Friday, February 8, 2013

And then there was Apple... The Department of Justice announces that they have settled with Macmillan, leaving one last litigate in e-book pricing case

The U.S. Department of Justice announced today that it has reached a settlement with Macmillan in the e-book case where major book publishers and Apple were "accused of conspired to eliminate retail price competition." All the publishers – Hachette Book Group, HarperCollins Publishers, Penguin Group, Simon & Schuster, and now Macmillan have settled with the DOJ. That leaves only Apple left. The trial against the Cupertino company is scheduled to begin in June of this year.

"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 Department of Justice’s Antitrust Division. "Just as consumers are already paying lower prices for the e-book versions of many of Hachette’s, HarperCollins’ and Simon & Schuster’s new releases and best sellers, we expect the prices of many of Macmillan’s e-books will also decline."

The DOJ says that the accused book publishers, plus Apple, were attempting to stop the heavy discounting of e-books and illegally worked together to "eliminate price competition, substantially increasing prices paid by consumers."

The DOJ describes the settlement with the last of the four book publishers in its announcement:
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. The proposed settlement agreement also will impose a strong antitrust compliance program on Macmillan, including requirements that it provide advance notification to the department of any e-book ventures it plans to undertake jointly with other publishers and regularly report to the department on any communications it has with other publishers. Also for five years, Macmillan will be forbidden from agreeing to any kind of most favored nation (MFN) provision that could undermine the effectiveness of the settlement.
In his message today, John Sargent, chief executive at Macmillan, explained what motivated the publisher to settle with the DOJ.
There are two reasons we did not settle earlier. First, the settlement called for a level of e-book discounting we believed would be harmful to the industry. We felt that if only three of the big six publishers were required to discount and we stood firm, those problems might be avoided. But when Random House agreed to be bound by the Penguin settlement, it became clear that all five of the other big six publishers would be allowing the whole agent’s commission to be used as discount, and Macmillan’s stand-alone selling at full agency price would have no impact on the overall marketplace. And in addition, your books and our business would have a pricing disadvantage for two years.

The second reason was simpler. I had an old fashioned belief that you should not settle if you have done no wrong. As it turns out, that is indeed old fashioned.