March 10, 2011
Michigan Consumer Protection Law Invoked in Textbook Pricing Case
There's an interesting case that's developing in the Eastern District of Michigan. Textbook seller MBS Direct LLC and MBS Textbook Exchange, Inc. are under fire for allegedly violating the Michigan Consumer Protection Act. MBS is the largest mail-order textbook business in the United States, according to the Court. The essence of the suit is that MBS enters into exclusive contracts with schools and universities to act as their bookstores. These schools direct their students to MBS for their class materials, having supplied MBS with reading lists for the term.
MBS made representations on their web site such as “MBS Direct relieves the burden, hidden costs and hassles of textbook fulfillment,” and “Best of all, there are no start-up or hidden fees for our services.” In reality, prices are higher for books than MBS' other web site textbook.com, which is not a school-directed destination. There are similar so-called cost-saving statements cited by the plaintiff and the Court. MBS allegedly did not disclose that it paid a "commission" to the referring school, or as the plaintiff identifies it, a "kickback" of somewhere between 4% and 11% on the sale of the book. This is one potential reason for the higher prices.
Michigan's consumer protection states, among other provisions:
(i) Making false or misleading statements of fact concerning the reasons for, existence of, or amounts of price reductions.
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(s) Failing to reveal a material fact, the omission of which tends to mislead or deceive the consumer, and which fact could not reasonably be known by the consumer.
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(z) Charging the consumer a price that is grossly in excess of the price at which similar property or services are sold.
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(bb) Making a representation of fact or statement of fact material to the transaction such that a person reasonably believes the represented or suggested state of affairs to be other than it actually is.
(cc) Failing to reveal facts that are material to the transaction in light of representations of fact made in a positive manner.
The case is at the stage where defendants have filed a motion to dismiss. They succeeded on dismissing one part of the claim which stated MBS should have provided ISBN numbers along with other details so purchasers could comparison shop. The Court said that MBS did not a legal duty to make that information available. Another defense was that higher prices of 4% to 11% were not "grossly in excess" of similar property or services. The Court didn't buy that one, at least for a motion to dismiss, and said the suit could proceed. Discovery will determine whether there is enough evidence for the claims to stick.
My suggestion to anyone buying or selling textbooks online: shop around. The school may care about that revenue stream, but I'm almost certain instructors do not care where a student purchases books. Not everything online is a deal. Hat tip to the Legal Skills Prof Blog and the BNA Electronic Commerce & Law Report. The case is Stalker v. MBS Direct LLC, E.D. Mich., No. 10-11355, 3/01/11. The order with the rest of the details of the case is on Justia. [MG]