A Tale of Many Cities 

Breaking free of the chains

Independent booksellers take on the industry's Goliaths

Trees come to Missoula to die. Companies around the valley do big business in modern-day papyrus-both in the form of hard-won green portraits of dead presidents, and that marked with a different sort of currency, the printed word.

Missoula's a literary town perpetually caught between blue-collar roots and collegiate aspirations, with a legion of readers and a battalion of writers making sure the pulp plants never stop rolling. In a city so interested in books, magazines and newspapers, there have always been more than a few merchants trying to reap the benefits of this fascination with everything between covers.

Thus, a hardy handful of Missoula stores have survived years in the book-selling game, enjoying reputations based on love for their work and attention to their customers. In a town where it sometimes seems you couldn't toss a brick without dinging the skull of a novelist, mainstays like Fact and Fiction downtown and Freddy's Feed and Read near campus take considerable pride in their role as servants and arbiters of literary taste.

In 1996, when Barnes & Noble came to town, many of these same booksellers reacted to the new behemoth as though an airborne cancer had metastasized into their midst. The national chain's new outlet, built in the swelling commercial sprawl on North Reserve Street, instantly dwarfed every other bookstore around with its 25,000 square feet and space for 150,000 titles.

Shortly after the megastore threw open its doors, Freddy's and Fact and Fiction-which together carry around 30,000 titles-co-sponsored a fundraiser called "Nightmare on Reserve Street." Equating a relaxed, smooth bookstore atmosphere with the cinematic gore unleashed by Wes Craven's cinematic evil-doer Freddy Krueger may seem a bit of a stretch. But the event summed up the homegrown booksellers' message: If you don't support us, they seemed to say to local readers, we're dead meat.

Independent booksellers across the country have tried time and again to make this gruesome image hit home with customers. The arrival of chain outlets has, indeed, meant the end of many independents. Smaller stores in New York City, the so-called publishing capital of the world, capsized as Barnes & Noble expanded its once text-book based enterprise, and even Elliot Bay Books, a Seattle stalwart, could be heard quaking when the like-minded Borders Books chain came to town a few years back.

Now, after a year and half of eroding sales, Freddy's has taken up arms in the national bookstore wars.

The quarter-century-old store, born from early '70s rebel culture, has signed onto a formidable lawsuit against Barnes & Noble and Borders, B&N's main national competitor, which alleges a vast pattern of illegal business practices. The suit, filed jointly by the American Booksellers Association and 26 independent stores from around the country, accuses the chains of repeated violations of anti-trust laws.

Specifically, the suit charges Barnes & Noble and Borders with using their huge size to force publishers into secret, illegal deals unknown and unavailable to other booksellers. Combined, the two companies account for more than 35 percent of American bookselling, claiming more than $5 billion in business in 1997.

The chains, in eyes of the ABA and the booksellers, are aiming not-so-secretly for monopoly, breaking both the federal Robinson-Patman anti-trust law and state laws in California, where the case was filed in U.S. District Court. Neither Barnes & Noble nor Borders, the argument goes, could have managed their dramatic expansion over the last five years without benefiting from under-the-table deals.

The companies refuse to comment on the lawsuit, both issuing statements saying they've yet to be served with formal documents. But they deny dirty pool was involved in their expansion. Corporate spokespeople interviewed for this article refused to go near any questions even vaguely connected with the allegations in the suit.

Enter David

Freddy's enjoys a starring role in the vitriolic 50-page text of the lawsuit challenging the chains' dominance.

"In Missoula, Montana," the complaint reads, "Barnes & Noble employees at a new superstore were told by management that independent bookstores in the community were unnecessary and competed for the same customers as Barnes & Noble.

"Management stated that the success of Barnes & Noble in the community would be measured by whether it put a major independent... out of business, and advised employees that Barnes & Noble would actively pursue steps to achieve this."

Under instructions from Jenner & Block, the D.C.-based law firm handling the case, Freddy's owner Mark Watkins will only say that it's his understanding that Freddy's is the Missoula indie mentioned. But given the Helen Avenue store's history as a magnet for liberals, students and intellectuals-both full-fledged and would-be-since 1972, it's easy to imagine that some nameless manager would want it snuffed.

Watkins doesn't shy away from the obvious Biblical parallel for the economic and legal fights that have erupted in the wake of this challenge.

"I'm excited. It's a true David and Goliath story I've gotten myself into," Watkins says. "I've always rooted for the underdog. In this case, I think we have a chance to win a very significant victory and to revitalize our mission as independent bookstores.

