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Judge Upholds U.S. Government's E-Book Pricing Settlement

posted on 2012-09-09 09:56 EDT

Federal Judge Denise Cote approved the Justice Department's settlement with publishers Hachette Book Group, Simon & Schuster, and HarperCollins on e-book pricing on Thursday.

The U.S. Department of Justice filed a civil antitrust lawsuit in April against Apple and the publishers Hachette Book Group, Simon & Schuster, Penguin Group, HarperCollins, and Macmillan. The suit charges the companies with colluding to raise e-book prices through the use of the "agency model," where publishers, not booksellers, set book prices. Simon & Schuster, Hachette Book Group, and HarperCollins have agreed to settle with the Department of Justice.

The settlement requires the publishers to end their contractual relationship with Apple in a week, as well as any other contracts with e-book retailers that do not allow retailers to set their own e-book prices or contain a “most-favored nation” clause, which says that no other retailer is allowed to sell e-books for a lower price. The publishers may not enter into any new contracts that limit a retailer's ability to set prices for the next two years or enter into any new contracts with a "most-favored nation" clause for the next five years.

Publishers Penguin and Macmillan are not affected by the settlement. These two publishers and Apple filed an opposition to the Department of Justice's proposed settlement on August 15. Apple argued the company would be punished by the settlement although they never “participated in, encouraged, or sought to benefit from collusion,” and the deal would harm the company by nullifying contracts “before a single document has been introduced into evidence.”

Judge Cote wrote in her opinion on Thursday that the Justice Department had claimed a “straightforward, horizontal price-fixing conspiracy” and rejected requests to hold an evidentiary hearing as an unnecessary delay.

The contracts forced retailers like Amazon to market their e-books at a US$12.99-14.99 price point. Publishers Penguin and Macmillan's opposition cited that Amazon.com, a competitor to Apple in the digital publishing front, was a "monopoly" before Apple introduced its iBookstore platform. Authors Guild president Scott Turow added that Amazon is lowering its prices "only as long as it takes Amazon to re-establish its monopoly." Amazon held 90% of the e-book market prior to the publisher's contract negotiations.

Penguin Group USA, Macmillan and Apple will have their day in court next summer.

Source: The New York Times


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