The holdout publisher in the Justice Department's e-books price fixing case agreed to a settlement with the government today, setting the stage for a showdown between Apple Inc. and federal prosecutors later this year.
Holtzbrinck Publishers LLC, which does business as Macmillan, will immediately lift its restrictions on discounting and other promotions by e-book retailers and will be prohibited until December 2014 from entering into new agreements with similar restrictions. It will also be subject to an antitrust compliance program.
DOJ sued Macmillan, Hachette Book Group Inc., HarperCollins Publishers LLC, Penguin Group (USA) Inc. and Simon & Schuster Inc. along with Apple in Manhattan federal court in April, alleging that they conspired to raise e-book prices in violation of the Sherman Act.
Three of the publishers - Hachette, HarperCollins and Simon & Schuster - immediately agreed to a settlement, which was approved by Judge Denise Cote in September over Apple's objections. Penguin settled in December.
DOJ alleged that the companies "worked together to raise retail e-book prices and eliminate price competition, substantially increasing prices paid by consumers."
Before the alleged conspiracy, e-books generally sold for $9.99 but rose to $12.99 or $14.99 as a result of the illegal activity, according to the government.
"Together, Apple and the Publisher Defendants reached an agreement whereby retail price competition would cease (which all the conspirators desired), retail e-book prices would increase significantly (which the Publisher Defendants desired), and Apple would be guaranteed a 30 percent 'commission' on each e-book it sold (which Apple desired)," the complaint states.
Macmillan's settlement leaves Apple as the only remaining defendant. The trial against Apple is scheduled to begin in June 2013.
Macmillan was represented by Sidley Austin. Apple is represented by O'Melveny & Myers and Gibson, Dunn & Crutcher.
All five publishers and Apple still face a consumer class action.