounts of capital) which induced the retail customers of the Independent Retail Booksellers, including TIBI, to make an increasing number of their book purchases from the Retailer Defendants.
92. The goods, services and price reductions made available by the Retailer Defendants are described to some extent in subparagraph "A (12)" of # 40 above, and are only temporary, designed for use only long enough to take away customers of TIBI and the other Independent Retail Booksellers, and make them become unprofitable and go out of business. After this started occurring, the Retailer Defendants started to eliminate some of the goods, services and price reductions as no longer necessary.
93. These goods, services and reductions could not be afforded by the Retailer Defendants if they had paid for books at the same price (as published in the Publishers' respective Discount Schedules) as the Independent Retail Booksellers, including TIBI.
94. These activities of the Retailer Defendants constitute an unlawful, intentional interference with the advantageous business relationship existing between the Independent Retail Booksellers, including TIBI, and their respective retail customers, and the Publishers and Distributors from whom they have been purchasing books.
95. TIBI has been damaged by reason of the defendants' activities to the extent of the loss of all but 2 of its 14 retail bookstores; the loss of $11,000,000 in annual sales volume (from $11,500,000 in fiscal year 1996 to $500,000 in the current fiscal year). The dollar amount of TIBI's damages is approximately $10,000,000 or more, which will be ascertained with certainty at the time of trial.
96. Kuralt has been damaged by reason of the defendants' activities to the extent of $1,250,000.
97. Plaintiffs are entitled to an award of disgorgement of defendants illegally retained Discounts, Rebates and Deductions, and attorneys' fees.
98. The defendants acted with malice, and with near-criminal or criminal indifference to defendants' civil obligations, and adversely affected many thousands of Independent Retail Booksellers, and many tens of millions of book purchasers in the United States.
99. Plaintiff TIBI is entitled to punitive damages in an amount equal to at least 3 times the amount of plaintiff TIBI's actual damages.
100. Plaintiffs repeat and reallege each of the allegations set forth in ## 1-93 above and further allege that the activities constitute unfair competition, deceptive practices and false advertising and a violation of @@ 349-350 of the New York General Business Law by the Retailer Defendants.
101. Section 349 of the New York General Business Law, entitled "Deceptive acts and practices unlawful", provides in relevant part:
(a) Deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state are hereby declared unlawful.
102. Section 350 of the New York General Business Law, entitled "False advertising unlawful", provides: False advertising in the conduct of any business, trade or commerce or in the furnishing of any service in this state is hereby declared unlawful.
103. The activities of the Retailer Defendants, as alleged above, are deceptive as to retail customers because they purport to be based on lawful conduct and superior business practices, when in fact they are based largely on purchasing of illegal book inventory at illegally-low prices, and using the illegal savings to purchase, for a temporary and deceptive period of time the amenities which induce the customers to patronize the Retailer Defendants.
104. The customers and public are injured, as well as competition, by reason of these activities for the reasons set forth in ## 30-31 above, and are unwittingly permitting the Retailer Defendants to monopolize, or tend to monopolize, the book industry.
105. TIBI has been damaged by reason of the defendants' activities to the extent of the loss of all but 2 of its 14 retail bookstores; the loss of $11,000,000 in annual sales volume (from $11,500,000 in fiscal year 1996 to $500,000 in the current fiscal year). The dollar amount of TIBI's damages is approximately $10,000,000 or more, which will be ascertained with certainty at the time of trial.
106. Kuralt has been damaged by reason of the defendants' activities to the extent of $1,250,000.
107. Plaintiffs are entitled to an award of disgorgement of defendants illegally retained Discounts, Rebates and Deductions, and attorneys' fees.
108. The defendants acted with malice, and with near-criminal or criminal indifference to defendants' civil obligations, and adversely affected many thousands of Independent Retail Booksellers, and many tens of millions of book purchasers in the United States.
109. Plaintiff TIBI is entitled to punitive damages in an amount equal to at least 3 times the amount of plaintiff TIBI's actual damages.
110. Plaintiffs repeat and reallege each of the allegations set forth in ## 1-109 above and further allege that the activities of the Retailer Defendants amounts to unjust enrichment by them at the expense of the Independent Retail Booksellers, including plaintiff TIBI.
111. By reason of the aforesaid activities by the Retailer Defendants, the Retailer Defendants have obtained (i) Discounts, Rebates and Deduction, (ii) customers, (iii) private and public financing, (iv) sales, (v) income, (vi) gross profits, and other benefits to which they are not entitled (the "Unjust Amount"), at the expense of the Independent Retail Booksellers, including plaintiffs, and others.
112. The Retailer Defendants should not be permitted to retain such Unjust Amount, and such Unjust Amount should be returned through disgorgement or other relief to the proper persons, including plaintiffs and the other Independent Retail Booksellers, and others.
113. TIBI has been damaged by reason of the defendants' activities to the extent of the loss of all but 2 of its 14 retail bookstores; the loss of $11,000,000 in annual sales volume (from $11,500,000 in fiscal year 1996 to $500,000 in the current fiscal year). The dollar amount of TIBI's damages is approximately $10,000,000 or more, which will be ascertained with certainty at the time of trial.
114. Kuralt has been damaged by reason of the defendants' activities to the extent of $1,250,000.
115. The defendants acted with malice, and with near-criminal or criminal indifference to defendants' civil obligations, and adversely affected many thousands of Independent Retail Booksellers, and many tens of millions of book purchasers in the United States.
116. Plaintiff TIBI is entitled to punitive damages in an amount equal to at least 3 times the amount of plaintiff TIBI's actual damages.
WHEREFORE, plaintiff prays that a judgment and decree be entered against each of the defendants:
1. Adjudging or decreeing that each of the defendants acted unlawfully as alleged, respectively, in Counts 1-9 above, and that plaintiffs were injured as alleged;
2. Awarding plaintiffs three times the total amount of plaintiffs' $11,250,000 or more in actual antitrust and other damages incurred;
3. Ordering a disgorgement of the Retailer Defendants' discriminatory Discounts, Rebates and Deductions and payment to plaintiffs and the members of the CPLR Class and Federal Class of Independent Retail Booksellers;
4. Awarding each of the members of the CPLR Class of Independent Retail Booksellers three times the total amount of the damages of each;
5. Ordering, adjudging and decreeing that the statute of limitations for the members of the CPLR Class and the Federal Class has been tolled by the filing of this complaint, and that the facts are established for the members of the CPLR Class and Federal Class as alleged in ## 23 and 26 of the Complaint;
6. Granting plaintiffs a permanent injunction prohibiting defendants from any further violations of @@ 2(a), 2(c) and 2(f) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. @@ 2(a), 2(c) and 2(f), and @ 3 of the Robinson-Patman Act, 15 U.S.C. @ 13a;
7. Awarding plaintiffs punitive damages in an amount to be determined by the trier of fact.
8. Awarding plaintiffs their attorneys' fees;
9. Awarding plaintiffs pre-judgment and post-judgment interest;
10. Awarding plaintiffs their costs;
11. Awarding plaintiffs and the member of the class such other and further relief as the Court may deem just and proper.
Plaintiffs hereby demand a trial by jury of all issues properly triable to a jury pursuant to Rule 38(b) of the Federal Rules of Civil Procedure.
Dated:..New York, New York
........August 5, 19987
__________/S/ CARL E. PERSON___________
Carl E. Person (CP 7637)
Attorney for Plaintiffs
325 W. 45th Street - Suite 201
New York, New York 10036-3803
(212) 307-4444