Houghton Mifflin Wields a Heavy Hand
BROOKLYN (CN) - A textbook distributor claims in court that Houghton Mifflin Harcourt Publishing tried to squeeze it out of the business by withholding textbooks and changing the way they've done business for decades.
Adams Book Co. based in Brooklyn, was created in 1945 and is a major supplier of kindergarten-through-12th-grade textbooks.
Starting in 2012, Houghton Mifflin Harcourt Publishing, a "multibillion dollar conglomerate" that controls about 40 percent of the national textbook market, began a campaign to "weaken and eliminate" Adams as a competitor and limit its competition in the K-12 school book industry, Adams claims in the lawsuit in Kings County Supreme Court.
This year Houghton Mifflin Harcourt, which provided Adams its books, told Adams that it wanted to rework the terms of their longstanding agreement by reclassifying Adams from an "institutional" account to a "reseller," thus denying Adams the benefit of lower shipping rates and sales tax exclusions.
The agreement also shortened the amount of time in which Adams could return overstock items, and rescinded the amount of customary price discounts on new edition releases.
The proposed agreements incorporate "anticompetitive changes to sales, pricing, distribution and return policies that would damage, weaken and eliminate Adams as a business competitor or it would refuse to process book orders for Adams," the complaint states.
Adams refused to "surrender to HMH's economic duress and coercion to sign the contract because such an agreement constituted a poison pill that would render Adams uncompetitive and destroy the company," according to the complaint.
HMH then stopped accepting Adams orders, and told Adams that it would block its orders for ebooks if Adams didn't sign the contract.
Defendants "have agreed and conspired among themselves to dominate and monopolize the K-12 scholastic book publishing industry in the United States and to unfairly restrain competition and eliminate Adams as a competitor," the lawsuit states.
HMH "completely cut off sales of all print and electronic" books to Adams in June, according to the complaint.
"The new changes and restrictions to the return policy ... are intended to limit competition in the industry by seeking to eliminate consumer choice and Adams as a competitor because these changes do not apply to its other customers who purchase directly from HMH," the lawsuit states.
"Knowing that industry standards experienced a 15 percent return rate, HMH eliminated the unlimited return policy that existed for decades and reducing it to a predatory and commercially unreasonable 10 percent of sales in 2012," according to the complaint. That return policy was reduced again, to 3 percent, this year.
But while it reduced the "historical" return policy to Adams, HMH continues to offer it as unlimited to schools if they buy directly from the company.
Adams says it's being denied the ability to return more than $150,000 in books returned by its customers. Book returns are customary because school administrators tend to over-order without knowing how many students will be enrolled in any given year.
Adams seeks damages for breach of contract and unfair competition.
It is represented by Laurence Warshaw.