Picking a Fight

A legal dispute between college bookstores and Amazon about the Internet giant's advertisements takes the textbook war on an unusual foray outside the marketplace.
May 6, 2011

It's hard to beat Amazon's prices. Especially on textbooks.

College bookstores have been consistently losing ground to the Internet retail giant since it entered the textbook market. With its ability to buy in bulk, low overhead and employee costs, and partnerships with third-party sellers, Amazon has made itself one of the cheapest ways to get books and other retail goods.

So to "level the playing field," the National Association of College Stores, which represents more than 3,100 college bookstores, has picked a fight with Amazon – the world’s largest bookseller – over advertising claims made by the Internet giant. The claims, which can all be found on Amazon's textbook page, are that individuals can "Save up to 90 percent on used textbooks," "Save up to 30 percent on new textbooks," and "Get up to 60 percent back when you sell."

On March 25, the National Association of College Stores asked the National Advertising Division of the Better Business Bureau, a self-regulatory body of advertisers, to look into the three claims made by Amazon. On Tuesday, Amazon filed for a declaratory judgment from the U.S. District Court for the Western District of Washington that the company’s advertising claims were not misleading.

While the price of textbooks has long been a hot topic of discussion -- prompting among other things the formation of student groups and legislation to combat high prices -- rarely has the market been competitive enough for advertising to be a point of legal contention. But the dispute between college bookstores and Amazon could indicate a new, more competitive era of textbook sales.

“NACS and the 3,100 college bookstores it represents are threatened by the lower prices that Amazon offers students on the sale of textbooks, and the high prices it offers to buy back books. It is actively seeking to limit Amazon’s ability to advertise these prices,” reads Amazon’s complaint. Amazon did not cite its market share in the complaint or respond to a request to comment on the subject.

For years Amazon and other Internet retailers have been moving into a college textbook market that was virtually oligopolistic 15 years ago. Most college towns had only the college-run bookstore and one or two independent shops. Internet booksellers and the ease with which students can compare textbook prices have now made the market “exceptionally competitive,” according to NACS’s complaint to the National Advertising Division.

On any given day, one can find textbooks available on Amazon for significantly less than what they cost in campus bookstores. A new copy of the Chemistry 100 textbook at Ohio State University, titled Chemistry in Context, costs $146.65 at the campus store. A used copy costs $110. The same book could be purchased Tuesday on Amazon for as little as $40.50 new and $16.83 used.

In Amazon's complaint, the company names 16 titles from its list of the top 20 bestselling textbooks for the fall of 2010. In each case, the prices available on Amazon through third-party retailers were significantly less than the book's listing price. New books were roughly 70 percent cheaper and used books were roughly 90 percent cheaper, matching or exceeding the claims the company makes in its ad, according to the company's interpretation.

While the numbers are hard to argue with, NACS has taken issue with the way Amazon has gone about advertising its rates. The NACS’s complaint is that Amazon’s claims are so broad as to be unverifiable. Amazon says “Save up to 90 percent.” NACS is asking, “90 percent off what?”

NACS argues that customers could interpret the phrases “Save up to 90 percent on used textbooks” and “Save up to 30 percent on new textbooks” in a multitude of ways, not all of which could stand up to federal regulations.

For example, the phrase “Save up to 90 percent on used textbooks” could be interpreted to mean that the cost of used textbooks on Amazon is 90 percent less than the cost of used textbooks available from other retailers. Amazon, which bases its 90 percent figure on the list price for new books, would likely not be able to meet that standard. One could find a copy of “Chemistry in Context” for $16.55 on Barnes & Noble’s website on Thursday.

A more common interpretation might be that Amazon saves the consumer up to 30 or 90 percent off the listing price of the book. Based on Amazon's complaint and the comparison it provides between the listing price and sale price, this is how it interprets the phrase. That is also a problematic interpretation, the association argues, because many textbooks simply don't have listing prices. And because prices fluctuate so widely on Amazon, the statement could be misleading.

That last part is central to the association's overall argument. General advertising law holds that, when a company makes an ambiguous claim such as "up to 90 percent," it should be able to show that a "significant percentage" of transactions meets that number, typically around 10 percent. Because prices change so frequently, Amazon would have no way of knowing if, at any given moment, it was meeting the claim it makes in its advertisement, says the college stores association.

The final claim that college bookstores dispute regards Amazon's buyback program, for which it offers "up to 60 percent back." For many of the same reasons that it objects to the other claims, the association argues that the "up to 60 percent" claim is too broad to be defined. It also argues that because the site gives sellers Amazon credit instead of cash, it is "literally false."

The association claims that its action against Amazon isn't intended to make the site look bad.

"NACS was not trying to achieve any type of public 'win' with its filing," the association said in a statement, "but to promote a level playing field by eliminating unsubstantiated advertising claims."

The association's action against Amazon is not without some precedent. NACS won a similar challenge against Chegg, Inc., a website that rents textbooks, in 2009. NAD found that Chegg's claims about how much it saved consumers were not an "apples-to-oranges" comparison because Chegg was comparing its price for renting a book with the market price of the book.

Since Amazon filed its case in the district court, the National Advertising Division has dropped its investigation into the matter. The division does not investigate matters that are being litigated or investigated by a federal agency. The association is alleging that Amazon filed the case in federal court to avoid a judgment by the National Advertising Division.

"By filing an action relying on legal grounds in the State of Washington not relied upon in the NAD complaint, Amazon is merely trying to shift the attention away from the arguments that NACS made at the NAD," the association said in a statement. "This strategy only highlights to NACS that Amazon could not successfully defend itself at the NAD. This heightens our concern over the truthfulness of the retailer’s advertising."


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