"It is critical that we prevail, because the trends right now are not good."

The ABA says it has ample evidence to prove every charge made in its legal complaint, uncovered through investigations and in a series of similar lawsuits against publishers settled out of court in the last few years.

"Those suits arose after years of industry rumors and hearing tidbits from our members," says ABA spokesperson Len Vlahos. "We did an investigation into the publishing industry and came to strongly believe that publishers were violating anti-trust laws by giving secret deals to certain purchasers.

"Those were the flip-side of the present lawsuit. In each case, the publishers settled out of court without admitting wrongdoing. But they agreed to abide by special anti-trust measures specific to the book industry."

While not admitting guilt, at least one publisher, Penguin, agreed to pay the ABA $25 million to make the charges go away. That money is funding the lawsuit against the bookselling giants.

Setting the stage

Beyond raw cash, conversations with booksellers big and small make it plain that they consider this suit a matter of life and death.

In talks with the Independent, managers and owners of stores like Elliot Bay and Denver's Tattered Cover-either could have been a prototype for a chain of megastores-complain that the giants' alleged pattern of law-breaking puts them in the same bind that squeezes quaint small-towners like Freddy's.

The trends they speak of are indeed dire for independent booksellers. To wit, in 1991 the ABA had nearly 5,200 members. Today, the trade association has only about 3,500 stores on its rolls.

According to Barnes & Noble spokespeople, the chain has added an average of 70 superstores per year over roughly the same period to reach its present total of 483. Managers say they plan to keep the same pace for at least three years. Borders likewise has gone from running five stores-including the celebrated flagship in the Midwestern intellectual bastion of Ann Arbor, Mich.-in 1989 to more than 200 today.

Counting various subsidiaries, including B&N's B. Dalton and the Borders-owned WaldenBooks-both of which have outlets at the Southgate Mall-the two chains now operate some 2,000 stores nationwide. Meanwhile, independent bookstores' share of the adult market dropped from 32 percent in the early '90s to 18.6 percent in 1996, according to the ABA.

Watkins says Missoula provides a prime example of how chain expansion has brought the book industry to a crisis point. Although you would think that Missoula's collegiate nature would supply an endless supply of book buyers, Watkins begs to differ.

"It's very clear to me that Barnes & Noble has affected our sales," he says. "The pie in this community isn't all that big. You have to scratch and dig for every sale, and in every community they go into, they divide the pie a little bit more.

"Beyond the issue of Freddy's sales," Watkins says, "we're seeing an unprecedented roll-out of corporate retailing space at the same time book sales have been flat. I get irritated and very concerned when I hear the representatives of chains say they're growing the book market in this country, because they're not."

Barbara Theroux, the veteran owner of Fact and Fiction, was unavailable at press time to discuss her impressions. But according to figures released last year by the American Association of Publishers, 45 percent of books shipped by publishers in 1996-97 were returned unsold. A study by Open Book Publishing quoted in the ABA lawsuit shows that national chains return books at a rate 50 percent higher than independents.

Returned books are often destroyed or recycled by publishers to avoid storage costs. Watkins and other booksellers allege that this waste is fueled by the demand of chains looking to fill shelves, and consequently drives book prices up, increasing industry reliance on blockbuster bestsellers of marginal quality.

Watkins clearly thinks such inflation proves that the chains aren't very good at selling books the old-fashioned way. Certainly, it's hard to envision Barnes & Noble setting up a table laden with scholarly tracts outside a campus conference on eco-feminism, but that's exactly what Watkins did last week at the University of Montana.

It was a move perfectly in keeping with the heritage of Freddy's, which has always worn its heart on its sleeve. Founded as a cooperative with clear liberal leanings, Watkins' store has long colluded with Missoula's self-proclaimed progressive community. Setting up shop at the conference is the kind of specialty work Watkins say could save independent bookstores in the corporate era.

"I don't think there's any big secret," he says. "I try to carve out a niche, stay close to customers, blow our horn a little more and a little louder than before, and remind people that Freddy's has done an awful lot for this community.

"We've contributed immeasurably to the quality of life in this town, and we need people to remember that now."

A cynic could go so far as to say Freddy's itself-not to mention other bookstores both large and small, including Barnes & Noble-smacks of anachronism in an age when kids are more likely to wait for books to come out on video and readers can find everything they need on the Internet's own version of B&N, Amazon.com.

