Friday, July 30, 2010

SkyRiver/III v. OCLC: the lawsuit


Smoking Guns

The complaint has what I see as two smoking guns:




Solid Arguments



The complaint also speaks to OCLC's revenue:






Coming next: Some odd claims, and some misses


Jonathan Rochkind said...

The 'non-profit thing is getting a lot of attention, but I'm unsure what importance it actually has in the legal suit.

I don't think non-profits (of any variety) have any exemptions or relaxations of anti-trust enforcement. Anyone know any reason to think otherwise?

Thanks for your analysis/reporting on this stuff, Karen.

Jonathan Rochkind said...

But when you do get to the non-profit/cooperative aspect (which I don't think matters for unfair competition), here's an interesting thing -- they complain that OCLC doesn't act like a cooperative, and complain that trustees are representatives of member institutions -- that's the one way in which OCLC surely DOES act like a cooperative, that's the ordinary way cooperatives work.

The way many lawsuits work though, is the plaintiff throws a whole lot of stuff into the complaint, knowing that some of it won't stick.

Karen Coyle said...

Jonathan, we really need someone with legal expertise to weigh in on many of these issues. Unfortunately, I don't know of anyone who would be inclined to do so.

The nonprofit issue is an interesting one. Just out of curiosity I pulled down the IRS reports from some obvious nonprofits (ACLU, Planned Parenthood, Internet Archive) just to see how their makeup and financials compared to OCLC. The numbers themselves are interesting, although I do not know what they mean. OCLC is HUGE as a non-profit, earning way more than, say, the ACLU (about 3 times more). Its officers are compensated quite a bit more than the other nonprofits (OCLC CEO: $1.3 million; ACLU CEO: <$400K), but not out of proportion to its size. Also, in none of the other nonprofits that I looked at were the board of directors members given any compensation. OCLC's trustees earn between $30K-$60K.

I don't know what is and what isn't normal for a nonprofit, but OCLC seems to be in a fairly rare category in terms of income source (almost entirely services, almost no donations) and size. It's therefore hard to analyze what affect its nonprofit-ness has on the library market, because it would be hard to find a comparable situation in another community to compare it to.

Anonymous said...

I think many people have a too-narrow understanding of what non-profits are allowed to do, and what latitude they have in pricing and products.

For example, credit unions are not-for-profit organizations. Some of the nonprofit-based complaints against OCLC are reminiscent of the complaints the banking lobby makes against credit unions. I don't think they will have much traction.

On the other hand, it seems like determining whether or not some form of product tying or barrier to entry is being practiced is of some legal interest in this case.

Karen Coyle said...


I do think that you are right about a narrow view of nonprofits. Also, there are different kinds of nonprofits, of which the 501(c)3 is only one kind (and there are categories within that, as well).

Jonathan's question about nonprofits and anti-trust is a good one, and I don't know who might have the answer to that one.