November 6, 1998 1:55 PM PST
Barnes & Noble deals questioned
Today's $600 million deal combines giants in both the retailing and distribution ends of the book business. It follows last month's announcement that Germany's Bertelsmann plans to pay $200 million for a 50 percent stake in Barnesandnoble.com, the book retailer's online arm.
Bertelsmann is another powerful force in the book industry, owning publishing houses such as Random House and Bantam Doubleday Dell. Bertelsmann also runs a mail-order business that pumps 700,000 books per day to 25 million book-club members, making it the biggest seller of English-language titles.
This newly formed trio in book publishing, distribution, and retailing already is raising anticompetitive concerns because Ingram and Bertelsmann also do business with other booksellers, including Amazon.com and independent companies. Some of these competitors worry whether Ingram and Bertlesmann will cut better deals with Barnes & Noble at their expense.
Ingram insists the deal won't hurt any outside booksellers. "Ingram's intention is to continue to serve the rest of its customers and to serve Barnes & Noble in the spirit of fair play for everybody," spokesman Keel Hunt said. Barnes & Noble echoed Hunt's remarks. "This doesn't increase our market share, [and isn't] considered to be a violation of any regulations that we are aware of," said Alan Khan, the company's operating chief.
The deal is subject to regulatory approval by the Federal Trade Commission. Khan expects the deal to be completed within 45 days.
But competitors still are questioning the deals. "It's very depressing news," said Bill Petrocelli, co-owner of Book Passage, an independent bookseller in Corte Madera, California. He worries that Ingram will offer wholesale discounts to Barnes & Noble stores while constricting independents with regular, or even inflated, prices.
"Independent bookstores rely a lot on wholesalers--Ingram in particular," Petrocelli added. "It basically disrupts the channel of distribution."
Jason Klein, an analyst at Blackford Securities, said, "It certainly is a sticky situation." He doubts that Ingram would ever cut off the online bookseller for fear of antitrust complications, but he asks: "If both Barnes & Noble and Amazon are looking for a title, who is going to get the book if Ingram is down to the last case of that book?"
Amazon.com also raised concerns: "The combination of the country's biggest book retailer with its biggest distributor, and, given the recently announced Bertelsmann transaction, its biggest publisher group, undoubtedly will raise industry-wide concerns.
"Like other independent booksellers, we hope that Ingram resolves those concerns with a strong commitment to treating all bookstores fairly," Amazon said, adding that it will continue its strategy of diversifying its book suppliers and increase direct purchasing from publishers.
It tried to remain optimistic, however. "To our customers: Worry not," said Amazon.com founder and CEO Jeff Bezos in a statement. "Those who make choices that are genuinely good for customers, authors, and publishers will prevail. Goliath is always in range of a good slingshot."
In trading today, Amazon.com's stock fell 3.75 to 124.75, or 3.75 percent. Shares in Barnes & Noble jumped 10 percent on the news, to close up 3.375 to 34.25.
In March, the American Booksellers Association and 23 independent booksellers sued giants Barnes & Noble and Borders, alleging the companies are using their clout with publishers to get discounts and preferential treatment. The companies have denied the charges.
Sandeep Junnarkar contributed to this report.