Author Sues Amazon Under Sherman Act for Monopolistic Audiobook Practices

Amazon “abuses its market dominance to shield itself from competition, reduce market activity, and extract supracompetitive fees,” alleged an antitrust class action Thursday (docket 2:24-cv-00851) in U.S. District Court for Western Washington in Seattle.

By “foreclosing competition,” Amazon can charge supracompetitive prices to authors for distribution of their audiobooks through its Audible subsidiary, alleged the complaint. Though the company's costs are about 5%-10% of the sales price, Amazon charges class members -- the independent audiobook authors and rights holders who purchase its distribution services -- at least 60% of the audiobook’s sales price, which it sets, the complaint said. For authors “who dare challenge Amazon’s dominance by distributing their audiobooks on other sites, Amazon extracts even higher prices” of more than 75% of the sales price it sets, alleged the complaint. “No matter what authors choose, they are gouged by Amazon’s exercise of its monopoly power,” the complaint alleged.

CD Reiss, the pen name under which author Christine DeMaio has created and published audiobooks, alleges Amazon uses “exclusivity restrictions to lock up content, starving competing or nascent firms that wish to compete in the marketplace.” The California resident has distributed audiobooks through Amazon both exclusively and competitively over the past four years. For exclusive distribution, Amazon charges Reiss at least 60% of the sale price set by Amazon, and at least 75% of her audiobooks’ purchase price for her nonexclusive titles, it said.

Amazon is a “monopolist” in domestic audiobooks, accounting for over 60% of consumers sales, leaving many authors with just “one rational economic choice”: to distribute exclusively through the Seattle-based e-tailer to avoid a higher price, plus additional “non-price penalties” Amazon imposes on authors who distribute through Amazon competitors, alleged the complaint. The penalties “coerce audiobook authors into not distributing their books on other sites, thereby preventing the emergence of rivals to Amazon who could acquire enough content to effectively compete and offer lower distribution fees to authors,” it said.

The inability of Amazon's rivals to gain footholds enables the e-commerce giant to extract supracompetitive fees from authors, alleged the complaint. Even when audiobook retailers offer authors a lower price, they can’t offer a price “low enough to make up for the loss of much, or substantially all, of an author’s revenue from Amazon as a result of that book losing its exclusive status” with the defendant, it said.

The foreclosure of competition from other retailers is “especially acute” for subscription-based services that need a “critical mass of content” to entice consumers to sign up and maintain their subscriptions, said the complaint. Amazon knows that and penalizes authors who distribute to other platforms, thus diminishing their competitiveness by limiting content available on their sites, it said.

Amazon doesn’t allow authors to convert their nonexclusive titles into exclusive ones, said the complaint; authors can make a one-time switch from exclusive to competitive distribution and incur a 15% competition penalty and other non-price penalties in doing so, it said. “There is no going back,” it said: “The switch is permanent.” That limitation “punishes” authors for “testing the market” and experimenting with other sales channels, it said.

Amazon can “credibly threaten to all but wipe out an authors’ earnings on non-exclusive audiobooks on Amazon” by charging higher distribution fees for non-exclusive titles, “burying nonexclusive titles to make them hard for consumers to find, prohibiting preorders and promotions on non-exclusive titles, and prohibiting non-exclusive titles from converting to exclusive," alleged the complaint. Authors therefore choose to accept Amazon exclusivity “rather than risk losing most sales through Amazon’s dominant audiobook channel,” it said.

Amazon’s additional anticompetitive conduct in the audiobook market includes its requirements for exclusivity for many titles; a window of exclusivity on new releases, when demand is greatest; and “prohibitions on other competing subscription platforms offering certain 'must have' titles as redeemable for credits to their customers,” it said.

The defendant’s anticompetitive behavior has affected “billions of dollars of sales by audiobook authors in the last four years alone,” alleged the complaint. Its behavior has “materially and proximately injured all class members," the complaint said.

The plaintiff alleges Sherman Act violations and seeks judgment against Amazon for damages sustained by her and class members, plus additional damages, penalties and other monetary relief provided by law. She also requests pre- and post-judgment interest, relief requiring Amazon to cease its anticompetitive practices, and attorneys’ fees. Amazon didn't comment Friday.