Watkins, however, is firmly convinced that given a level playing field, his place stands a fighting chance against the corporate aesthetics and billion-dollar buying power of Barnes & Noble, even against the march of technology.

"If given equal footing, an independent bookstore can certainly compete," he says.

"It's not the competition we're complaining about. We'll take 'em on, but let's everybody play by the same rules."

Cue the Goliath twins

At first glance, most Barnes & Noble shops don't seem all that sinister. In fact, Missoula's uber-bookstore, which shares a building with fellow chain giants Staples, Gart Sports and Future Shop, is entirely, overwhelmingly nice.

There are plenty of soft chairs. The new books section, one of the first to confront customers near the entrance, currently features Latin American novelist Isabel Allende, the late Jewish storyteller and author Isaac Bashevis Singer, and plenty of new, hip stuff in between.

Beyond the discounted front shelves, thick racks of literature lead browsers back to the more arcane realms of European history, Judaica, foreign languages, sports and sexuality. For a word addict, the magazine rack offers a hit too stiff to resist, even if many of the hundreds of titles are home-and-garden offerings aimed directly at Middle America.

All in all, it's a very pleasant place to be. Then again, one expects nothing less from a company that racked up $2.8 billion in sales in 1997.

Linda Knox has managed Missoula's Barnes & Noble since last October, having come from working at the chain's Twin Falls, Idaho, outlet for three years. She's not authorized to discuss the lawsuit or how well her store is doing, but she does provide an insider's view of the company the indies loathe.

"What we're here to do is promote literacy," she says. "Through educational programs, highlighting artists of the month, involving visual arts, drawing people into the store with story times for kids, lectures for adults, book groups and discussions-it's all to get people reading. That's what Barnes & Noble does."

To Knox, the atmosphere and the steady schedule of events are part and parcel of this benevolent mission. She disagrees with the notion that the arrival of Barnes & Noble in a small market like Missoula rings the death knell for independent stores.

"I feel all the bookstores are complementary. They all serve different needs in the community," she says. While Knox is not forthcoming with statistics to back up her position, she cites anecdotal evidence in asserting that the literary scene is enhanced, rather than diminished, by the big store's presence.

"I think we turn people on to reading. In my experience in small towns, in fact, there's been an explosion of people getting interested in reading, in part because of Barnes & Noble bringing books to the people.

"Small communities have never had this kind of access to books before. For the first time, people can go in, read a chapter and decide for themselves if they like the book."

As for independents' assertion that they do a better job responding to their customers and community, Knox points to B&N's involvement with charities like Writers Harvest, a nationwide anti-hunger effort, and First Books, which gives free books to kids in HeadStart. She also notes the corporation's recent decision to honor ex-Missoula author J. Robert Lennon's first novel, The Light of Falling Stars, as a sign that chains aren't always fixated on the latest blockbuster.

Largesse such as this is certainly nice, both for the likes of Lennon and for little kids getting food for mind and body. According to the lawsuit's charges against the two companies, though, such public-spirited charity is a facade, sickly sweet icing on a very sour cake. Like the rest of the chains' operations, the suit alleges, these programs are funded by breaking the law.

The slings and arrows

The lawsuit against Barnes & Noble and Borders is as thick as a small novel-and for a legal document, it makes pretty good reading. Apart from the blank parts, that is.

Pages at the document's heart are empty. Whole articles have been deleted from the version that is publicly available. According to Vlahos at the ABA, the evidence and accusations contained in the sections are protected by court orders issued during the course of settling other lawsuits against publishers. The material won't be disclosed until the case goes to trial.

Barbara Bonds Thomas, the president of the ABA, says secret deals have to be an integral part of how the chains do business. Otherwise, she says, they couldn't have pulled off their mushroom-like explosion.

"I've had a store for 20 years, so knowing the business, knowing how the business works, this sort of amazing expansion was puzzling," she says. "Advertising best-sellers at a 40-percent discount when the biggest discount offered on a publisher's rate schedule is 47 percent is a little curious, to say the least."

The ABA believes the remedy for these alleged wrongs lies in the Robinson-Patman Act. The 1936 law was passed, in the words of one relevant court decision, "to curb and prohibit all devices by which large buyers gain discriminatory preferences over smaller ones by virtue of their greater purchasing power."

Carl Person, a New York City attorney who specializes in Robinson-Patman cases and claims not to be involved on either side of this case, describes the Depression era act as the last survivor of a family of laws designed to stop monopolies.

