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US Justice Dept Settles In e-Books Case

by Glen Shapiro,, New York

14 February 2013

The Department of Justice (DOJ) has announced that it has reached a settlement with Holtzbrinck Publishers, which does business as Macmillan, but will continue to litigate against Apple Inc. for conspiring with Macmillan and four of the other largest book publishers in the United States to raise e-book prices to consumers.

The proposed settlement was filed in the US District Court and, if approved by the court, will resolve the department’s competitive concerns involving Macmillan. The DOJ’s Antitrust Division has previously settled claims against the four other book publishers - Hachette Book Group, HarperCollins Publishers, Penguin Group (USA) and Simon & Schuster.

It was recorded that, on April 11, 2012, the DOJ filed a lawsuit against the six publishers alleging they conspired to eliminate retail price competition, resulting in consumers paying more for their e-books on Apple’s iBookstore than on, in violation of US anti-trust laws.

The settlement with Hachette, HarperCollins and Simon & Schuster was approved by the court in September 2012, and the public comment period on the DOJ’s settlement with Penguin will close on March 5, 2013. The trial against Apple is scheduled to begin in June 2013.

According to the complaint, the five publishers and Apple were unhappy that competition among e-book sellers, particularly with, had reduced e-book prices and the retail profit margins of the book sellers to levels they thought were too low, and below their cost. To address those concerns, the DOJ accused the companies of working together to raise retail e-book prices and eliminate price competition, substantially increasing prices paid by consumers.

Before the companies began their actions, e-book versions of new releases and bestsellers were regularly sold for, as described by the CEO of one of the publishers, the “wretched USD9.99 price point.” As a result of the “conspiracy”, consumers typically had to pay USD12.99 or more for the most sought after e-books.

Under the proposed settlement agreement, Macmillan will immediately lift restrictions it has imposed on discounting and other promotions by e-book retailers and will be prohibited until December 2014 from entering into new agreements with similar restrictions.

“As a result of today’s settlement, Macmillan has agreed to immediately allow retailers to lower the prices consumers pay for Macmillan’s e-books,” said Jamillia Ferris, Chief of Staff and Counsel at the DOJ’s Antitrust Division.

A strong antitrust compliance program will be imposed on Macmillan, including requirements that it provide advance notification to the DOJ of any e-book ventures it plans to undertake jointly with other publishers; and Macmillan will be forbidden, for five years, from agreeing to any kind of provision that could undermine the effectiveness of the settlement.

John Sargent, CEO of Macmillan, commented, when the DOJ’s began its court action in April last year, that his company “came to the conclusion that the terms (of the DOJ’s demands) could have allowed Amazon to recover the monopoly position it had been building … We also felt the settlement the DOJ wanted to impose would have a very negative and long term impact on those who sell books for a living, from the largest chain stores to the smallest independents.”

When now agreeing the settlement, he has added that, although he still believed that his company “had done no wrong,” it would not be “large enough to risk a worst case judgment.”

The Author’s Guild has also been opposed to the settlements. At the time of the settlement with Hachette, HarperCollins and Simon & Schuster last September, it stated that the companies were being required “to allow Amazon to resume predatory pricing. Amazon’s pricing - selling bestselling frontlist e-book titles at a loss - had helped the online retailer gain a 90% share of the e-book market by January 2010.”

The proposed settlement with Macmillan will be published in the Federal Register, consistent with the requirements of the Antitrust Procedures and Penalties Act. Any person may then submit written comments concerning the proposed settlement within 60 days of its publication. At the conclusion of that comment period, the court may enter the final judgment upon a finding that it serves the public interest.

TAGS: court | compliance | business | commerce | law | enforcement | internet | e-commerce | United States | retail

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