Judge Jed Rakoff
Amazon.com holds 60 percent of the U.S. e-book market. Its Kindle devices command 60 percent of the “dedicated e-reader market.” E-books with Amazon’s “digital right management access control technology” (DRM) can only be read on Kindle devices or Kindle-enabled devices, which can only display DRM-enabled e-books. In addition to Sherman Act claims that Amazon restrained trade and monopolized the e-book market, plaintiff independent bookstores—who sell e-books through an arrangement with e-reader device maker Kobo—alleged that by renewing distribution contracts with Amazon, codefendant publishers “confirmed, affirmed, and/or condoned” Amazon’s use of restrictive DRMs limiting the devices on which its e-books by the publishers can be read. The court dismissed suit. Even if concerted action were plausibly alleged, plaintiffs did not plausibly allege an unreasonable arrangement among defendants. They lacked sufficient market power to inhibit market-wide competition. Any unlawful arrangement among the publishers and Amazon would affect only 36 percent of the U.S. e-book market. Any vertical arrangement between an individual publisher and Amazon would affect only 6 percent of the e-book market.