"Anti-trust laws are dead in this country," Person says. "Gone. Except for Robinson-Patman, which is just barely alive. It's the only one that has any vitality, so imagine what the others are like. They're down the tubes."

Where Robinson-Patman is concerned, Person dispenses with the notion of innocent-until-proven-guilty. He describes the end of anti-trust enforcement in criminal proceedings as a political phenomenon, forcing justice-seekers to civil court; the rise of super chains like Barnes & Noble, he says, is the consequent economic injustice.

"Since Nixon got into office, we've seen a gradual decline in anti-trust enforcement," he says. "The Justice Department will not, under any circumstances, pursue prosecutions under the Robinson-Patman Act. They just don't want to be bothered.

"I think any statistician could show that this decline in enforcement is in direct proportion with the increase in the concentration of the economy."

Person says that business people who suspect they're being victimized by Robinson-Patman violations are probably right.

"Any Robinson-Patman Act complaint against any major manufacturer or retailer is probably legitimate," he says. "You have to understand, most big corporations violate this law."

The present case charges the chains with bullying publishers over everything from book prices to promotional engagements. Among other things, Barnes & Noble and Borders are accused of unilaterally "discounting" the bills they owe publishers, demanding that publishers pick up the cost of shipping in cases when they wouldn't ordinarily do so, making publishers pay for in-store promotion and demanding-and receiving-refunds when they're not entitled to them.

Person describes the suit as a classic Robinson-Patman complaint, and points out that the monetary stakes in any action under the law are considerable. The upper limit on damages under Robinson-Patman is 9,000 times the provable losses for a single day's business. That multiple takes into account the slow crawl most cases take through the legal system, hits taken over the years, and the punitive tripling of damages provided for by the law.

That means a business that can prove it's lost $500 a day due to their competition's Robinson-Patman violations could get up to $4.5 million back.

"That's the kind of motivation people need to consider," Person says. "You know that they're doing it. That's a given. It's a just question of damages."

Corporate spokespeople for both Barnes & Noble and Borders refuse to discuss the lawsuit or the issues surrounding it. Jody Kohn, director of public relations for the Michigan-based Borders, says the lawsuit has made off-limits a topic that the company would usually be glad to discuss.

"It's not like we have anything to hide," she says.

Like Knox, Kohn points to Borders' efforts to tailor individual stores to their communities. She says most of the 74,000 events held at the chain's 200 stores last year were designed for their particular locales. Up to 50 percent of the inventory at a given Borders is chosen with regional focus in mind, she says.

"Our stores have a lot of autonomy. We do have a level of participation from a national level, but you're not going to see the same inventory at every Borders."

Despite the publishing industry's claim that hardcover book sales declined 10 percent in 1997, Kohn says, Borders has no special problem with unsold inventory. "Borders has some of the lowest returns in the book business," she says, declining to give specific figures.

Indeed, the fact that Borders superstores pulled down a reported $450.1 million in the fourth quarter of 1997, a 31.5 percent increase over the same period in '96, would seem to indicate that things at America's second-largest book chain are just fine. Barnes & Noble recently announced similarly rosy financial results, along with assurances that growth would continue as planned.

The independent merchants suing these twin titans of the bookselling world, however, suspect these figures mask a shaky reality. They say the chains are spending so much in an effort to gain total dominance that they're actually losing money. Their unchecked growth, the ABA maintains, allows them to issue sugar-coated reports to investors.

Tony Weller, of Weller's Zion Books in Salt Lake City, a huge general-interest store founded by his grandfather in 1929, characterizes the chains as paper tigers. Their frantic growth, to his mind, has stretched the financial world of American letters to the breaking point, leaving the country's reading options hostage to the whims a very few.

Faced with what it sees as a delicate crisis situation, the alliance suing Barnes & Noble and Borders hopes to win relief from the courts.

Weller speaks in grave terms about the alternative, summing up the future with a metaphor immediately familiar-and ominous-to people in places like Missoula where the economic life of a community can hang by a thread.

"Anyone who's lived in a Western boom town has seen and can describe what happens when the boom goes bust," he says.

Photos by JEFF POWERS

Barnes & Noble on Missoula's North Reserve Street benefits local authors and school kids, but those who believe the big bookstore has broken the law argue that such gains are ill-gotten.

Shopping in the aisles of Barnes & Noble, it's easy to see why the vast selection and comfy chairs draw in bibliophiles.

Mark Watkins of Freddy's Feed and Read claims that his shop has been systematically targeted by Barnes & Noble.


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