Legal Information Industry: Anticompetitive and Unfair Business Practices

From LisVendor dot Info

Anticompetitive conduct

In 2007, three legal publishing corporations controlled 85 percent of North America’s legal publishing market, valued at $4.4 billion. By acquiring potential rivals and pursuing unfair business practices, they have used their dominant market positions to bar entry or restrain competition by smaller competitors. Their anticompetitive conduct has significantly harmed law libraries and other consumers. One type of harm involves rapidly escalating costs to maintain supplemented legal publications. The 1996 and 2004 AALL Price Indexes for Legal Publications show that costs of all types of supplemented legal publications increased five times faster than inflation between 1973 and 1996, a period of rapid consolidation in the legal information industry. Costs of supplemented treatises increased two and a half times faster than inflation between 1998 and 2004. According to a representative sample, Kendall Svengalis found that the largest legal publisher, Thomson-West, charged an "annual compounded rate of more than 11.5%" for its supplemented titles between 1995 and 2006. (2008 Legal Information Buyer's Guide and Reference Manual, at 17-18) Economist Mark McCabe has attributed such cost escalation to the anticompetitive effect of the 1996 merger between Thomson Corporation and West Publishing Company.

Unfair business practices

Here is a sample of unfair business practices:

deceptive advertisement; inaccurate price listings; non-disclosure demands in contracts; contractual restrictions of user copyright protections; incomplete disclosures about licensing restrictions; tying unwanted or defective products to purchase of subscriptions; opaque, confusing, and deceptive pricing models for online subscriptions and for "bundled" portfolios of print or print-and-online subscriptions; inclusion of more or fewer titles than requested in bundled subscription contracts, with inadequate or no options for correction; continuing, systemwide errors in invoicing for offered renewal discounts; misrepresentations of dates of publication coverage; automatic billing for remotely related subscriptions; automatic subscription renewals without customer consent; and serious, widespread failures in editing, indexing, updating, and revising of publications.

The harmful consequences of anti-consumer practices

These practices have exacted enormous, if unknown, cost to law libraries and allied consumers, whether directly, in wasted spending, or indirectly, in foreclosed opportunities for more productive spending and more productive legal research. In at least two ways, law libraries have sustained disproportionate injury. First, their budget increases have lagged far behind the pace of increases in conduct-related costs. Second, although the U.S. has more than a million attorneys, over 3000 law libraries account for a large share of legal publishing spending in the U.S.. Of total spending by law libraries, estimates vary from $2.4 billion in 1995 - then more half of the U.S. market for commercial legal publication - to $1.2 billion in 2001. Of course, the economic crisis has compounded the dire financial outlook of law libraries, and they have responded with growing cutbacks in print collections and online subscriptions. Even law firm libraries have have been reported “fighting hard against the most egregious price increases.”

The same types of harm to law libraries extend to allied consumers and the practice of law. A majority of attorneys work in firms with five or fewer attorneys. Often having limited or no access to Westlaw or Lexis, they depend on law libraries for research. Even attorneys of AmLaw 200 firms need research materials from other law libraries. As law libraries shrink print collections, and further restrict access to costly online services, attorney users of law libraries will pay more for research alternatives or decide they can not afford more diligent research. Moreover, attorney customers of legal information sellers (LIS) have increasingly unaffordable, and less reliable, resources for finding and understanding the law, due to the soaring costs and declining quality of commercial legal publication. Solo practitioners and small law firms appear especially vulnerable to anti-consumer practices by some LIS, because, unlike larger firms, they typically do not employ law librarians. (A former industry executive told Svengalis that law librarians "are viewed as the major obstacle to the publishers' ability to roll over the lawyer market.")

In fact, a more general gap continues to grow in America between those who can and cannot access costly, commercial legal publication and related, online services. Soaring costs have undermined the capacity of law libraries to narrow the gap. A more competitive market would allow smaller LIS to enter the market or expand their offerings at more affordable cost. If other LIS refrained from unfair business practices, law libraries and other consumers would achieve considerable savings, and sales of editorially defective publications would end.